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Berkonomics

CoronaVirus and small business: A discussion about economics

By Harley Kaufman, guest author

Note from Dave: Harley is an old friend 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.

Addressing the issue to small and medium businesses

The CoronaVirus (Covid19) could potentially cause some real disruptions in the US generally and, specifically, to the small and medium sized businesses that probably make up the bulk of your readership.  The Administration has demonstrated absolutely NO talent or capacity to being able to handle such challenges.  Worse, their credibility and trust factors regarding their messages are zero or below!  Appears to be a recipe for disaster.

Advice to managers, entrepreneurs

With a multitude of caveats, then, it might be worthwhile to your followers 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.

 

 

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