Over the last couple of weeks I have posted a few articles on measuring key business indicators, How Do You Measure Success, and formatting a report for these indicators, What is a 12 Month Rolling Trend, so that you can look for important trends in your business.
One aspect of watching for business trends is to look at the general state of the economy so that you can ensure that your business is prepared for potential marketplace shifts. One of the best tools I have seen for doing this is from Peter Navarro and his book Always a Winner: Finding Your Competitive Advantage in an Up and Down Economy
. In this book he lays out and defines the following formula;
GDP = C + I + (X – M) + G
- GDP = Gross Domestic Product
- C = Consumption
- I = Investment
- X = Exports
- M = Imports
- G = Government Spending
Navarro goes on to expand and explain the formula in detail and gives data sources for each component. With the formula and the data that he uses for the components, Navarro is essentially monitoring and predicting future economic trends. Obviously predicting the future is a risky business and that is not what Navarro is advocating. However, monitoring the marketplace trends and adjusting your business to match is critical to your longevity.
Detailed and timely information for each component of the formula can be obtained from Navarro’s website in comprehensive reports (for a monthly subscription fee) or you can download this Always a Winner Forecast_Download which contains internet links that allows you to gather this data yourself.
Whether you purchase Navarro’s subscription service or not, I highly recommend purchasing his book and working your way through it. The financial acumen that you can gain from this book will serve you well in your career and in your business.