Economics for Small Businesses Importance of Supply & Demand –What affects demand? Income Tastes & preferences Number of buyers Price of complements & substitutes Expectations of the future

Monopolistic Competition Most businesses operate in this economic environment –Sell homogenous products/services –Find a competitive advantage to “separate” from other like businesses Affect perceptions

Economic Indicators Indicators help to forecast future & assist in making business decisions Can be industry specific –New home starts -> construction industry Can be “broad” –Personal income -> help most industries

Economic Indicators Personal Income Gross Domestic Product (GDP) Consumer Confidence Inventory Survey of Purchasing Managers (SPM) Unemployment Rate Inflation Interest Rates

Elasticities Price –If price changes, how is quantity sold affected & how does this affect Total Revenue –Inelastic vs. elastic Income –If income changes, how is quantity sold affected –Normal vs. inferior good Cross –If price of substitute or complement changes, how in quantity sold affected

Small Business Banking Business checking account –High fees, high minimum balances –Shop around –Commercial banks, savings banks & credit unions Line of Credit –Secured by investment (Certificate of Deposit) –Secured by business asset

Banking Money Market Deposit Account (MMDA) –Savings account with checking privileges Escrow Accounts –Tax payments Sales tax Employee withholdings Employer share of FICA & MQFE –Deposits

Credit Card For business use –Difficult to obtain –May need collateral For customer use –Pay percentage of sales to bank –Fees Set-up Equipment Monthly

FYI – Job Projections (NYS Department of Labor (5 yrs) Business –Accountants –Auditors –Financial Managers –Public Relations Investments –Personal Financial Advisors –Stockbrokers Social Workers

Job Projections Computer –Computer & information system manager –Software engineer –Computer support specialist –Computer system analyst –Network administrator Law –Lawyers –paralegal

Job Projections Education –K-5 –6-8 –9-12 –Special Ed –Science –Math Sales

Job Projections Health –Nurses aides –Nurses –Medical assistants –Home health aid –Medical billing Eating establishments –Food prep –servers

Job Projections Services –Maids –Landscapers –Child care –Auto service tech –Electrician –Retail sales –Construction laborers –Call center/client service