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.