Small Businesses play a significant role in a developing economy – from creating valuable business opportunities to employing a large chunk of the workforce. They are the drivers of growth contributing significantly to a range of sectors and industries.
Small Businesses produce nearly half the manufactured output and are also the largest employers of workforce in India after agriculture. Roughly, 75 million people in India are employed with small businesses. They contribute approximately 9-10% of the Indian GDP. An estimated 90% of industrial units in India come under small businesses. They contribute to 40% of value addition in the manufacturing sector and 35% to India’s merchandise exports.
With such significant contributions, it becomes imperative to encourage the growth of these businesses in India. We are now witnessing an increased focus on small businesses from several government institutions, corporate houses and financial entities. The government, by recognizing the small business opportunity, has introduced various policy measures to help them grow. It is also working towards promoting the small business segment by capacity building measures to keep them updated on emerging areas of business and familiarizing them with the changing laws and regulatory frameworks. Today, the government is developing a positive environment to encourage new businesses and entrepreneurs by providing support in several ways including financial assistance by allowing medium-term loans, reduction of interest rates by RBI etc.
India is a huge market brimming with many opportunities. This has encouraged the growth of the small business segment and brought tremendous success to entrepreneurs and business owners. So far, these businesses have limited their operations to the local Indian market. Increasingly entrepreneurs are keen on expanding to other markets and establishing a global identity. Today, the Indian small business industry is aiming for global markets, ready to compete against global giants. This is an encouraging sign and this industry needs to be provided the right support to cater to global needs. Industry exchange programmes and access to market research data will help develop an understanding of the global market and its needs. Government support in setting up technology infrastructure will boost productivity and quality for these small businesses.
Another aspect that is essential in creating a positive environment for small businesses is to have friendly regulatory policies. Allowing Foreign Direct Investment, speeding up approvals, creating a single window system for information, simplifying operational frameworks etc. are key factors that will contribute towards the growth of small businesses in India.
Even with adequate support from the government and the private sector, small businesses in India face several challenges which need to be addressed. Prominent among them is the lack of access to technology and financial management resources. Despite various schemes from the government to enable easy access to capital, small businesses struggle to raise adequate funds. Private sector can contribute towards this issue by infusing equity funds and venture capital. In a study conducted by Intuit supported the Ministry of Micro, Small and Medium Enterprises, Government of India, pointed out that small businesses in India are yet to realize the full potential of technology as a game-changer for business. The study also highlighted the top barriers to technology adoption being cost, lack of skilled manpower, low awareness of the benefits of technology, poor infrastructure and concerns about security and privacy. A collaborative effort is needed to address these concerns of small businesses and identify and develop solutions through participation from various quarters. A collective approach with government and private sector coming together is the ideal way forward. Intuit in association with NIESBUD has introduced a financial literacy programme aimed at helping small business owners understand financial management. Initiatives like these are a positive step in bridging the gaps.
Key hindrances to the growth of small businesses also include lack of infrastructure and limited access to institutional assistance. Infrastructure hassles have to be addressed on priority as it forms the base of starting a business and also affects productivity. Setting up SEZs, improving transportation through better road and rail connectivity, allowing reforms in telecommunication etc. will help address few problems related to infrastructure. Another challenge for small businesses is labour and talent acquisition. Start-ups and small businesses are generally not considered attractive career options. Participation in education and career related events and academic outreach will help in reaching out to youth and spreading awareness about this sector. Growth and success of small businesses will also automatically make them lucrative for acquiring the right talent.
There are a few factors that even small businesses need to keep in mind to succeed before starting out. Understanding the market is the topmost among them. Considerable research is required to comprehend the ‘what’, ‘why’ and ‘how’ of the market. It is necessary to understand the market preparedness for your product or service. Evaluating possibilities, pricing and competition will help build a credible product or start a service. Re-organizing and implementing necessary changes is essential to sustain in changing markets conditions.
Lastly, success in entrepreneurship and running a small business is not just dependent on the external factors as discussed above but on the internal ones such as the mindset of the entrepreneur. Challenges are abundant in starting a business but the will to find solutions and overcome these challenges is the key.