Why working capital management is critical to prepare SMBs for the Paris Olympics

The Olympics will be highly competitive — and not just for the athletes!

There’s a sense of nervous excitement for Paris business owners as they prepare for the Olympic and Paralympic games from July 26 until September 8, 2024. By some estimates, the Paris Games could increase local business revenues by between €5.3 and €10.7 billion. 

That’s a huge cash injection, and potentially a once-in-a-lifetime opportunity for Paris SMBs.

But there’s also reason for caution. Paris is already among the most popular tourist cities in the world, but the expected Games rush will be at a whole new level. Everything from souvenir stores to public transport will be under a different kind of strain for a few short weeks. 

This spike in demand could be a boon for small businesses, but it pays to be prepared.

You need the necessary resources in place to keep up. Which brings us to working capital. Managing such a rapid, temporary swell in demand puts a real strain on cash flow. For example, Bulliz, a pastry shop in the 10th arrondisement in Paris, expects a pickup in foot traffic. "With our expected increase in sales for our cream puffs, we've had to place early orders for our cream in Madagascar meaning we've needed extra working capital to cover the early supplier payments," says owner Fanny Gautard.

Bellota, Bellota, known for their Iberian ham, has also leveraged short-term financing to fund their pop-up restaurant in the upcoming Olympics Village. "With fast access to short-term financing, we've been able to win the bid to be an Olympics caterer while maintaining a healthy cashflow," comments Mickaël Piffard Besnard, CEO at Bellota-Bellota and Group Byzance.

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With only 52 days until the opening ceremony, here’s some of the top worries our small business customers have shared and what they’re doing to prepare. 

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Disclaimer: Defacto is not an official sponsor of the Olympic Games and nothing in this article should imply a partnership between Defacto and the Games or the International Olympic Committee (IOC) themselves. We’re a Paris SMB too, and want to help you prepare for this exciting event.

5 anticipated challenges for SMBs during the Olympics

First, the temporary nature of the event makes things tricky. The Games last less than a month. 

So you need to hire staff, boost inventory, or improve your infrastructure in the immediate term, without overcommitting for the future. That’s a delicate balancing act. And the biggest impact is on cash. 

Your preparation needs to begin now, if not months ago

1. Stock and supplier shortages 

Higher demand means more sales — clearly a good thing. But with all local businesses enjoying the same glut, supplies may be in short…supply.

Case in point: In 2017, France experienced a butter crisis which really hurt local bakeries. Low production led to a huge spike in butter prices, and bakeries quickly ran out of this essential ingredient. 

All of this (apparently) caused by unproductive cows. 

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These were production issues, but a massive increase in demand may well have the same effect. And not just for bakeries. Expect supply shortages for everything from taxis (and Ubers) to security staff.

2. Increased competition, for everything

Local businesses will rush to take advantage of all the extra people (and their euros) in town. We’ll see special events, pop ups, extended shopping hours, dedicated campaigns — every trick in the book. 

But there will also be added competition for suppliers, as we just explored, and the same goes for staff.

You’ll likely even see constraints around financing. If you’re planning to rely on extra funding during this intense period, it may be harder than you think. Factoring partners and bank loans will be sought after well in advance. Plus, both can take some time to secure. 

For this reason, a pre-approved line of credit is a great way to ensure that you can cover additional costs. It also lets you make fast decisions and invest on the spot to make the most of this exciting time, with complete flexibility to only use what you need.. 

3. Staff & skill shortages

Finding skilled, temporary workers to cover a few shifts is always tricky. Now, try to find them for just a few weeks, when everyone else is in the same boat. 

There are already reports of a scarcity of security personnel. These reports focus on Games venues themselves, but this trickles down into supermarkets,clubs malls, events — anywhere requiring private security. 

Plus, the Olympics are an international, multicultural event. It's advantageous to prioritise bilingual or multilingual workers who are adept at interacting with an international clientele.

You may also need to provide more training to less ready team members. Which requires additional funding. There are official initiatives in place to upskill local workers, with more than 150,000 jobs created in the build up to the Games. But attracting and employing that talent for such a short period is an extra strain that SMBs will need to prepare for. 

4. Transport issues 

Paris and its residents are already bracing themselves for the Olympic effect on local transport. Metro lines have been closed for renovations, and new public service campaigns tell residents to expect delays and to welcome others into their space: 

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Meanwhile, ticket prices are set to double, and the Mayor of Paris has already warned that “there will not be enough trains and not frequently enough” to cope. You will undoubtedly face regular issues getting staff to work on time, or at all. 

And then there’s logistical transport. Trucks and transporters will be in short order (sensing a theme?), and the traffic in central Paris promises to be nightmarish. 

You can’t avoid these issues altogether, but here are a few simple strategies: 

• Communicate with staff and delivery people in advance. Are they aware of road and metro closures, and do they have other routes available? 
• Load up on stock. Smart small businesses keep relatively low inventory levels, but this is one case where it may pay to have extras in reserve.
• Schedule deliveries for quieter hours. Can suppliers come early, late, or on the weekend? And can you ensure you have staff there to greet them? 

While most local Parisians are simply resigned to the idea that traffic will be tricky during the Games, SMB owners can’t afford to take it as it comes. Have your backup plan(s) in place now.

5. Unfamiliar customers

Two temporary demographic shifts will occur during the Paris Olympics:

1. Paris expects more than 15 million tourists during the Games, compared with only 2 million city residents. 
2. Because of transport issues, many workers are being asked to stay home during this period. This has even led to (spurious) claims that citizens’ movement will be restricted. 

This changing customer base could have an impact on local businesses. Cafes, bars, and takeaway lunch spots may have their regular customers replaced for these weeks. Which of course doesn’t have to be a bad thing. But you can expect more misunderstandings and slower service than with your frequent flyers. 

Some companies may even experience slower business when the usual nine-to-five crowd isn’t there. If you’re not in a tourist area and away from the Games venues, it may feel oddly quiet. 

All you can do is prepare. Are your staff trained to deal with a higher degree of difficulty? Can you be both efficient and warm in service at the same time? 

You may also need to work harder to get unfamiliar customers in the door. So a little advertising investment or getting team members outside on the pavement may be necessary. 

How to overcome cash flow challenges

All of the above issues can be mitigated — or solved entirely — with working capital. And the best answer to temporary cash issues is short-term financing. 

You need extra funding that is: 

• Specific to this period, without a long-term commitment once all the extra attention is gone. 
• Fast to set up, and that lets you re-up in real time as new obstacles arise. 
• Fair and flexible, and doesn’t require you to put up a year’s invoices as collateral (like factoring, for example)
• Cost-effective, and doesn’t eat away all the extra revenue you earned in this exciting period. 

Short-term financing delivers all of the above.

Get short-term working capital financing 

If you’re finding your business falls into one of the above timely challenges or just in general needs more working capital, we’ve got your back. 

Defacto provides fast and flexible financing for SMBs with the ability to get a pre-approved line of credit against your outstanding payables or receivables, which you can dip into as needed. 

This way you don’t end up over-borrowing, and instead just take what you need to get through your busiest and most intense moments. Simply add your business identifying number and connect your bank and in as little as 27 seconds you’ll be pre-approved for up to €50,000. That’s faster than the world records for the 400m sprint and the 100m freestyle. 

It’s even easier if you’re already a customer of Pennylane as you can request financing directly from your Compte Pro!