SMEs can still reap huge dividends

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Bikky Khosla | 14 Oct, 2008
The current global financial scenario calls for steps to raise the tempo of small and medium enterprises (SMEs) in general and the export community in particular. This requires the concerted efforts of a number of agencies that can prevent this niche sector from being affected by the external factors that are proving to be the bane of their existence.

I would, however, say that SME holders should increase their networking with other entrepreneurs to not only encourage sharing of ideas and experiences, but also to mentor upcoming entrepreneurs.

In many instances it is seen that SMEs lack understanding of their products and markets. They should take extra care in doing away with these two drawbacks. Moreover they should regularly involve in conducting extensive background research, especially on marketing and financial aspects.

One vital aspect which most SMEs give a miss is focus on quality. A customer will come back the second time not because of the cost, but mostly because of the quality of the products sold to him earlier. So focusing more on the quality of the products rather than on their costs can help SMEs reap huge dividends.

The government needs to lend its helping hand too. Authorities have to ensure a conducive business environment, simplified startup processes, improvement in delivery time and reduction in corruption in various departments. The government needs to speed up the development of a world-class infrastructure.

I have seen cases where entrepreneurs are unable to do business smoothly because of lack of information dissemination. They are caught unawares by policy changes. The authorities should initiate some kind of information centres from where SMEs can get relevant information instead of having to run from pillar to post.

There needs to be a paradigm shift in the mindset of banks which must consider SMEs as a major business opportunity. Banks and financial institutions need to incentivize SMEs to undertake ratings and information disclosures by linking cost of credit to ratings. They need to implement significant policy initiatives, including relevant RBI recommendations which facilitate ease of credit flow to the SME sector.

Having said that, SMEs need to develop clear business plans and set targets for their growth. Without an unclear future planning one is actually living one's present in absolute darkness.

It has also become very essential for SMEs to participate in the development of the rating processes of banks, to enable better risk management for finance which is very important.

Notwithstanding the fact that in recent times the global markets have shrunk considerably, SMEs with a few corrections in their working module can profitably run even in these difficult times.

All that needs to be seen is whether we face the storm head-on or wait for it to pass by. Waiting for the storm to pass by will only leave us counting the damages.