Planning and maintaining a small business through the coronavirus pandemic is not an easy task. Unlike larger corporations that have the ability to hire economists and scientists to predict the future and model how the business will survive, small businesses cannot afford such luxuries.
To help you out, this article takes a look at the most recent science behind the COVID-19 outbreak, and how you can start planning now to ensure that your business can get in on the economic rebound.
To start, let’s take a look at what scientists are saying about how long this CoV-2 virus is supposed to stick around.
More Likely Than Not, Coronavirus is Here to Stay
Eradicating a virus is dependent on several factors directly related to the virus’s ability to spread, replicate, and infect more people. Social distancing efforts, while effective at reducing this spread, is not enough on its own to completely eradicate a disease.
In fact, many epidemiologists and health professionals now recognize that this first wave of infection may be the “herald wave” – a term used by those who study tsunamis to describe the much smaller wave that hits before the tsunami.
For businesses, this will likely mean more social distancing and widespread economic shutdowns in the future.
How Much Social Distancing Will Be Required?
To understand just how long we will have to remain socially isolated and economically crippled in order to defeat this disease, researchers at Harvard give predictions based on previous viral outbreaks, public actions like social distancing, and epidemiological modeling. They state:
“…To mitigate the possibility of resurgences of infection, prolonged or intermittent periods of social distancing may be required. After the initial pandemic wave, SARS-CoV-2 might follow its closest genetic relative, SARS-CoV-1, and be eradicated by intensive public health measures after causing a brief but intense epidemic. Increasingly, public health authorities consider this scenario unlikely. Alternatively, the transmission of SARS-CoV-2 could resemble that of pandemic influenza by circulating seasonally after causing an initial global wave of infection.”
With this scenario in mind, the authors of the Harvard study give this dire warning:
“Under current critical care capacities … the overall duration of the SARS-CoV-2 epidemic could last into 2022, requiring social distancing measures to be in place between 25% and 75% of that time.”
Unfortunately, the only thing that can allow the economy to reopen without sacrificing millions of lives is an effective vaccine. Researchers note that because CoV-2 is such a novel, unique virus, it could be a long time before a vaccine is approved and distributed to the population. Specifically:
“Realistically, SARS-CoV-2 vaccines will not be available for another 12–18 months.”
Since this article was published in April 2020, it could be June 2021 before a safe and effective vaccine is widely distributed.
Cash is King: Prepare for A Long Road Ahead
If your business relies on foot traffic, directly serving customers, or high levels of cash flow through the economy, you should not take these warning lightly. Small businesses and those who have already lost out on this first wave of infection will only survive if they begin planning ahead now.
So, it’s best to prepare for the worst, hold onto your cash reserves, and assume that the next year or so will contain at least 1 more wave of viral infections and social distancing measures. While it is unclear whether this wave will be larger or smaller than previous outbreaks, there is significant reason to be worried.
Some scientists have estimated that 50% of the population would need to be infected by the virus before any sort of “herd immunity” was developed. Without a vaccine, that would mean billions of people would need to be infected before a reduction in infections was seen. This also means that when social distancing is relaxed, the virus will be posed to make a violent expansion through the population. In the U.S. alone, this could mean millions of deaths.
Since it is highly unlikely that the global economy could even function with these high rates of infection and death, governments are likely to continue employing social distancing measures at a high level every time infections begin to spike.
Don’t Forget About Foreign Exchange Rates
As we have already seen with this first pandemic wave, exchange rates are going to swing wildly as the viral outbreak affects different countries through multiple waves of infection. For businesses dealing internationally, this could mean huge problems in cash flow and profit as these exchange rates change drastically.
One way to protect your business: Forward Contracts
A currency forward contract is simply a contract between parties that specifies an agreed-upon price for a specific item – only in the future. Using a forward contract, you can specify a reasonable exchange rate, regardless of what the actual exchange rate will actually be.
In a sense, forwards contracts are a bit like eliminating the gambling on the future price of a product and the exchange rates between companies. The buyer essentially wants to set a price adequate for his business FX needs, while the seller banks on the market value increasing more than the price they agreed to in the forward contract.
However, in a much more realistic sense, forward contracts introduce a level of stability into a working relationship that ensures both parties are satisfied with the outcome. With a good forward contract, both the buyer and seller can set it and forget it. Regardless of future fluctuations in foreign exchange rates and prices, forward contracts can ensure that the buyer gets the products they need while the seller can rest assured they will get a good price.