Covid Report: Do I close my business or not?

Covid Report: Do I close my business or not?

If one is informed through the National Institute of Statistics (INE), one can now conclude on July 22, 2020 things like the following:

“The Harmonized Business Confidence Index (HBI) is maintained in the third quarter of 2020 with respect to the second quarter”. . . .

“. . . . . . 7% of business establishments forecast a favourable quarter and 54. 9% are pessimistic about the progress of their business”

“. . . . . 66,1% of businesses remained open during the state of alarm and of these, approximately two out of three saw their sales reduced, according to the survey published this Friday by the National Statistics Institute (INE) on the impact of confinement on the various economic sectors.

Reviewing its website (www. ine. es), the INE data reveal that only 6. 5% of the establishments have increased their activity during the months of the state of alarm, although in the case of commerce it rises to 13. 1%.

Almost 70% of the companies had to reorganize or reduce the working hours of their workers during the state of alarm, a percentage that rises to almost 80% in the case of industry.

The statistics reveal that nearly 40% of companies have taken advantage of a Temporary Employment Regulation (ERTE) file for all or part of their workers, a percentage that exceeds 50% in the transport and hotel industry branches.

— “This is all very well but I, who have a small restaurant, without a terrace with room for thirty diners, which with the new safety distances are reduced to 17, with one employee and one extra. I can’t get the numbers. What do I do? a client asks me.

— “I don’t know if I can even close. I have debts and three employees. ” – another one continues.

When a business is started, a business plan is drawn up. A projection of what needs to be invoiced to cover costs and obtain a margin on them, taking into account as realistically as possible the market situation and business possibilities. Optimal, medium and bad scenarios are made. These business plans are usually made with illusion and great effort and we always recommend that with much rigor because it is the basis of generating confidence in investors, but it is also the true thermometer of the life of the business and if it gives signs of “fever” should force to act quickly on pain of the business itself sick irreversibly.

When the investors are Investment Funds or companies or people used to placing capital in other people’s companies it is easy to cut corners when business is not going well. Moreover, the good manager if after a prudent period of time fixed in advance the business is not “of age” – that is, profitable – considers that investment in that site as lost and focuses on sending capital to another site. Just like that.

In AVERUM  Abogados we know that for the small businessman or professional his business, or his shop, or his office is not a land where to sow capital and go to the end of the year to collect fruits. Not at all. It’s more like the little garden next to your house from whose fruits you and your family live. It’s the only way to make a living that you know well.

For the investor, closing a store is a stone in the path of his capital. For the self-employed or small business owner, it’s a stop to walking.

And of course, who is so objective, so cold and calculating with himself when things get ugly to decide without fear of closing the business he and his family live from?

But the truth is that sometimes closing is the best way out. The opinion of an honest and experienced third party can help. And if one decides to close, and only then, one discovers that closing also requires a “strategic closing plan” with a realistic inventory of assets and liabilities, of responsibilities with third parties and with a formal work of negotiation with one and another to be able to close the page without the errors or debts of the past pursuing us the rest of our days.

It is a job that combines economic work to assess the possibilities of continuing or not and also legal work to close not only the business but the responsibilities with it acquired. And it can be done. And you can start over without being “marked” by the fatality of a past project that didn’t come out.

And at AVERUM Abogados we can help you decide.

I would like to recall here something that is not without its fascination for me. Mr. Ford changed the world nearly a hundred years ago with its Ford-T model. Mass production of affordable motor vehicles. Cities and roads had to be paved. The scale economy with production chains in car factories was used for other products and export, the volume of large companies, marketing . . . . . . . . . . . everything changed.

Well, the T is the 21st letter of the alphabet and was Mr. Ford’s 21st attempt to create a successful prototype car. The previous twenty times he didn’t make it.

Are there or are there not second chances?