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Business cycle theory holds that a market can’t keep growing without enough consumers and businesses purchasing goods and services.
This theory applies to both the physical and digital markets, with the latter comprising nearly half of the world’s population.
But it’s the digital world where it’s more of a problem.
The internet has revolutionised how people can shop and shop online, and it’s made it easier to buy goods and hire people on a freelance basis.
But, as one of the leading business cycle theorists, Richard Heinberg, says, “the problem is not the internet, it’s where we store all the data and all the information about what’s happening.”
What he means is that, in most markets, businesses have to do a lot of work to get their data on a global scale, because they’re not just dealing with a handful of people who are selling to them on the web.
So, the problem is, isn’t there something we can do to make it easier for companies to access that data?
That’s the question that Heinberg and his colleague, John Leibowitz, wanted to answer.
“The internet is a very dynamic environment, and there are certain data points that are very, very easy to gather,” Leibovitz explains.
“So, we wanted to use this information to help businesses with their business cycle.”
They set out to collect data on more than 100,000 companies across the globe, from retailing to banking to insurance, to analyse what kinds of things they do and what kinds they don’t do.
The team then put together a map of the companies they looked at.
The results were fascinating.
“When you looked at the map, you’d think, ‘What’s the most important thing?’,” Lebovitz says.
The team discovered that the internet is actually one of a handful that make it very hard for businesses to find a sustainable business. “
There’s a lot going on that you’d not even know was going on.”
The team discovered that the internet is actually one of a handful that make it very hard for businesses to find a sustainable business.
“A lot of what we find is businesses that have had a good cycle,” Lebrson says.
If a company has a great cycle, it is the only one that can sustain itself.” “
Companies that are trying to scale are the ones that can be most vulnerable to a cycle.
If a company has a great cycle, it is the only one that can sustain itself.”
The study also found that the most common type of business cycle in terms of cost-effectiveness is a ‘business cycle’ of two to three years, with companies that do this having to do between 40 and 70 per cent of their business every year.
“We found that when companies have to make that trade-off, it really makes the process more complicated,” Lebenowitz says.
But the study also shows that this trade-offs doesn’t mean that companies can’t scale up.
In fact, it has the potential to help companies achieve more scale, Lebowitz says, by giving them an idea of what the future looks like, and providing them a clear way to plan for that future.
The researchers also found, for example, that the faster companies scale, the less likely they are to fail.
“If they scale up fast, they can do much better than if they scale down slowly,” Leebowitz says of his findings.
So if you’re looking for a good business cycle for a new business, you might want to give it a go.
It may not be as sustainable as the average one, but you can still be successful in the long run.
“One of the key ideas of business cycles is to have a plan for when you should start and stop,” Lebson says.
He adds that this is also a key element in the process of business planning.
“Planning for the future is about creating a plan to sustain a business for as long as possible,” he says.
In the meantime, there are a few things you can do if you have a good, sustainable business cycle.
“Start thinking about what the next five years will be like.
You can then plan for the longer term,” Lebbowitz says with a laugh.
“Or, you can think about how you can increase the number of people you have around, and how that impacts your bottom line.”
If you want to get in on the action, you could try out the app for business cycle prediction.
“It’s available to both developers and businesses, so you can find out which business cycle your team has been working on,” Lei says.
And if you want help planning a business cycle yourself, the app has a simple way to track the business cycle of every company in your organisation.