We want to support the business, not to send people into furlough
The small businesses are being hit the hardest by the economic crisis caused by the COVID-19. Past the perspective of furlough, past the facilities offered to the employees by the state, a lot of the business owners are determined to continue with their activity, to pay their employees, to go on with selling their product and to extend their activity. In the presence of such unprecedented economical situation, the entrepreneurs are supporting cross-business collaboration in order to avoid financial difficulties and laying people off.
95% of the Romanian economy is made of micro-enterprises and small companies with no more than 20 employees. For many of these entrepreneurs, the new Coronavirus means more than social restrictions. They are being forced to face an unprecedented situation which could lead to insolvency.
In a call launched over the internet, the entrepreneurs are stating that this is not the time for an economical shut-down. It’s not the time to closes businesses or to send people into furlough. It’s high time they worked together and made new, stronger partnerships.
‘We have a small company which delivers trainings, organizes events and offers consultancy and our numbers went down 100%.’ said Ligia Neacsu, the owner of Best Smart Consulting. ‘Most of the small enterprises with touristic activity, event organising, training and consultancy are collapsing. We might be on the brink of insolvency. We are really looking forward to going on with our activity, to paying salaries to our employees who have families and bills to pay. They cannot live with the money that the state is offering. We want to continue paying our taxes, to ensure the state with funds meant to help fight the pandemic. We are up for the fight.’ she continues.
Just as Ligia, there are many entrepreneurs who are trying to reconfigure their businesses.
A lot of companies will fight for survival in the next period of time because not all of them have resources for the longer term to pay their employees. Romania was quite a lot sustained by the consumers, but this kind of consumption is decreasing because the consumers stopped cashing from their previous sources of income and the supply chain was also affected. ‘Each antrepreneur has to reinvent his or her business, come up with new services deriving from their main area of activity and identify new markets.’ Valentin Radulescu, PRINTMAG manager mentioned.
‘To cope well with the present situation, some specialized associations like HORA, FIHR, ANAT, UNTRR or FORT are maintaining the players in a collaborative work relation which is meant to make them stand together in front of this common enemy. There is a series of measures which could help the industry, like tax exemption or postponing the payment of the taxes until after the crisis. ANAF already announced that they will accelerate the payment of the VAT and that they will suspend the execution of the receivables. Every day new measures are being communicated as a consequence of the state of emergency. There are also solutions but they are limited. First of all, the operators have to evaluate the available budget and to asses if they will maintain an open business. Ideally they should see if they could identify adjacent sources of income which could allow them to remain part of the market. It can be takeaway food, food delivery, private cooking, catering or bakery -activities which not only bring income but also maintain the market.’ Ionut Ivan, founder of Fabrica Ospitalitatii (Red Angus) explained.
‘Retail, services, transportation, consultancy. Lots of businessmen reconfigured their businesses thinking that the restrictions would not be over in the middle of the month of April. Small producers of fruit and vegetables started promoting themselves on the internet, the restaurants came up with home-delivery services using their personnel as delivery people, some others started selling their products using specialized websites and platforms. Everybody is trying to maintain their business, not to surrender and to force the employees into furlough.’ Adrian Negrescu from Frames explained.
According to a survey delivered by MiniCRM among Romanian entrepreneurs, between the 1st and 20th of march, 77% of the companies already noted a loss in their income caused by the crisis. 45% of these companies faced major loss. Moreover, 84% of them are expecting negative numbers in the following two to three months, which is in contrast with how prepared these companies are at the moment.
THE TRAP OF DESPAIR
Unfortunately, out of desperation and out of lack of orders, a lot of companies started offering their services for free. ‘I understand them; they believe that by offering free services they will also get some paid contracts or they want to see what are companies are fighting with and try to occupy their market segment as well.’ Ligia Neacsu said.
According to Ligia, the free services are no more than a trap which can rapidly lead to insolvency. ‘How can you pay salaries? How can you pay the bills? Such offers, from my point of view, should not be promoted because, they will, most likely, promote the underground economy. People will start again working without a contract, without papers, and whom are also benefiting from the money the state is paying. We have to avoid such situations.’ she added.
According to the MiniCRM survey which had 246 responses from entrepreneurs conducting smallers businesses, 81% of the companies faced difficulties with their partners and suppliers. More than that, 36% of them are facing serious issues.
According to Frames, the danger of an increqasing underground economy is quite substiantial. ‘We have indicators from various domains that, as a consequence of the state offering financial benefits in combination with furlough, there is a significant number of businessmen who have officialy closed their businesses just to take advantage of these benefits and started offering their services on the black market, without paying taxes. This is not the way to go through the crisis, this is not the way to go through this unprecendented situation.’
‘This kind of instability brings with itself an international financial crisis as many analysts are already informing, so this is why it is very important to concentrate on both our businesses and the bigger picture also. I also believe that the state’s interventions are going to play a very important role in determining the consequences of this period of time.’ the founder of Fabrica Ospitalitatii (Red Angus), Ionut Ivan, claims.
FURLOUGH SHOULD BE NOT THE PRIMARY BUT THE LAST SOLUTION
A lot of entrepreneurs are asking themselves what is it that they can do in this kind of situation. According to Ligia Neacsu, the companies have the option to develop a new range of cheaper services meant to keep them afloat.
‘From among the restaurants, the ones providing fine dining services were the most affected, because they don’t really have many choices. The ones specialized in more casual dishes had to come out of the comfort zone and go into delivery, takeaway and catering. This kind of change means a lot of alterations in terms of menus – dishes especially created in order to cope well with the transporation, which can be eaten at home in optimal conditions etc. – production and delivery flows and others. Even the payment methods have to be different because both the operators and the customers prefer the safer contactless payment which doesn’t involve bills.’ Ionut Ivan, founder of Fabrica Ospitalitatii explains.
‘We decided not to offer our services for free, but to develop new prices which will help me cover my bills. I want to be able to support the salaries of my employees, to be able to pay my taxes, to be able to pay my suppliers: CRM, internet, phones, etc. I think that this is how we can actually support the economy, by paying full salaries and not 75%, so that my employees and their families can, too, pay their taxes and this way help the state have resources to fight the virus, so that my providers wouldn’t need to reduce their business and, therefore, have with whome negociate services after the crisis’, the entrepreneur said.
‘If I don’t keep my firm active, in just a few months, when I will go buy some copy paper, I will end up paying for its weight in gold. I don’t want us to end up in that situation when only the big players to establish the prices and me not to have negotiation power just because I am a small entrepreneur and not matter as much.’ Ligia Neacsu said.
According to Frame analysts, the Romanian business world needs, more than ever, to come together. ‘Except for the furlough facilities, we want to have subsidized interest line of financing. The business environment needs, first of all, money, cashflow, so that you can, as an entrepreneur; to be able to discuss with the bank and obtain a quick line of financing, to have the resources to continue with your production, to reconfigure the business, to become active in the online, to continue offering your services. Furlough has to be the last resort, not the first one as now is.’ Adrian Negrescu, manager of Frames,said.
BUY ROMANIAN PRODUCTS
Ligia Neacsu and other entrepreneurs who are sharing her opinions are currently working on an online business platform were offer and demand can meet in a simple and efficient way. From products and services presentation, to courses and business tutorials, the entrepreneurs want to share their knowledge and share their resources in order to support the economy.
‘I want to believe that we are mature enough not to let ourselves worn out by this period of time, that we are a force and that we have something to say. Let’s get together and go on with our activity but without exploiting, just to target the mere coverage our our expenses’, the entrepreneur says.
Recently, on the economical forums in social media, this trend of buying romanian produce has grown a lot and it became even more relevant. From small producers to training and consultancy service, the entrepreneurs are being advised to support the local business environment.
‘We have such a fragile economy with a very dregree of capitalization. Except for the multinational companies which have a very positive, important role in our economy, more than 80% of the companies are lacking capital, and financial dependancy is very high. Left aside the ones whose activity was stopped by the military ordinance, the entrepreneurs from the other sectors should find ways to work togeher, to support their employees and not fall into the trap of drastic measures – personnel reduction, not paying the suppliers’, Frames analysts claim.
According to some estimates made by a consulting company, paying the bills and taxes might get extended to 4 or 5 months, unlike now, when it takes up to 3 months. ‘Once the financial flows get stuck, the economy is due to fall like a sandcastle.’ Negrescu said.
Signed
LIGIA NEACŞU
