Ask MSMEs what’s the key growth bottleneck for them and you are most likely to hear lack of easy access to capital. However, even if there are those that are replete with capital, which may be few and far between, it is not easy to identify the one single issue.
Ask MSMEs what’s the key growth bottleneck for them and you are most likely to hear lack of easy access to capital. However, even if there are those that are replete with capital, which may be few and far between, it is not easy to identify the one single issue or concern for the entire segment. The reason is that while there are approximately over 70 million SMEs in India, it is a great heterogeneous mix such as in terms of their nature of business including traders, service providers, professionals, manufacturers etc. Further, there are different industries these players cater to, like hospitality, construction etc. The third important factor is these businesses might be in different stages of evolution ranging from start-ups to businesses being run from generations. Nonetheless, there are five key gaps that they face in growing their businesses:
Finding new business connections such as potential clients, suppliers or advisors isn’t easy for them. “SMEs generally network actively in different events as they have a high hunger to build these connections. However, managing these connections becomes a tough task,” Sameer Vakil, Co-founder & Chief Executive Officer, GlobalLinker — a digital networking platform for SMEs based in Mumbai that offers a digital business card to MSMEs that helps them match with relevant opportunities and connections.
Unlike larger corporations, access to the resources is quite tough for SMEs even as many of them don’t have their own domain name and use Gmail IDs for their businesses. These SMEs also face challenges in more sophisticated processes like accessing and establishing an e-commerce platform, managing supply chain operations etc. “These SMEs have to first decide on the most suitable solution followed by reviewing viability in terms of costing etc., and then devising a mechanism on how to implement it for the business,” said Vakil.
Another concern SMEs face is their next generation not being keen on joining the business as they look to it being a traditional business in approach and hence gets attracted to a corporate job. “With India’s vision to become a $5 trillion economy, SMEs will prove to be the backbone. But the second generation of these SMEs is now moving to the corporate job which is self-defeating the purpose,” said Vakil. So there are “economical problem of reducing footfall” in the traditional shops along with not having easy access to the digitization and social problem of youth moving towards the corporate job.
Lack of right knowledge about the sector that MSMEs operate in or the industry overall is another area that they need to fill. Digital platforms could come handy to help MSMEs overcome this challenge. For instance, “articles, news for their sectors and discussions as well as the industry events including trade shows etc.,” said Vakil.
Economies of Scale
Through GlobalLinker’s large pool of 25 million SMEs, “companies enjoy economies of scale that is not individually viable for them,” according to Vakil. For example, in terms of legal services, most SMEs do not protect their Intellectual Property. The company offers trademark and registration services along with pre-negotiated offers right from hotel booking to trademark registration, domain purchase etc., that “help SMEs save money.”