The Engine of the Economy

Panama's economy is practically under normal conditions (besides wearing facemasks all the time and a lot of unemployment). We can go out on Sundays now, which will create a little more demand in the country. However, with unemployment still hovering around 20%, there is not much to expect, so you have to resort to many tricks to reach the pockets of those who have work, money and who can generate some demand. So, what can we do now? Let's begin to delve into the details of what entrepreneurs can do to first survive and open, and then gradually return to normal conditions.

One of the new trends that are resulting from the pandemic is that, as the Americans say, "less is more". From there to that at this moment we are seeing how large corporations are looking to reduce their operation, but not reducing without analyzing it, but they are looking for technological solutions for process issues that before they preferred not to change, but that the pandemic has made you rethink and activate Its use.

We will continue to see that banks close branches totally unnecessary to provide their service to the public, huge stores will tend to decrease in size, they will try to sell their products and services electronically, new ventures will emerge with lower costs and that will be able to offer low prices, in short, the business game is going to change radically. We have to adjust our model, looking for efficiencies, productivity, and better prices.

A financial plan is essential to establish the parameters necessary to open your business. You have to have a good eye to know what is happening, what customers want, how much they are willing to spend, who are willing to spend, and under what conditions they would spend. You have to do a lot of research to see where there may be savings that allow you to move forward and stick to your financial plan until things improve and you can change something about the plan. However, I remind you that the world has changed, and we have to adapt to the new things that are happening.

In order to make good decisions, you must have information about the company. Many have made the decision not to open yet, waiting for demand to rise. But how do you make that kind of decision? The first thing is to calculate that it costs you less, whether to keep the company closed, taking advantage of the fact that you can keep the employees on contract suspension until December (for now), or open little by little, and start producing to generate income to open more later on, with some more money.

But this decision is subject to a more important one, can I endure until the demand takes off? Is that, if you do not see the conditions for your company to survive, you will have to make the most sensible decision and close it completely (obviously if you do not have the funds to support this, this is the right decision) or change the business model or change of business.

If you decide to open, the next question is: now what? The first thing is to know how to generate the income you need. And here the issue of demand is fundamental. You have to ask yourself, is it necessary to lower prices? If I lower my prices, will I have more quantity demanded? And if I lower prices, how much can I lower them to avoid losing money? How long do I keep prices low? These are essential questions to continue determining what your return to business would look like.

If you decide to go ahead with the opening, can you keep prices low and pay your current debts? Now we must notify everyone that we are open. If you don't have a lot of money, I hope I already have a lot of followers on social media. It is the social networks that can help us to activate our clients, with a relatively low or no cost, and with good effectiveness.

If you want to be something more creative, you can do cheap activations with your staff, inviting customers to enter your business, make your signs to notify promotions/discounts, make noise about your reopening, you have to attract customers who have income.

You have to remember something very important, the more expensive your product is, the more difficult it will be for it to be sold in a negative economic environment, like the one we are experiencing at the moment coming out of quarantine. But this crisis is not a crisis of economic fundamentals (as in 1995, 2001, 2008 for instance), it is a health crisis, with different edges that lead to a drop in demand and high unemployment. Investors will be eager to find where to invest their money, and this transforms into more jobs, more wealth, and more demand. It is a matter of time (sometimes a very short time).

Once they have reviewed their income, it is the turn of the costs, and here the most logical answer is to look for the best supplier and the best possible price to buy the products or raw materials to transform into sales since the decision of the selling price to offer will be based on how much they are my costs. Here we have to review the type of raw material products to use, and who will you buy it from. And, if your clientele is not so prone to the quality of the raw material/product, and what you are looking for is a price, you also have to look for the same thing that your customers are looking for (at least at this moment). If your clientele is waiting for quality, then your search is somewhat tougher.

The last thing you are going to check is your expenses, and here we have a lot to check. The first question, are you performing an efficient and productive process? And it is that this question is essential to save costs and expenses. Here you may ask, how can I make my process much better? That is, faster, in fewer steps, and with fewer people.

Do you have the right amount of people to do the job, without meaning that you are abusing your employees? And here "rightsizing" comes into play. And it is not that we are recommending you fire your employees, but that you have the right amount of employees to survive.

Another important question. Do I need to have a local for the operation, or can you have a virtual operation? Or maybe you can have a blended operation. Or people working on the premises and others in their homes. We must remember that the fewer people you have in an office, the more easily you can comply with sanitary measures. But also, it needs less space for its operation, and it will save money in rent, in public services (electricity, telephone, water, cafeteria, cleaning).

In the case of companies where there is only one owner, it is very common to see how they mix their personal expenses with the operations of their companies. And although the idea is not to tell them what to do with their companies, but to give them tips on how to stay in the market, this is not the time to mix things up, much less make decisions as such. A healthy recommendation is to establish a salary, with which they can live, in such a way that the company has the "pressure" on a fixed salary and not on their expenses. Also, you would be avoiding problems with the treasury/taxes, and also, I remind you that personal taxes are lower than business taxes in Panama.

And the other thing concerning this issue is that the owner of the company cannot pretend to maintain the same standard of living as before and force the company to pay for his personal expenses at these times when the economy is not quite good. On the contrary, if the company makes cuts, the owner of the company must do the same with his expenses. Your lifestyle must change if it depends only on the company.

The economy of Panama and the world is going to recover. One faster than the other. I am betting on the recovery of the local economy for many reasons, which I have already exposed previously. But it will not be instantaneous, and you have to deal with the business until this happens. Be patient, be cautious, the important thing is that the company survives so that later the company can hire staff again and make its contribution to the economy. But in the end, everything will go back to normal, you only have to survive until everything is normal again, the rest will fall into place by itself.