The impact of the pandemic, felt more brutally in the case of small companies. Half of the managers claim that they have been affected by Covid-19, and business decline is twice as large as in the case of large companies.
- Decline in the business of small companies, 20% in Q4, compared to 10% in the case of major players
- Half of the managers of small companies claim that they had problems with working capital
- Managers of small companies estimate in 2021 an increase in turnover by only 1%, while larger companies expect a 5% growth
Companies with a turnover of less than EUR 100,000 per year have felt more brutally the effects of the pandemic last year, half of the managers considering that their own companies are affected by Covid-19, and business decline is, in this case, of 20% in Q4/2020 compared to Q2/2020, according to CONFIDEX Q4 2020 – companies under 100.000 results made public by Impetum Group. Moreover, the increase in turnover, estimated for 2021 as compared to 2020 is by around 5 times smaller in the case of small companies, as compared to major players (1% vs. 5%).
Therefore, managers of small companies perceive more acutely the impact of the crisis generated by the pandemic and have a lower average mood indicator than those in larger companies: 4.6 versus 4.9. The difference in terms of profit decline in Q4/2020 vs. Q2/2020 is enlightening in this regard: minus 22% for small companies and only 12% for large companies. Moreover, the profit is expected to continue to fall for smaller players, by 4% in 2021, while large companies already estimate growth for this year.
“The survey shows us that the size of a company is relevant, especially in the difficult periods of the economy. Therefore, companies with a turnover of less than EUR 100,000 per year have felt much more severely the effects of the pandemic, and the return is perceived as more distant. Moreover, most of them expect a decrease in profit this year, while major players already estimate an advance thereof, says Andrei Cionca (photo), CEO & Co-founder of Impetum Group.
„From our point of view, this is a key moment for small companies, because they have the opportunity of taking a big step towards an entrepreneurial culture based on partnership to get through this crisis”, concluded Andrei Cionca.
Difficulties in the cash flow area are obvious, half of the managers claiming that they had problems with working capital. Under these circumstances, only 10% of the managers of small companies are relaxed or very relaxed in terms of how the national economy evolves, while 19% of them are concerned or very concerned.
Romanian managers are prudent for 2021 and don’t have high hopes regarding the vaccination campaign
Small companies are less confident than the large ones in terms of the positive effect of the vaccination campaign on the economy and on their own business. Therefore, only 66% of them think that it will have a positive impact on their own business, compared to 73% in the case of large companies.
”The more pessimistic vision of small entrepreneurs is also seen in the way they look at the impact on a larger scale, beyond their own yard. Therefore, approximately 80% of the managers of small companies consider that economies (global, European and national) are affected to a “large” and “very large” extent, compared to 74% in the case of larger companies“, Andrei Cionca, CEO & Co-founder Impetum Group, also said.
At the same time, small companies don’t have an equally solid basis for recovery in 2021, given that the main measures taken during the pandemic targeted the reduction of staff recruitment and cutting marketing and research expenses, as well as investments.
Digitization, a more important priority than access to loans
The pandemic has revealed the importance of digitization, more than ever, so that it ranks 5 in the top of priorities, even before access to loans. On the first places, as it was expected, is the increase in sales and keeping jobs, followed by the improvement of the relationship with clients and investments.
However, small entrepreneurs expect a recovery of demand this year and claim that they are rather focused on increasing productivity, to the detriment of cutting costs. Moreover, at least from statements, the pandemic becomes the catalyst for a paradigm shift in business: 64% say that the pandemic will generate enhanced innovation at company level and 71% talk about rethinking the strategy.
Managers of small companies estimate a recovery of the economy in 2 years and 5 months, but of the own company in less than 2 years. As regards the financial instruments necessary for recovery, reinvesting the profit and the supplier’s credit are mentioned the most often by the small entrepreneurs.
Methodology and prospects
Initiated shortly after the start of the pandemic, CONFIDEX measures the confidence of Romanian managers in the current economy and is aimed at creating concrete milestones for businesses and supporting the business environment in making decisions adapted to reality.
In CONFIDEX campaign of measurement of Romanian managers’ perception on the business environment in Q4/2020, 180 managers with companies with turnovers of less than EUR 100,000 have chosen to fill in the questionnaire, although their profile was not in the CONFIDEX sample.
The CONFIDEX Q4/2020 survey includes the answers of over 900 managers in companies with turnovers of over EUR 100,000 and 180 managers in companies with turnovers of less than EUR 100,000 in top 7 categories of economic sectors contributing to GDP: agriculture; industry and electricity; constructions, trade; HORECA; transport; distribution; storage; services. The survey was answered only by CEOs or C-level managers, and out of the targeted companies 75% have over EUR 1 million turnover and 31% over EUR 5 million turnover.
CONFIDEX index is made up from the aggregation of 29 items and measures on a 0 to 100 points scale the confidence in economy of the Romanian managers and entrepreneurs.