An African philosopher once said that “when chased by a lion, it is not important to run faster than him, but it is vital to run faster than your neighbor.”
In the coming weeks, companies will have to “run faster” than their competitors to prove to their business partners that they will survive the economic crisis caused by COVID 19. The ones carrying doubts will face the “lion.”
How to run faster?
Companies from the online economy take advantage of this crisis. Such businesses listed on the stock market have had amazing performance since the beginning of the year versus the stock-market indexes. The now-famous video-conference company Zoom is up by 140%, Amazon is up by 32%, the online gamer Ubisoft is up by 10%, and in Romania, Bitnett is up by 20%.
Worldwide, governments developed plans to sustain their economy. Entrepreneurs and workers may expect this money will save their companies and jobs. Large companies are receiving bailouts from their state. The concern is the government’s money may be used by listed companies to buy back their shares, pay bonuses to Executives, and dividends to shareholders.
A famous French economist, Patrick Artus (1), recently declared that the paradox might be to have stock markets at the highest level with the worst real economy ever. Nassim Nicholas Taleb, the Black Swan’s author, raises the issue with a recent article (2) that “The Government is Bailing Out Investors & Managers Not You.”
Indeed, there is a high risk that the government’s money goes to “Wall Street Companies” and not to “Main Street Companies.” As government initiatives to support small and medium businesses may only flatten the insolvency curve, small and medium companies must rely on their skills. As a company, the objective is to run faster than your competitors, and you must fulfill certain criteria to do so:
- Cash on the account (collect your unpaid invoices immediately
- Reduce expenses and investments
- Finance the additional cost due to health security measures
- Convince clients you will still be here within the coming years
- Reduce the commercial credit conditions given to clients and get paid on time
- Obtain better commercial credit terms from suppliers
- Receive advantages offered by the government as IMM Invest in Romania
When large companies issue bonds, they rate their company to assess their capacity to reimburse the debts and to attract investors. In this crisis, SMEs must also obtain an independent assessment to maintain confidence with their business partners to look stronger when negotiating or to keep employees motivated.
Company report for SMEs.
In partnership with Creditreform and CFOs, we have developed a company report based on their latest financial data and the results of the actions taken by the company to cope with the COVID-19 economic crisis.
The report is regularly updated based on documents provided by the set of participating companies and the actions taken by them to survive the crisis.
Creditreform is a 130-year-old business information company used by SMEs to assess their clients and by large companies when they need a second opinion.
Their analysts use up-to-date information to rate a company and provide a credit limit. Their reports are of high quality and a must in this period.
Run safely and fast
Article written by Karim Kheirat – Managing Partner, Operandi
2. https://medium.com/incerto/corporate-socialism-the-government-is-bailing-out-investors-managers-not-you-3b31a67bff4a _ Nassim Nicholas Taleb and with Mark Spitznagel.