Second semester arrives with uncertainties for small and medium enterprise

GDP shows service sector on the rise, but followed by inflation and expensive credit

The second half of 2022 has become the place every entrepreneur would like to be. Throughout the pandemic, this period was pointed out as the moment of normalization of activities. Now, just a few days into the second half of the year, the situation is not as progressing as expected.

“Unfortunately, there is no miracle in the economy, we are reaping almost two years of reduced production due to the pandemic, and the increase in consumption causes prices to rise”, says Pedro Almeida, director of Multiplicando Sucessos, a consultancy specializing in franchising. “There is also the unpredictability of diesel prices, which is mainly responsible for the increase in logistics costs.”

Almeida recalls that 93% of all production depends on road transport, and that almost 100% of the truck fleet uses diesel. On Friday (17), Petrobras announced a 14.26% increase in the price of this fuel.

Inflationary pressure —until May, the IPCA (Ample National Consumer Price Index) rose 11.73%— is just one of the components that make it difficult to return to normality.

“We believe that the biggest challenge will be to make forecasts in this second semester. We still have a year of elections, and it is a fact that many entrepreneurs end up holding back their investments to first understand what the political and economic scenario of the current or new management that will take over Brazil in 2023 will be”, says the expert.

Despite the difficulties, there are entrepreneurs who see a good horizon. These are businesses that managed to maintain themselves during the hardest years of the pandemic and are now preparing for the next year.

With services for the civil construction area, the big data solutions company Prospecta Analytica showed a growth of 90% in 2020 and 120% in 2021, reaching a turnover of R$ 15 million in the last year, when it opened 21 units cross country.

“In the first year of the pandemic, construction was determined as an emergency service — that is, essential — so it was one of the sectors that did not stop”, says Wanderson Leite, CEO of Prospecta. “For 2023, for sure, civil construction will be able to beat the record of the last ten years, I can nail that by the numbers we have seen. Of course, we depend on several factors and we are also in an election year, but, if everything goes well, next year has everything to be the best of the last ten.”

If the health crisis generated opportunities in the construction area, entrepreneurs who deal with credit also recorded growth. But if on the one hand it is a sign of recovery, on the other hand it shows the problem of companies that have not been able to keep their accounts up to date.

“Our franchisees didn’t stop, they worked remotely, meeting the demand of people who were in need of credit, including small businessmen”, says Ademilson Mendes, director of the Azul Empréstimo network.

Mendes says that there was also an increase in the number of franchisees: Azul should end 2022 with 100 new stores. “It’s been the best year for us, many people who lost their jobs in the pandemic and others whose businesses became unviable started looking for us, the demand is very high in this first semester.”

However, for those who need credit, the scenario is not the best. The continuous hikes in the basic interest rate raise the cost of money, affecting the main lines accessed by small businessmen. Last Wednesday (15), the Central Bank raised the Selic rate by 0.5 percentage point, to 13.25% per year.

The combination of inflation with more expensive loans results in higher prices for products and services.
This is one of the concerns shown by entrepreneurs in a recent survey carried out by the ABF (Brazilian Franchising Association). According to the survey, 67% of respondents said they passed on the rise in costs to prices.

The study also shows that 58% of the entrepreneurs interviewed readjusted their operations, while 44% promoted the change of suppliers to try to minimize the problems generated by inflation.

“One of the most important facts is that, in all segments, who pays the inflation bill is the final consumer. With increasingly tight margins due to the increase in inputs and logistics costs, the entrepreneur needs to pass on this increase, making the product or service even more expensive”, says Pedro Almeida, from Multiplicando Sucessos.

Renato Ticoulat, president of the Cleaning with Zelo network, closely observed all the retraction and resumption movements. With the need to reinforce the hygiene of environments, he saw his company grow during the health crisis. But he has also witnessed the problems, and believes that most of the business has not yet recovered.

“We have, in São Paulo alone, 547 customers who have not yet returned, and the large, more structured ones are still operating with reduced cleaning staff”, he says.

Ticoulat explains that, despite the retraction among “corporate” clients, new opportunities have emerged. “In recent years, 250,000 apartments were sold in Brazil, which are now being delivered. These properties require at least 30,000 janitors, so it is a new segment that is being added to the cleaning service.”

The example of Cleaning with Zeal shows how the different sectors are interconnected. The heating up of the real estate market, which promotes the hygiene sector, also boosts Prospecta Analytica’s business, creating a movement that is reflected in trade and, consequently, in GDP (Gross Domestic Product).

The service sector’s GDP increased by 1% in the first quarter compared to the last three months of 2021. The segment accounts for about 70% of the national indicator, according to the IBGE (Brazilian Institute of Geography and Statistics).

But if everything is interconnected, it returns to the political question. Flávia Nunes, a retail and franchise consultant at Complement, has seen some apprehension on the part of entrepreneurs, and this is also related to concerns in an election year.

“We have a political issue that leaves everyone a little dissatisfied, lost. We are still understanding where to walk in this environment.”

Source: Leaf