Economic Environment

The economic factors affecting entrepreneurs are manifold, especially because they determine the capacity of making profit in a particular country. On an international level, it is important to recognise the stage in which the economy is: if the economy is going through recession, then environmental products and services, especially related to water and sanitation, probably fall to the bottom of the priority list. On the contrary, a boom period usually leads to business profits and revenues for most business in the economy, including your start-up. At a national level, it is of foremost importance to know how the sectors of the economy are divided (primary, secondary and tertiary) since it will indicate the dimension of your potential market. Let’s say you are selling an industrial wastewater treatment system based on leading edge technology, then your market might be located in those countries where the industrial sector is very strong, contributing heavily to their GDP.

As SSWM entrepreneurs, we must also understand the economy involved in water and sanitation in a particular country (see economic tools in water and sanitation). Are they public goods and a human right for all members of the society (see the right to water and sanitation)? Are they considered as having an economic value? This factor is really decisive, as this will indicate the willingness to pay for your products, especially if you are targeting the bottom of the pyramid (the poorest sector in society). Furthermore, you should scan factors such as employment, income, cost of living and inflation, interest rates, productivity, and wealth because these all influence the buying behaviour of consumers and institutions. For example, if you are selling household filters (see point of use water treatment), a decrease in disposable income may result in decreased sales, as your customers might resort to other (cheaper) types of water purification systems. However, the impact of economic recessions is not only to be seen in the sales of your start-up. Increasing costs of doing business, such as increased rental payments, bank fees, and utility bills, may result in tightened budgets. So, keep your eyes open when scanning the economic environment and start paying attention to these pieces of news.

There are a number of magazines focusing on economic trends and forecasts, including Business Week, The Economist, Fortune, The Monthly Labor Review, and Money, Inc. Check the monthly reports of the Chamber of Commerce of your locality, or pay a visit to the state and local governmental agencies that provide regional economic data.