SARS Has Negative, Positive Impact on Small Business
As with the war in Iraq, entrepreneurs are feeling the impact of a deadly disease but also finding ways to benefit.
Since the first cases of Severe Acute Respiratory Syndrome (SARS) appeared in China in November, the world has been contemplating what exactly the impact will be of this outbreak, with nearly 4,300 cases and 250 deaths worldwide to date. The business community is also taking a hit, with travel limited, shops losing customers and manufacturing plants missing workers.
As international health agencies continue to update travel alerts for regions of Asia and North America, vacations are being canceled, hurting a variety of travel-related industries. Business travelers are also putting their travel plans on hold, costing many companies time with partners, workers and clients.
"People are flying, but on a 'must travel' basis," says Matt Bennett, editor and publisher of FirstClassFlyer.com, a site providing tips to business and first class travelers. "It's important to remember, though, that while traffic on some routes across the Pacific is down as much as 25 percent, that means three out of four people are still taking their trips to Asia."
Those who aren't traveling are relying on videoconferencing or just waiting the situation out. "Inability to travel freely in Asia is causing technology suppliers to rethink how they sell, service and support," says Peter Kastner, chief researcher with Aberdeen Group, a Boston-based IT marketing analysis and positioning services firm.
In addition to travel disruptions, tech companies also have to deal with manufacturing delays: "The People's Republic of China is a $100 billion producer of electronics components, assemblies and finished goods," Kastner explains. "If business is disrupted, this will have a severe negative impact on global supply." To combat this, some companies are looking to suppliers outside Asia.
What's more, the IPO market is also bracing itself for the ill effects of SARS. In putting together its IPO prospectus recently, Santa Clara, California, networking products company Netgear Inc. listed SARS as a "risk factor," stating the illness "may have a negative impact on our operations," according to a Dow Jones report. This listing, though, is more a precaution than a declaration.
"Companies must address risk factors that could materially impact the value of an investment in the company's equity," says Bryan Armstrong, executive vice president of Ashton Partners, a Chicago-based investor relations and corporate communications firm. "Given the nebulous meaning of materiality, it is conceivable that companies are including SARS as a potential risk factor given its impact to investor and consumer confidence."
Whether SARS will have a negative impact on IPOs is still debatable. "I put SARS as a risk factor in the category of stupid risk factors to list in the prospectus, just like the Y2K problem was a stupid risk factor in 1999 prospectuses," says Jay R. Ritter, Cordell professor of finance at the University of Florida in Gainesville. "Of course it is a potential problem that could hit some businesses, such as tourism, very severely if it gets out of hand."
It's Not All
Not all businesses are feeling negative effects from SARS, however. Jeremy Shepherd, owner of Pearl Paradise.com, an online pearl reseller, is actually seeing increased opportunities since the outbreak. "We typically purchase from many small pearl farms [in Asia] that produce a limited number of the quality pearls we need, [and] what we have faced in the past are multiple buyers vying for the best pearls," Shepherd says. "Over the past months, the buyers have ceased visiting these farms, [and] for the first time the farms are fighting for the few buyers' business and prices are dropping rapidly."
Shepherd is eager to take advantage of this situation. "I am personally traveling to Asia at the end of [April], and will, of course, be taking precautions while there," he says. "I've read the CDC's reports regarding SARS; I do feel comfortable with my decision and am not very worried."
Missy Cohen-Fyffe has felt the indirect benefits of SARS for her Pelham, New Hampshire-based company, Babe Ease LLC, manufacturer of Clean Shopper, a cotton quilted glove that fits over the seat, handle and metal area of shopping carts, protecting babies and toddlers from bacteria. "SARS has had a positive impact on our business simply because it is a virus that appears to be transmitted through human contact," says Cohen-Fyffe. "Many of our customers are extremely aware of disease-causing bacteria and how those germs are transmitted to their babies; if there is a way to prevent the spread of germs, our customers want to know."
As awareness of SARS has increased, so has traffic to Cohen-Fyffe's site. "We first noticed the change in mid-March when traffic to our site increased dramatically," she says. "Typically we receive 5,000 hits per month--for March, the number was 6,700. Several customers actually asked if the Clean Shopper could protect against SARS. While we explained that the Clean Shopper is really designed to protect against germs associated with shopping carts, we still made those sales."
Though Cohen-Fyffe understands the long-term impact of SARS on her business (more hits to her site means more sales means more potential customers will see her product), for most businesses the question of what's next still hangs in the air. "Until we get a better handle on this virus that is still not very well-understood, the long-term impact is too difficult to determine," FirstClassFlyer.com's Bennett says.
|With every crisis, there's a silver lining. Entrepreneurs are also making lemonade out of the war in Iraq, either by supporting the troops, or by bidding on subcontracts for the reconstruction of Iraq.|
Entrepreneur Editors' Picks
These Co-Founders Are Using 'Quiet Confidence' to Flip the Script on Cutthroat Startup Culture and Make Their Mark on a $46 Billion Industry
My 7-Year-Old Daughter Started Selling Eggs. Here's What She Taught Me About Running a Startup.
Why You Need to Become an Inclusive Leader (and How to Do It)
Career Transitions You Can Make in Your 40s and 50s
Billionaire Naveen Jain Is an Expert at Disrupting Fields He Has No Experience In. His Secret Sauce for Building Multi-Million Dollar Companies? 'You Have to Come as Naive.'
4 Principles to Develop Next-Level Leadership at Your Company
This Filipino American Founder Is Disrupting the Beverage Aisle by Introducing New Flavors to the Crowded Bubbly Water Market