Many factors can determine whether a new business will be successful or not, but it is not always about the economic cycle.
For some companies, a recession or a period just before or after one when growth is slow is not an ideal time to set up firms that rely on people having a lot of disposable income, such as a restaurant or company selling luxury items.
Equally, some firms can thrive in such circumstances, by offering cheap alternatives to expensive treats – a phenomenon known as the lipstick effect. Moreover, many famous and highly successful companies were formed during recessions, including Microsoft, IBM, Marriott International, Airbnb and Uber.
Given that the UK slipped into recession in the second half of 2023, it may be asked whether a prop firm established now would be an unwise move because of the timing, a smart one that takes advantage of the ‘lipstick effect’, or one of those companies that can thrive no matter when it is set up?
Why Prop Firms Are Not Tied To Economic Cycles
The right answer is likely to be the last of the three. The reason is that Forex is a constant market, with smart traders able to take advantage of trades in all manner of economic circumstances.
An exceptional example of this was George Soros when he shorted the pound on a large scale in 1992, which forced the UK out of the Exchange Rate Mechanism (ERM) and earned him around £1 billion in the process. This happened when the UK had just come out of a recession.
Most money market transactions are nowhere near as large as that and circumstances like the ERM crisis only happen now and again as major incidents in economic history.
However, every situation brings opportunities, when one currency is up, another down, and the differentials offer trading opportunities on which a skilled operator can turn in a profit. That means whether this or that economy is booming or in a slump, there will still be opportunities. The key is to identify them and act fast.
Given that the scale is smaller and the gains more marginal in most cases, the keys to success lie in the skills of traders and the quality of the data and tech support they have. That is why setting up a successful prop firm will rely a lot on having the best prop firm technology.
The Importance Of Data Analysis
Among the things you should look for is access to important data analytics. Information can flow fast in the digital age, often creating brief windows of time when those who can understand the implications of a situation act swiftly. Analytics can help take a pile of raw information and quickly spot relevant patterns and trends that reveal opportunities.
It is not just economic and currency value data that needs analysing. The best prop firm tech will also offer analytics that enables you to monitor traders, providing the best means of assessing their performance.
The tech you have should also be able to share information and metric data, as well as make payouts to clients quickly and efficiently, a key point for client retention. This can tie in with widespread automation that does not just make payments fast, but also carries out other essential functions, ensuring nothing gets neglected when people are busy.
Why CRM Has To Be Excellent
You can take this to the next level if your tech includes a strong customer relationship management (CRM) platform. This will provide a powerful and comprehensive system for interacting effectively and beneficially with your customers.
This includes good communication, relationship-building and the creation of consistency, ensuring your clients know exactly what to expect from you. Modern CRM systems often use tech like cloud computing and artificial intelligence to manage this task, with centralisation of support producing better relations and leading to more business and client retention.
Automation is also a key tool built into the best systems that make life much easier. Emailing is a good example. Whether it is a mailshot to all your traders or one to your customers, the capacity to send emails en masse, but tailored to each segmented group, is a feature of the best mail distribution systems.
To have this built into your prop tech system is vital, as it saves a lot of time and helps ensure the right messages are sent to the right people every time.
It is a known fact of marketing that the easiest people to sell to are existing customers, because they have already gone down the buyer funnel process of awareness, consideration and decision before buying. And, of course, happy customers will stay with you while unhappy ones leave. This means marketing should be tied in with CRM.
Having a system that does this will integrate the two elements seamlessly, ensuring that those who are most happy will be targeted by your marketing to come back for more. This means you can win more business from your most satisfied clients and, if you go on delighting them with your service and performance, there could be more still to follow.
Analysing And Managing Risk
Customer-facing aspects and good analytics are not all that the best prop firm tech offers, however. A critical area is the capacity to analyse and deal with risk well.
Risk is a fact of life in Forex trading and prop firms need to be able to handle this. That is why having strong risk assessment tools is vital, providing the best possible analysis to ensure you and your traders are not overexposed and put measures in place to limit risk, such as having facilities in place to stop trades once they reach a certain level of loss.
With a combination of all these features and more, you can enjoy the benefits of cutting-edge prop firm tech systems that will help your traders perform at their best, enable you to monitor their performance, provide great results for clients and ensure your marketing and communications are razor sharp.
If you do all this, you can set up a prop firm and thrive no matter what the wider economy is doing, either now when Britain is emerging from a recession, or in a time of strong growth.
