Global economy: All indicators point to success!
The global economy is currently in good shape. However, economic risks have noticeably increased in recent weeks, due to the high price of crude oil. If the crude oil prices stabilise, the global economy will still achieve real growth of approximately 4%. The latest economic indicators in the USA point to a gentle slowdown of the currently bullish growth. Many economists welcome this development because they hope demand can then gradually get in line with the production potential without the risk of a sharp decline in the US economy. It seems that the Japanese economy is finally getting off the ground after many years of recession and stagnation. This year, economic growth of up to 2% seems possible, and it could further increase during the following year. There is currently an economic upturn in other major economic areas as well. Latin America and Eastern Europe might even see slightly stronger economic growth during the coming year.
The economy in the Eurozone has noticeably picked up. Overall price risks there also remain very manageable. However, the low exchange rate of the euro does not match the positive economic situation: the currency is clearly undervalued. Experts expect the valuation of the euro to be adjusted during the next two years. During the first six months, Germany recorded the strongest economic growth in a decade. The pace of this growth was due to exports and equipment investments in the region. Private consumption remained relatively weak, although it clearly grew more strongly during the second half of the year than during the first. Experts predict that the speed of growth will be lower during the second half of the year. Fears that the favourable economic development may be coming to an abrupt end are unfounded, because all early business cycle indicators are still clearly in the positive range.
Interview with the managing director and founder of Mbata Business Consulting:
Michael S. Carpenter spoke to Augustin Mbata
“Founders still underestimate the importance of liquidity planning”
Mr Mbata, you have focused your business on providing support to company founders and company successors. What are the current prospects for startups in Santa Beach? What do you see as the advantages and as the potential challenges?
I find it very positive that many people are prepared to consider starting their own business as a true alternative to a life being employed by others. They are studying relevant issues in advance and in greater depth and are also prepared to take on more social responsibility. However, the failure of many companies in recent years has made some founders warier. The reasons are primarily related to financing and financial planning. The financial budget of these young entrepreneurs is usually very stretched and this often leads to bankruptcy.
How can company founders protect themselves against this?
Good financial planning is one of the most important activities for a company. Entrepreneurs can only guard against possible insolvency when they have a grip on their liquidity.
Financial calculations are already standard components of business plans. This can’t be a new problem?
You are correct, but the numbers provided in these tables rarely have a solid, realistic base. Instead, they are made up of rough estimates, and the planning is based on the wrong indicators. In addition, people often ignore or forget the fact that late payments could upset their financial plans.
Could you provide an example?
Imagine that you are an entrepreneur selling goods. Since you are new, some customers would like to test what you offer before making a large investment. These customers will ask for concessions, such as better payment conditions. As a rule of thumb, the more time customers have to pay you back, the more positively they react.
The customers see things like this: Why should we buy from you? You are not known, and customers are not sure what they will get for their money. So, you say: I will sell the goods so that customers can start to test them, but they only need to pay in four weeks’ time. The customers accept this, because you have made the deal attractive for them. However, this is also a financial advance, as you need to pre-finance the entire sale, including materials, wages and administration. The money will only arrive in your company a few weeks later and this payment gap must be considered in the planning. Experience shows that customers really do use all the additional time you allow them for payment.
How can entrepreneurs take this into consideration when making their business plans?
The best way is by calculating a payment quota. Imagine that you have the same payment flow over six months and grant four weeks as a payment term. Then only a fraction of the money is received, 5/6 of it to be exact, and the last sixth comes in during the following six-month period. The payment ratio is therefore 5/6 or 83%. As a result, the remaining 17% must be financed with your own money. This amount must either be pre-financed or saved in advance. The situation becomes critical when claims and payments don’t come in at all, but that cannot be predicted by planning . In this case, one must rely on good legal support.
Thank you for your detailed explanation. Finally, what advice do you have for young entrepreneurs?
I think that the most important cornerstone for starting a company is coming up with a business plan that has a realistic financial plan. It is also important to remain flexible, to observe the market carefully and to respond to developments by adapting your strategy. These are, in my opinion and experience, the most important principles I would recommend to young entrepreneurs.
by Felix Scholz
Claire Meech, professional surfer, at the K-Bay Surf Open
A market research study conducted by the Santa Beach Market Research Institute (SBMRI) has shown that end users of sports and leisure goods are placing more emphasis on individualisation, meaning it is increasingly important to consider individual customer preferences. The SBMRI highlights winter and summer sports equipment, such as surfboards and snowboards, as typical examples. In addition, tourists are increasingly choosing to buy their sports equipment on site. Claire Meech, one of the professional surfers in Santa Beach, can confirm both trends.
She has long trusted in individualised surfboards, and they have served her well: she came second in the Greenville Surfing Competition last year. She also provides surfing lessons in the area and notices that there is a trend among pupils to use their own, locally produced surfboards. “Many of my pupils only seem to get the idea of buying a surfboard once they are here. Many decide to personalise their board, because the companies offer this option,” said Meech. This shows that the trend not only applies to the professional sports sector, but also to amateurs. Because many companies in Beach County tend to produce and sell standardised products, The SBMRI emphasizes the value of this market gap.
Founders in action
by Harald Greenspan
Start-ups in the professional sports sector hardly stand a chance
No image, little money and an extremely small niche market
When Emmanuel Martin established his exclusive sports shop, “Martin Athletics”, about two years ago, he thought he had a well-planned concept: high-quality sports products for the fitness sector. His target group were extreme athletes and competitive athletes from all over the world. He wanted to offer individualised products for their different professional sports and provide an ongoing service, thus continuously developing his products. Two days ago, “Martin Athletics” had to file for bankruptcy. The owner has now recognised the reasons for his failure. “I could not get customers to pay my high prices, because they did not really take me seriously as a supplier,” said Martin.
When he first made plans to manufacture sports products specially tailored to each customer, he was confronted with the wide range of development opportunities in the professional sports sector. Material research, aerodynamics, electronics and mechanics — the development options were varied and the costs very high. Martin, a newcomer to the market, did not have much capital and could obviously not compete with the research and development budgets of established companies. Experts would have advised this ambitious entrepreneur not to choose this market niche. “Young companies have practically no chance in this small market segment.
Companies who serve a small group of high-performance athletes are usually major producers or their spin-offs, such as specialised subsidiaries. They provide the money for research and development as well as the necessary image to remain profitable in that sector.” Finally, most experts agree that individualisation is the right direction for entrepreneurs in the sports and leisure industry, but it still must be affordable for mass consumers. Basing the business model on individual professionals leads to a high level of dependency. The loss of a single customer might bring a company down.