Transition from Fixed Expenses to Variable Expenses in Times of Crisis
A pharmaceutical importer I spoke with this week told me, “In the era of COVID-19, those who are smart enough to transition from fixed expenses to variable expenses will succeed.” He’s right. The coronavirus pandemic has created uncertainty in the international market and certainly in the Israeli market. “Take my industry, for example,” explained Ben Shichi. “Businesses that used to roll smoothly and manage fairly well suddenly started feeling cash flow pressure with the outbreak of the coronavirus crisis. Suddenly, there were delays in payments, shipments got stuck, but the expenses – what can you do, they keep piling up.”
In an era of uncertainty, volatility, and concerns for many businesses, we examined how businesses and companies can cope with the crisis and what existing solutions in the field allow almost any business to weather the storm. Alongside large businesses that are largely surviving the COVID-19 crisis and some even prospering, there are many small and medium-sized businesses suffering from instability during this crisis. Lockdowns, delays in the arrival of raw materials, port closures, the increase in air freight costs, and even changes in consumer habits create significant volatility and, of course, cash flow difficulties. This is happening not only in Israel but worldwide.
In the field, managers in various businesses are forced to deal with uncertainty, such as in managing their human resources. Questions like, “Should we lay off employees temporarily? And if so, how many? And if we suddenly need them, how do we bring them back and for how long?” arise repeatedly without clear answers. And we haven’t even discussed the gathering and delivery of goods, raw materials and products, storage, and inventory management. In short, it’s a significant headache and risk management. All of this, of course, directly affects these businesses’ ability to price their products accurately and ultimately impacts their bottom line.
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