• Ian Paul Otero

Covid-19 and entrepreneurs

As I write this blog, there are more than 120,000 cases of covid-19 in 114 countries, with a mortality rate of more than 3.5 percent and an alarming infection rate, increasing thirteenfold in the last two weeks.

If we add to that the socio-political situation in the Middle East and its trade disagreement with Russia that has led to a fall in the international price of oil to levels not seen since 1991 and that this is happening in a scenario of economic slowdown as a result of trade frictions between the United States and China, we could be facing a perfect storm for both micro and small businesses and entrepreneurs in the country.

While it is true that the Government must urgently propose, with ingenuity and effectiveness, public policies that facilitate access to financing for the most vulnerable companies; generate incentives for productive investment and devise schemes to preserve jobs; it is also true that we as companies must assume the responsibility of achieving the sustainability of our businesses regardless of what the Government does.

It's critical that we address the recommendations of the authorities (at least those who are taking the issue seriously) such as implementing measures that promote the health and care of employees and their respective families, working remotely, and avoiding massive events and extendable or non-priority travel. All of the above is important, but what is also essential to the company is having a business continuity plan, a plan that is communicated to employees in a timely manner and foresees preventive measures in the operational dynamics, as well as protocols to follow in the case that Covid-19 has a greater impact on the organization than expected.

In a situation like the current one, it is of the utmost importance to maintain prudence in the use of financial resources, keeping a controlled expense and taking care of the liquidity. We are in a time of economic uncertainty that prevents planning and measuring the impact on the performance of companies, so maintaining liquidity becomes a priority until there is stability in the market dynamics again. Additionally, I suggest giving yourself time to review your budgets in detail from a "zero-base", considering the effects of possible contract cancellations, decrease in sales, effects on available cash flow and complications in access to financing and capital. Identifying and segmenting critical operating expenses, customer acquisition, and growth expenses, research and development expenses (if any), and planned investments can help you make better decisions with more time to plan. It is important to prioritize activities that pay for the profitability of the business and wait for more certain times for risky bets.

Volatile environments undoubtedly generate opportunities. In crisis scenarios, large companies have been successful in adapting and innovating in critical moments. Let's bet then to be on that side of the statistics and not on the one that will reflect death rates that, if we do not take preventive measures, could be higher in companies than in people.

Ian Paul Otero is Managing Partner of Redwood Ventures

Follow him on twitter: @iotero

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