SMEs have asked Dr Zero Cost basically two questions:
1st question: Should I relocate my manufacturing plant to another municipality in 2017?
The answer is: It depends.
But, it depends on what? It depends on some variables for you to make a decision. Making an all-out effort to enter such variables in a spreadsheet, comparing each municipality’s scoring and making a conscious decision.
Besides variables, other actions must be implemented for a SME to stand a chance of succeeding in 2017.
SMEs must strive for their survival in 2017, but what about growth?
Suggestion: Decrease costs and expand customers’ portfolio advises Dr.ZeroCost.
Except for the variables above, which will address in another article, there are important actions to consider:
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Being sustainable will align the SME to the guidelines of the newest generations.
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The market is dynamic, customers are more and more volatile, therefore, monitoring market is critical. Staying tuned with new trends.
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Internal processes can always be improved, and often an outside view may help effectively adjust them.
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Investing in the company is a survival must for it not to be obsolete and outside the market, IT investments are more and more necessary and essential.
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Governance is trendy, but it’s a trend that’s here to stay. Generally, the customer will no longer let anyone deceive them. Therefore, transparency and ethics are part of this win-win game.
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The team, or the best players in the team, must be kept. Often “apple polishers” are confused with competent people, one needs to separate the sheep from the goats.
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Culture, race, gender, and age diversity must be observed so that innovation has a fertile ground to flourish.
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If possible, since it’s not always possible, investing in Research & Development may set a SME apart from another SME and be crucial to success or failure.
And the question, to relocate or not to relocate to another municipality? Variables related to SMEs have different weights for each SME, that is, they depend on which a SME focuses on. For instance, if a SME is a service provider, a municipality with a 2% rate of ISSqn [tax on services] may result in a significant different when compare to a municipality with a 5% rate. Therefore, a SME must assign a higher weight to the municipality that offers a lower tax burden. On the other hand, if a SME is wages sensitive, as its employability is extensive, a municipality with lower wages must be more attractive. Another variable may be displacement, cities such as São Paulo impose significant costs when frequent displacement is needed, and so on.
The location or municipality with the higher score will have the privilege to host the SME in 2017.
The 2nd question asked to Dr.ZeroCost: And should I invest in land and relocation for my company with the interests paid by Brazilian Treasury Securities?
Relocating the company is not a short-term decision, it’s something to be planned, a strategic decision that must be accompanied with a feasibility study to confirm the costs saving, that is, whether the company will be better financially thanks to the relocation, and more competitive to face a future crisis.
When comparing current interests paid by banks versus new assets, such as land/plots, of course that interests will always be better rated financially, since Brazil faces an unusual situation. Today, assets deposited in bank yields way more than producing something; but this reality can’t be maintained, it’s not sustainable – if things were like that, businessmen should sell their businesses, deposit the money in the bank, and go home.
On the other hand, land and plot costs have never been so interesting. The thing is that businessmen have been taking a conservative approach, as they don’t want to take the risk. That’s fine, this is a personal decision, but they must be aware that when things change, that is, interest rates drop and credit is available again, land and plot prices will climb, and an opportunity may have been missed.
2017 seems to be the inflection point, where we go from a negative GDP to a next-to-zero GDP, and this change will have reverted the current scenario. This is a cyclic story!
If it was easy to decide, we would not be entrepreneurs!
Above, you can check the regional GDP of the 15 largest Brazilian regions, and the local GDP of all Brazilian regions (database 2012).
List of Brazilian metropolitan areas by GDP
This attachment lists Brazilian Metropolitan Areas by Nominal Gross Domestic Product (GDP), that is, the sum of the nominal GDP of all the municipalities that comprise Brazilian metropolitan areas, at current prices and relative and accumulated percentage participation in 2012, according to Instituto Brasileiro de Geografia e Estatística [Brazilian institute of geography and statistics] (IBGE).[1]This list provides Brazilian metropolitan areas with a GDP above BRL 5 billion. .[1]
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