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Tag: msme

seven

Seven Sins of SMEs

Businessmen put in their sweat & blood and invest money to build a thriving business. But as this business grows, there are several aspects which, if ignored, become the sins that can creat turmoil. Seven such sins that are often committed by SMEs impacting the growth of their organization are picked and addressed.

1. Service Ignorance

This is the worst sin any SME can commit. Ignoring customers’ service doesn’t just cause loss of that customer for repeat purchases; it also adversely affects word of mouth branding and referrals for new businesses. No matter how good your product is, if customer service is not up to the mark, expanding business would become a challenge. Make sure that you pay full attention to even the smallest of your clients. Happy customers would mean more repeat purchases implying increased Business Growth at lesser cost; hence much higher profitability. These satisfied customers become loyal to the organization with time. And loyal customers lead to successful Business Strategy implementation, Critical Learning Experience, Reduced Risk of Business Failures and Employee Motivation. Any SME can create a Competitive advantage by overcoming this sin.

2. Promoting Sycophancy

sychophancy

“Sycophancy is something which kills your business slowly but surely”

Human resource is one of the most important aspects of business which is very often ignored in SMEs. Herein manpower is managed either by the owner or admin manager and every employee has easy access and personal touch with management. Also, responsibilities are non-uniform. This approach leads to retention of low performing sycophants and attrition of high performing employees. This affects productivity and efficiency of the organization.  Hence, promoting sycophancy and ignorance of people management is the second biggest sin of any SME.

It is a need of the hour for owners to focus on employee aspects and create a more professional environment. You should create organic infrastructure to attract, retain, grow talent and develop internal leaders across the organization. This will directly reduce the operating cost and smoothen technological transition.

3. Undocumented Process

Every organization has its own way of functioning. Whereas, multinational companies follow well documented, technology driven processes. SMEs still have numerous undocumented processes. This creates high risk of miscommunication & lack of accountability among employees leading to poor culture across the organization which hampers productivity on ongoing basis. This becomes next big sin for SMEs.

This is high time for SMEs to define processes systematically. Whether the operations are big or small, having a clear blue print of what happens when, helps you keep a clear sight on things. Documenting exception scenarios and learning would help plan better for future and reduce risk of any last minute surprises. Make sure that the team understands and follows a defined process diligently. Process keeps you competitive & agile and creates a uniform culture across the organization. If done properly, this can become a real competitive advantage.

4. Impromptu Decision Making

In Indian SMEs, the decision making is highly centralized and the management takes almost all the decisions. Most of the times these decisions are made out of gut feeling, experience or inaccurate data analysis. As a result, delayed or poor decisions are made, which become bottleneck for the growth of the organization. Also, managements’ focus and involvement in operational aspects leads to poor focus on many important decisions related to growth, diversification & risk assessment, causing them to stick to the same business model. Management should allocate tasks to their team but ensure that all reports and data are stored centrally. This will help them get a bird’s eye view on everything – information flow, gap areas, places that need more attention etc. Also, this helps in enforcing a transparent work culture and reduces risks of delayed or lost information.

5. Absence of Identity

“As a Person needs an identity so does a Corporate.” In the absence of Corporate Identity, corporate’s brand value gets diluted in the mind of its customers, investors, banks & employees and this becomes a big hurdle in the road ahead towards being a professional organization. Hence absence of Corporate identity becomes a sin.

Corporate identity is visually manifested by way of branding and the use of trademarks. It, also, includes product design, advertising, public relations etc. Having a proper business mail id and web properties like a website, social media pages etc. adds more credibility to your business name. Moreover, this reinforces the practice of doing all official communication via corporate mail, thus dipping any chances of misinformation or data loss.

6. Change Mismanagement:

SME management is usually keen to bring changes in the organization but due to lack of effective internal system, these changes become very difficult and also irrelevant at times. From basic operational software to ERP to business intelligence tools, make sure you are up to date on technology. These are investments that would make your business more agile, scalable and secure. Using technology, you can expedite your operations, improve efficiency and control costs, all in one go. But implementation of these technologies becomes difficult due to poor change management. Therefore, poor change management becomes a sin.

hange management

“If only change is permanent then make sure you manage it well”

To successfully implement technological and other changes it is important for you to implement systems in the organization and it should be your priority. Also, before picking technological changes you should consult experts about what would work best for your business type and then pick that same.

7. Corporate Non – Planning

Because of poor systems and micro managing culture, SMEs usually don’t like to think beyond their current scenarios. As a result, your vision for the corporation is very limited. Either you remain at the same level or diminish with time. Therefore, lack of Corporate Planning is a big sin.

Business challenges keep changing with time. You should think big and define your 3 year- 5 year goals and act accordingly. Also make sure that processes foresee and cover some of the future pain areas and operational system is robust enough to sustain the unexpected jolts.

 

Although for SMEs, these seven sins are identified but if you overcome these blunders in a systematic manner and use people, processes and technology to scale and grow business effectively, you can become big and adaptable for all kinds of industrial reforms.

 

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[Open Letter] On the missed SME Opportunity in India

Image Courtesy: Canadian Health Coalition

17% of total India’s GDP contribution comes from the 80% of the businesses in India and that 80% named as SMB- Small Medium Business.  As India is on the path to find itself a niche while attempting to replicate the Chinese success story of economies of scale, there is a basic fundamental flaw that exists among the knowledge industry of this ecosystem.

Growth of SMB Market requires easy access to capital and investor community, which they find difficult because of these 4 characteristics, apart from a slew of reasons outside their control:

  1. Most of the SMB lack professionalism in the way they work
  2. They find it difficult to run their business with a goals-driven approach
  3. They don’t think over the long term, say next 5-10 years. Ironically, “the writing on the wall”, the vision statement is barely realized
  4. Business decisions are taken at the dining table with huge biases owing to personal relations with senior management, old staff and vendors
ProfitVendorsPersonalRelationsIn the CNBC show, The Profit, Jonathan Baron is asked by Marcus Lemonis to let go off Steven, an auto wholesaler his father had been working for years, in an effort to improve margins. You can read the episode in full here. Stories about Indian SMBs is no different.

People in leadership positions at small businesses find it difficult to overcome these attributes. It is here, where the knowledge firms like consulting, advisory and auditing firms could step in. They need to learn and execute professionalism while delivering services, building a consciousness around data, and ensure transparent practices both in their business as well as the small business clients they serve.

Based on what I have seen in the last 3 years, I suggest the following strategic steps for consultants and government officials to fuel the SMB Growth Story and realize the vision of Make in India:

For Consultants

Pricing in consulting practices is generally driven on the impact it expects to create. So serving a huge MNC will create a lot of impact because of the scale of the organization. In SMB, with the same efforts or even more, the impact created will be much less. As a result, pricing will definitely go down. Many of you find it difficult to understand because of their experience working at larger scale.

What we had learned and seen about consulting, and had similar mindset. But exposing ourselves early to the market helped us overcome this bias.

Consultants and firms should find ways about democratizing knowledge to serve more with the same effort to create a scalable, repeatable business model. The success factor of this market is scale and efficient way of sharing knowledge will be a key factor. Addressing the SME opportunity in India requires scale like B2C but lacks liquidity owing to its B2B nature. Our friends over at Busy Accounting call the opportunity B2C in size, B2B in behavior.

For Government Officials: Policies

Imagine you are convincing a constantly poor performing kid in academics to study more because it’s good for him. It won’t work, you need to create a benchmark of levels and incentivize on achieving different levels. Similarly, in this case, govt. needs to create specific and transparent multiple levels along with knowledge firms, to evaluate how they run their business as suggested by SMEs in this YES bank newsletter. Incentivization policies are required for different levels which might include assured business from PSU’s, import subsidies, credit ratings etc. A sense of competition among themselves is required by appropriate measurement mechanism and rewards.


This market has started to feel the heat of competition and will become more organized to survive as well as scale. But in this journey, many will die those who won’t be able to adapt to run business rationally.

At Sookshm, every person on the team understands and knows how to work well around these unique challenges. These values define the 30 customers we have served and 400 others we selected to interact with over the course of the last 3 years.

For questions and discussions, please drop a line below in comments or reach me on my LinkedIn. I am a regular there and answer within 24 hours :)