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Models of companies’ losses
Example 1 – Mr. Novák (company with 2 employees)
Mr. Novák is a master shoemaker and bagmaker, he has a shop where he sells leather goods both of his own and others making. Besides, Mr. Novák sews custom-made leather accessories and does small repairs. He employs one helper and a shop assistant. Apart from wages and employees’ insurance premiums payments, he has to pay the rent and also energy, water and Internet bills, same as propellants. He pays other suppliers for material and goods which he then sells in his shop. Besides all this, he pays by instalments the maintenance of his manufacturing equipment, amortizes an investment he made 3 months ago and he also pays for leasing, his two credits and his insurance. Every month he has to pay a rather big sum consisting of tax payments to the State. In case of a successful month, Mr. Novák earns 1.000.000 Czech crowns which afterwards converts into 130.000 Czech crowns of net profit.
Abiding by the Government decision, Mr. Novák had to close his shop on March 14th, 2020. Up to that date he did earn some money, however, it could have been better. Thankfully, he managed to make an arrangement with his suppliers to cancel his next orders for goods and materials, so, in both cases he paid only half the sum he pays normally. Unfortunately, he could not alter any of the other expenses, practically, he found himself day-to-day without any income and on the top of it with a loss of 360.000 Czech crowns!
Mr. Novák’s shop still has to be closed. It is a second month already when he does not have any income and, therefore, his family of four has to live solely on the parental allowance of his wife. Mr. Novák did not buy any new goods or material, however, he still has to pay all the other expenses, so, for the month of April he recorded a loss of 450.000 Czech crowns. Together with March his total loss amounts to 810.000 Czech crowns! All the savings and reserves were already used. It is certain that without any help Mr. Novák’s business activity will not recover.
Example 2 – Mr. Dvořák (company with 40 employees)
Mr. Dvořák is Mr. Novák’s competitor, he is also doing business in the field of leather haberdashery for the last 20 years, and, moreover, he is a successful manager. He has a small company of 40 employees in production and of a network of shops and express repairs of shoes in various towns in the Czech Republic. He sells a whole range of brand leather products and also original products designed and made by his own employees. His biggest expense items are the tax payments, also the goods he sells afterwards and the material. It goes without saying Mr. Dvořák pays wages to his employees, rent for his workshop with fitting and for all his shops, he also pays other bills as for example the ones for phone or Internet. Mr. Dvořák also did not want to stay behind, therefore, last year, he invested a rather large sum into new machines and equipment which enables a more efficient and environment friendly production. Now he amortizes this investment and pays for leasing and his credits. If everything goes well, Mr. Dvořák earns 16.000.000 Czech crowns while he will be left with 1.000.000 Czech crowns for him, his family and further necessary investments into his company.
Abiding by the Government decision, Mr. Dvořák had to close the whole network of his shops on March 14th, 2020. However, he did not earn from the beginning of March even a half of the takings he does during a successful month. The material and goods are delivered to him by suppliers 4 times a month – Mr. Dvořák succeeded in arranging for cancellation of two of the planned orders for March and, therefore, paid only half the expenses he pays normally. Other expenses, the wages for employees he sent home on the grounds of obstacles at work included, however, had to be paid in their entirety. In practice, he instantly found himself without any income, nonetheless, with a loss of 5.700.000 Czech crowns!
All the Mr. Dvořák’s shops have to be closed – all 40 of his employees are still at home while receiving full wages. Mr. Dvořák did not buy any new material or goods, eventhough, he recorded a loss of 8.400.000 Czech crowns only for the month of April. Together with March his total loss amounts to 14.100.000 Czech crowns! Apart from being without any income himself, he used all his reserves and savings and, moreover, deeply indebted both himself and his family. He is desperate, his company he was polishing and refining for the past 20 years is seriously endangered by bankruptcy. His fear is shared in the form of the fear of job loss by his employees and their families.