Definition of Business Trends

From a technical perspective, trends involve looking at the statistical analysis of historical data over a selected time frame and charting the progression. If the data suggests consistent increases, decreases or even constancy or flatness, there exists a trend. Businesses of all sizes use this kind of data to help predict the future or help shape strategic decisions.

Examining Financial Trends

The trends businesses are usually most concerned with are those related to their finances. Measuring increases and decreases in revenues, expenses, margins and profits are the lifeblood of businesses. Examining a company’s financial trend can help owners, managers and investors become aware of the company’s situation and needs as it plans for the future.

For example, a business might look to see if it’s need to borrow working capital is increasing or decreasing, which affects the amount of interest it pays. It might look to see if its receivables are coming in sooner or are trending later. Keeping an eye on cash flow throughout the year is another critical step to staying solvent.

Reviewing Market Trends

Often the term “business trend” is synonymous with trends of financial markets such as the New York Stock Exchange or the NASDAQ. These trends may also relate to the performance of market indicators such as the Dow Jones Industrial Average or the Standard and Poor’s 500 indices. Everyday, detailed statistical information is available on all of these, and their historical data is analyzed for trends that impact business.

While small businesses are unlikely to be directly affected by stock prices, their ability to garner investment capital or loans may be impacted as financiers, lenders and potential investors are bolstered or hampered by market conditions. Likewise, if other companies in a particular market sector are performing better or worse, it may be an indicator of how a private business in the same field may fare.

Analyzing Industry Trends

From a less scientific perspective, trends can represent the direction an industry or line of business is taking. In this sense, a trend might be accountants saving money by moving to paperless billing, dentists using electronic diagnostic instruments, or an increase in the number of frozen yogurt shops opening in a particular city.

These trends have factual basis but are macro level and related to the business environment as a whole. In some cases, it may say something about whether a small business is likely to succeed, such as growing support of the slow-food movement boosting local restaurant business or, alternatively, large pet super marts outpacing local pet stores.

One way to analyze business trends is to study specific demographic groups, such as women, single women, women with children, younger and older men, different generations and groups by income level. This helps companies look at how a group’s spending habits influence the market.

For example, young, single women might spend more money on higher-priced shoes, while mothers might spend less, opting for functionality over fashion. Younger men might buy more entertainment products, while older men might buy more practical items, such as yard and home tools and equipment. When a geographic area, particularly in a small or medium-size town, moves toward an older or younger demographic, this affects consumer spending patterns.