The 2017 Union Budget of India has laid a lot of emphasis on small business (Startups & SMEs) and announced a number of initiatives which will benefit them greatly, from lower tax rates to larger availability of credit. The announcement of large scale infrastructure development across farm and dairy sector, railways, transport, digitisation etc will offer an immense business opportunity for a large number of small businesses.
In fact, the problem Indian economy has always faced is that there are very few large businesses, and most of them are concentrated in a few hands. The numbers are telling. Out of 56 million businesses in India, less than 8000 show profits more than USD 1.6 mn a year. Many of them are companies of the same group.
Only in India, we have large groups who run businesses ranging from infrastructure to technology to automotive to retailing to whatever largesse they have been able to get from successive governments. Even the giant Korean corporations have such a diversity of business operations. Yet all these empires have low profitability, poor innovation track record and have played a limited impact in creating large scale jobs or nation building.
Small business, on the other hand, employs the largest number of people in India, directly and indirectly. Some of them in the last few years, having started small (startups), have rapidly scaled to giant size, disrupting existing models and providing employment and business opportunities to millions. E-commerce players support millions of sellers who have suddenly opened up a huge all India market to themselves. The smarter ones have grown exponentially. While the E-commerce players themselves lose a lot of money, sellers thrive, as also the drivers on cab services.
Many industries and categories are getting organised and aggregated, thanks to innovative business models coupled with technology. Thus helping small business owners across many categories get on the grid and find access to larger market opportunities and better systems.
But this is just the beginning. Opportunity for small business to grow big has never been better. It is a question of who has the dream to scale up quickly and what are they willing to do about it. Growing big brings its own complexities. It is not possible for any single business owner to be able to navigate all aspects of this complex journey. In fact, it is important to understand the various aspects to leverage the right opportunity.
I strongly feel that while ‘jugaad’ can get you started, growth will come from organising and professionalising the business.
Here’s a list of areas to examine for every business owner, to prepare themselves for greatness.
Picture the future.
Everybody likes to get big and make more money. But most don’t have the picture of what they would look like when they are big. Thus it remains a pipe dream. It is imperative that a business owner defines a realistic vision for themselves and chalk out a path to get there. This requires building a strategy and a plan. Consulting people who have been there done, can help you carve your strategy and develop a long-term business plan for growth.
Passion for brands.
Most Indian businesses have remained small because they were unable to build a brand and hence, unable to build a large consumer base. They took the easy way out at early stages of finding a few large customers and becoming bulk suppliers. That’s why there are very few large Indian brands which have been built in the last 7 decades. The problem with not having a brand is that the entire business strategy is pricing driven and large customers drive prices down or move business when they find lower prices. Brands build loyal customers and long-term profits. Business owners of all kinds need to devote personal time to understand and build a brand for their business.
Cost management is a science.
Indian entrepreneurs pride themselves in their ability to manage suppliers and costs. In their negotiation skills. But the fact is that proper supply chain science can far outdo what individual skills can. Every business has anywhere from 10-30% hidden costs. These could be in higher sourcing cost, logistics, inventory carrying, manufacturing inefficiencies, credit and debt management etc. Small tweaks at each stage can make a big impact to profit. Money saved from lower COGS should, however, be invested in building the brand and customers rather than discounting or pocketing the extra profit.
Everyone these days talk about technology. But how many actually understand anything about it. It is not difficult. Just requires some learning and appreciation. Use of technology can help a business make their process more efficient, connect better with business partners and customers, improve turnaround times, manage complex tasks and most importantly provide better control to business owners with fewer surprises. But beware. Embracing technology has to be done carefully. It is an investment. Cheap solutions will cause more trouble. Need is to focus on robust technology solutions from qualified partners and not a hole in the wall.
Evolve approach to sales.
People say selling is an art. But good sales also thrives with right partnerships. Identifying the route to market can change fortunes of corporations. E-commerce is changing the lives of many suppliers, earlier restricted to small geographies. Changing retail landscape offers the opportunity to many more products and services. Growing small town and rural consumption is a market well-addressed by re-thinking the existing sales channels.
Leading the new age small business has to be very different from the previous, centrally controlled model. The new age business owner needs to leverage the power of many brains to do more than she could ever do by herself. Constant learning in people management, technology, consumer dynamics, policies, politics and motivations will help evolve to the next level of successful leadership. Professionals can help coach business owners and their top management in this transformation.
Money is the oxygen for any business. Without capital, a business cannot grow or even survive. Right. But what people forget is that there are ways to make the same money go further. Better cash flow management. Lower credit. Faster turnaround. Lower inventory by moving from ‘made to stock’ to ‘made to order’. Many new sources of capital and funding are emerging. Important to understand and evaluate new modes of capital.
The environment is right. The pieces exist. It is upon each business owner to build their own jigsaw. But it requires a change in mindset. If you can’t open your mind and embrace new ideas, your business cannot grow and you will always have others pass you by.
At The Growth Labs, we believe that every business can be great. It just needs the right approach and lots of ideas. We have a consortium of ex-CXOs who have built many organisations to greatness and they can do it for yours as well. Happy to connect!
Alok Agrawal is the Founding Partner at The Growth Labs, Brand Consultant, Mentor and Investor.
It was first published on LinkedIn.
Senior Management professional. Brand, marketing and media specialist with over 25 years experience in building international brands in India market.