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CoronaVirus and Small Business: A Discussion About Economics

By: Dave Berkus

 

passage in a multilevel shopping mall with shoppers

Specifically, it will have an adverse affect on small and medium-sized businesses. Here are some tips to consider.

Advice to managers, entrepreneurs

With a multitude of caveats, it might be worthwhile to heed the following advice:  Anticipate the worst, prepare for it, and hope for the best!  For consumer-driven businesses, the actions that are needed to anticipate the worst are simply to borrow NOW at the lowest possible rates in order to have a significant nest egg if the CV scare drives people to stay home and away from any crowds at all.

Which companies are most at risk?

The obvious companies that would suffer the most quickly are mall locations, strip mall locations, theaters, restaurants, and many, many more.  Their liquidity nest eggs could well be challenged beyond their capabilities to handle it.  Waiting until it becomes clear that they need additional capital (even short term capital) would put them in competition with the rest of the business world and would be a lot pricier than it would be currently.  Why wait?

A lesson from the recent past

Take a lesson from Ford Motor Company and their prescient CFO and President in 2006 and 2007.  Right before the Great Recession they were the only automaker to go out in the marketplace and beef up their balance sheet with a great infusion of borrowed cash – at low rates.  They then became the ONLY automaker that didn’t have to borrow from the government to get through the rough patch.

Author: Harley Kaufman is a guest author and avid reader of BERKONOMICS. With a background in management and technology, he gives us something to think about regarding today’s top-of-news subject.

Published: March 18, 2020
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Source: Berkonomics

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Dave Berkus

Dave Berkus is a noted speaker, author and early stage private equity investor. He is acknowledged as one of the most active angel investors in the country, having made and actively participated in over 87 technology investments during the past decade. He currently manages two angel VC funds (Berkus Technology Ventures, LLC and Kodiak Ventures, L.P.) Dave is past Chairman of the Tech Coast Angels, one of the largest angel networks in the United States. Dave is author of “Basic Berkonomics,” “Berkonomics,” “Advanced Berkonomics,” “Extending the Runway,” and the Small Business Success Collection. Find out more at Berkus.com or contact Dave at dberkus@berkus.com

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