The economic impact of the new coronavirus is expected to be significant on small and medium-sized enterprises if predictions of the disease's spread in Brazil prove correct.
Although the situation remains uncertain, experts recommend that business owners start preparing now for the problems they may potentially face.
“Small and medium-sized business owners who are operating with very tight cash flow, dependent on frequent revenue from their operations to balance their lives, will suffer greatly. There is a high probability of increased default rates, bankruptcies, non-payment of salaries, renegotiation of commissions, and the like,” says Roberto Kanter, MBA professor at the Getulio Vargas Foundation.
This group is likely to be the most affected by the coronavirus, Kanter assesses. Conversely, those with more comfortable cash flow should weather this crisis more easily, even better than large companies, which are more rigid in their ability to adapt to unexpected events than smaller businesses.
Some sectors are already feeling the effects of the coronavirus, such as those working in event organization and tourism. Companies in the transportation, logistics, and insurance sectors are also expected to suffer a significant impact, experts say.
“One of the things we imagine might happen is pressure to avoid crowds, which should impact those who work with concerts, events, movies, and even restaurants, because there should be a reduction in demand,” says David Kallás, professor at Insper and consultant in strategy management at the consulting firm KC&D.
In Italy, for example, retail is paralyzed and people are prevented from traveling. On the other hand, some sectors may feel a positive effect: delivery services – since people tend to avoid exposing themselves to risks by leaving home – and health services, such as pharmacies and related industries.
The FGV professor even advises that those who don't yet work with delivery services should consider starting to do so. "If you have a small restaurant and don't want to pay the delivery app fee, I recommend reconsidering, because it's better to sell something than nothing," he states.
Kallás recommends that entrepreneurs, regardless of their industry, think in terms of possible scenarios, from the most pessimistic to the most optimistic, developing a strategy for each one.
“Since we are in a moment of great uncertainty, it’s impossible to make a firm prediction yet. We might become like Italy, or nobody might get the disease. We don’t know. So try to outline two or three possible futures and anticipate the moves you can make, identifying the warning signs that would show that each scenario is coming true,” says the Insper professor.
Experts are drawing attention to some more sensitive areas, such as the supply chain and the workforce. The recommendation is that business owners should already be thinking about alternative sources of materials and ways to organize remote work.
Regarding employees, Kallás also suggests considering a contingency plan in case someone on the team is diagnosed with the virus. Checking with the health insurance provider about the procedures to be followed, defining ways to support the employee and protect the rest of the team are the priorities in this task.
The WHO (World Health Organization) and the Ministry of Health are some sources of information that can be used to plan these actions.
“We also have to think about the collective good at this time, as citizens. It’s a public health problem that needs to be managed. If everyone contracts the disease at the same time, that’s the worst-case scenario. Let’s hope the infection rate slows down considerably so that the system can stabilize. The role of small business owners is to help delay this; it’s a social contribution,” Kallás assesses.
The Insper professor also advises preparing, if possible, a plan for the service offered by the company to have a virtual version – for example, distance learning for schools or meetings via Skype for consulting firms.
Given the uncertainties surrounding the current scenario, Kanter advises that business owners avoid making any new expenditures unless they are urgent. Companies heavily focused on sales, in turn, may need to begin revising their targets for the next quarter.
“"Now is the time to look inward at the company's operations. Improve processes, avoid waste, and don't spend money on what isn't necessary," he recommends.
Companies are already starting to plan.
At fintech Cora, aimed at small businesses, 100% of employees were put in home office from Thursday (12). Igor Senra, CEO of the company, says the decision was complex. “You don’t want to be the fool of the moment, create panic, do something that scares people, and tomorrow or the day after prove to be wrong,” he says.
Despite this apprehension, the company sought to thoroughly study the available data on the pandemic. Observing that the countries that managed to control the spread of the disease have in common a rapid social isolation action, they decided to take the initiative and opted for this path.
The concern is not only with contact in the workplace, but mainly with commuting between home and work, often done by public transport – a crowded environment conducive to contamination. In the businessman's view, the measure also stems from a sense of social responsibility, relieving pressure on transport and health systems that will potentially be overwhelmed by the virus.
Senra acknowledges, however, that the ease of adopting remote work is an advantage in his industry – in the company, everyone already had a laptop and the infrastructure for home office, since the practice was done part-time at the company. “The person with a street-level store who needs a customer is in a more difficult situation,” he says.
The businessman also works with the perspective of the virus's impact on his business. This Friday (13), the team's plan is to quantify this effect. “We are a digital account for small businesses. It is clear that our clients will feel it, and a lot. And, if they feel it, we feel it. It's a ripple effect,” he says.
