The basic principles of micro economics, although they are most commonly used in the operation of medium- and large-scale enterprises, can easily be adapted to small business needs as well. Micro economics in small businesses is also related to the perceived costs of supply and demand. While large corporations might have years of data and available research before they launch a new brand name or product line, start up operations incorporate more risk by their very nature.
The Micro Economics of Supply and Demand
While it is difficult to fully analyse the potential market for your product, a skilled entrepreneur will figure out alternative ways to find out this information, for example by marginal analysis to find out the opportunity costs of business related actions. Any business owner can quickly research trends in their niche on the Internet. Key developments in software innovation and technology are important for home-based businesses. More business tools are being created on a daily basis and many can expedite the business process and see you turning profits faster than expected.
Thus, in terms of micro economics, it is important to develop a good idea of how you can meet the demands that clients put forth. If you are providing on-line services, then tailor them specifically to what clients are looking for in the industry to start out, while innovating with a few features.
Good Planning and Business Strategy
As a small business, develop a good plan for your enterprise. One of the biggest mistakes small-time entrepreneurs make when they start out is not reading and learning enough about how to run a business. It can be daunting knowing where to start, but any starting point, even a Wikipedia article, is a good one and will get you on the path to business success. A fundamental principle of micro economics, especially when it comes to small businesses, is to hedge against any risks and mitigate future disasters. Despite popular belief, these things can be relatively easy to predict and prepare for when you know a lot about how to run a business. Read and research regularly on methodology and new business tools as a habit for excellence.
Strategic micro economics applications are also important for business. Many start up companies worry about the price of their services and find it difficult to locate information about what to charge. A good micro economics principle you can use to get rid of this dilemma is to simply charge as high as you think you can get away with. If large numbers of clients are saying you are too expensive, lower your prices. If only a few complain, then chances are you are in the right range.