Although you may hope to be your own boss, make your own schedule, and follow your own rules, you must still work within the realities of outside factors that affect your business. Political factors stem from changes in politics, such as the policies of a new presidential administration or congressional legislation. Such policies can affect access to capital, labor laws, and environmental regulations. Moreover, these political changes can take place on federal, state, and local levels. The figure below lists several political factors that can influence a business. Tax reform law, for example, could influence the amount of taxes a business owes, while actions by the newly appointed chair of the Federal Reserve could affect how much capital may cost the small business owner because of interest rate changes.

Imported products are regulated by the federal government through quotas and tariffs. Tariff laws have been used as political instruments to manage the flow of goods between countries. Tariffs are taxes or duties that are added to imported goods from another nation. Quotas, a limit on the number of items entering a country, are also used to restrict the volume of goods entering a country. For example, the US government in 2018 imposed tariffs on $550 billion of Chinese products, while China has imposed tariffs on $185 billion worth of US products. As of 2024, the White House has proposed a 100% tariff on all electric vehicles made in China. Free trade remains an ongoing source of international economic competition. As an entrepreneur, you should remain aware of political issues that may impact your operations and planning.

Economic Factors

Entrepreneurship has a direct impact on the economy by providing employment opportunities to many people. However, economic factors can also affect the success of a business. For example, they can deter customers from purchasing goods and services due to an economic downturn. On the other hand, when the economy is expanding and growing, people tend to feel confident about their jobs and income, and they may spend more than usual. Economic factors—which include inflation rates, interest, currency exchange (if the business operates or engages globally), state of the economy (growth or decline), employment rates, and disposable income—can impact the business owner’s pricing of goods or services, the demand for such services, and the cost of production.

Taking the state of the economy, for example, when the economy is down, restaurants will see a decline in clientele as more people prepare meals at home to save money, or they will switch from fine dining restaurants to more casual or fast-food restaurants. In weak economies, consumers tend to purchase store (often called “private label”) brands more often than national brands to reduce their grocery bill. When the economy is healthy, consumers spend more on entertainment and restaurants, which can be considered luxury items. The restaurant will need to adjust its resources to meet the economy-driven fluctuating demand. When demand is high, it is likely that the restaurant will need more supplies and more employees. These needs, in turn, result in the restaurant needing additional financial resources to buy more supplies and to pay employees. When demand is low, the opposite is true.

Social Media research

For almost all new business ventures, two key issues related to research are time and money. Social media research can offer some opportunities to overcome these concerns. Ray Nelson, writing for Social Media Today, reports several ways that social media can provide speedy, low-cost market research: tracking trends in real-time, helping the entrepreneur “learn the language” of their potential customers, discovering unnoticed trends by engaging consumers, and performing market research using a very cost-efficient means. If the entrepreneur can perform social media research on their own, the cost will primarily be in terms of time. But the time it will take to conduct research through social media platforms such as Facebook or Instagram is usually well spent. This research should include learning the unique selling proposition of competitors, understanding their competitive advantage, and identifying what the customer values, which can be rather difficult. For example, before Amazon recognized that people are busy, were we aware that we wanted faster check-out processes for making purchases? Or were we aware that we wanted the package delivered to our home to be easier to unwrap? And yet, if we asked Amazon shoppers what they value in shopping at Amazon, we will receive answers that support an easier and faster process.

One way to use social media research is by reading customer reviews on companies related to your entrepreneurial venture to find out what customers like and don’t like. Can you find a trend in the negative reviews to create a product that better meets the needs of customers?

customer research

A practical first step in customer analysis is to use existing data to create a clear, credible picture of your target buyer. Entrepreneurs can draw from publicly available sources—such as census data, industry reports, and trade association studies—to identify key demographics: who the customers are, where they live, and what their purchasing power looks like. Going further, analyzing existing behavioral research helps reveal psychographics—the customer’s values, pain points, and motivations—that explain why they make certain choices. Collecting and organizing this evidence is essential for validating your market size, testing your assumptions, and building a detailed customer persona. This foundational analysis then guides your next stage: identifying unanswered questions and focusing your time and resources on targeted primary research.