Multiple surveys have highlighted how Micro Small and Medium-sized businesses are a pillar of the Indian economy. Some estimates suggest that MSMEs contribute close to 6.11% of GDP in manufacturing, 24.63% of GDP in service, and 33.4% of India’s overall manufacturing output.
From scouting for orders to managing employees
Owner of an MSME has to juggle many hats, from looking at all the avenues available to sell, deliver customer demands and managing employees.
On a given day one of the challenges for a small business is the availability of funds to market its products and services effectively. If a startup has access to venture funding which is an exception rather than a rule it will have a limited marketing budget.
As an owner of a small business, one of the most effective ways to market is by undertaking gorilla marketing, explore innovative ways of connecting with your target customer. Imagine if you are a small business selling confectionery, one can entice new users by going to schools and setting up innovative quirky kiosks.
In new services economy, managing employee and ensuring their satisfaction is mandatory. Multiple surveys have shown that retaining and attracting talent is the difference between an organization’s success and failure. Leveraging of technology helps to attract and retain employees. Tools like Selectable and AllyO are disrupting this domain and should be leveraged by MSMEs.
Many MSME owners lack the management skills needed to scale business. The owners should not only know how to sell efficiently, but they must also need to control the fiscal side of the company. There is a dire for a DASHBOARD for that hard-working owner to be able to overview Indicators that matter in the success of the business.
Work processes in a silo or inadequate means for timely review
When faced with making business decisions on a daily basis, because MSME owner faces the issue of lack of industry best practices and technology their work functions are frequently in a silo. Let us take the example of a cricket bat manufacturer in Meerut city of Uttar Pradesh and a hub of cricket equipment.
An MSME manufacturer operating in this industry has to coordinate with his suppliers who can be as far away as a city in Jammu and Kashmir, to buyers who are in Uttar Pradesh, Bihar, and Jharkhand.
Manual ways of working
An MSME sales representative is typically visiting or calling its buyers to take orders which are captured in an order book. The inventory that the manufacturer has is maintained in a physical ledger and even if the financial ledger is maintained on a computer with two of the three systems in physical format, the interconnectivity of data is not possible in such a setting.
In this scenario scaling business becomes a challenge.
One thing to keep in mind and that is the tenacity of an MSME owner, S/he takes pride in their work. As an entrepreneur, the owner would love to invest in more machines, raw material, and marketing to grow demand. Given the available software solutions in the market, investments in computers and subsequent maintenance are required for gaining business process improvement. However, MSME capital is a limited resource and sometimes cannot afford the price tags of the software solutions.
Irregular income, lack of visibility of aspects like cash in hand, inventory levels
An important aspect that needs to be kept in consideration in reference to MSME is the fluctuating demand cycles. Take the famous example of Uttarkashi a city in the South of India and a hub for the manufacturing of fireworks. Their demand is mainly driven by the festival of Deepawali. So all year round their production process is optimized by the demand that is forecasted for a particular month and any impact on this has a direct correlation with their income.
In other industries which have a branch level network building visibility on aspects like cash on hand and free cash flows are a key challenge because of lack of a system that aggregates all the data periodically or in real-time.
Challenges on how to scale and access to industry best practices
Indian MSME faces challenges in scaling because of multiple reasons ranging from less focus on R&D, government regulation, complex, tedious registration and accreditation processes and access to credit. Insufficient access to credit is a key problem for MSMEs. Lack of access to long term credit for smaller businesses forces them to rely on cost short term finance.
The path ahead for MSMEs is exciting but it requires an ecosystem that nurtures and supports businesses to deliver the right product at the right price point. It requires changes in philosophy and processes to successfully execute on a vision of success.