A strong business is one that can overcome any crisis and economic shock. While big businesses find it relatively easy to steer their operations through economic meltdowns, MSMEs often struggle to survive the crisis. Challenges faced by MSMEs in India are many. Especially during COVID-19, an unprecedented economic crisis, MSME sector challenges were insurmountable. While many re organized their operations to remain solvent, countless emerging businesses had to shut shop.
The strategies adopted to solve these issues and challenges faced by MSMEs can make or break these enterprises. For instance, many MSMEs got their business registered on the Udyam portal to leverage subsidies, exemptions, and other benefits. In this article we will examine the challenges faced by MSMEs and create a survival guide for MSMEs that can help them battle future challenges and emerge stronger.
Here is a list of MSME problems and solutions that can help small businesses tackle their most common issues as well as challenges faced during tough times.
The cash crunch threat
As per a media report, 82% of MSMEs reported a loss in revenue during COVID-19. Many MSMEs shut down because their sales turned to zero and revenue just disappeared. Small businesses were finding it hard to find money for everyday expenses. They had to make severe budget cuts, fire employees, close departments, etc., to save their company.
Post COVID-19 businesses have learnt the hard lesson of securing cash flows for short term and long term. Having a cash flow surplus will help you tackle an unexpected crisis. This surplus will allow you to float your daily expenditure while you can plan and realign your business strategy to overcome the crisis.
Though several government loan schemes for MSMEs were introduced to offer relief, businesses realized the importance of maintaining good financial health for continuity.
How to battle the cash crunch threat?
- Maintain a cash flow surplus
- Follow strict financial discipline
- Track your expenses and eliminate unnecessary expenses
Lack of digitalization
Businesses around the globe have chosen to go digital, automating many of their tasks like customer relationship management, employee management, logistics operations, etc. This has helped these companies save money and time while ensuring smooth operations. A digital unit can be supervised from anywhere in the world by just using a phone or a computer. This helps in times of health crisis like COVID-19. A fully digital business unit will find it easier to function during a lockdown as most of their operations can be handled by a computer.
How to solve the lack of digitalization?
- Start by looking at complex operations within the business that can be automated.
- Explore different software solutions before choosing one.
No easy financial assistance
MSME funding challenges are a key problem as it is difficult for them to find the right source of funding. Most of them depend on collateral free loans for their short-term expenses but fail to get their loans approved. While big businesses find it easy to get loans, banks are reluctant to extend loans to small businesses because of their short credit history. Banks also think that chances of loan default are high when it comes to small businesses. The preference is to offer loans with collaterals, but absence of collateral decreases MSMEs chances of getting the loan.
In the post COVID economy many online business loan platforms have sprung up to help small businesses with easy access to short term and long-term finance. Platforms like Tata nexarc can help you find collateral-free business loans offered by leading banks and financial institutions in India.
How to get adequate financial support?
- Apply for loans at Microfinance institutions and NBFCs instead of big banks
- Apply for government schemes that gives loans to businesses at low interest rates
- Maintain a good credit history
Lack of talented manpower
Employees with good skillsets are an asset to the company. Big companies have the money and resources to hire employees with great talent, but small companies lack these resources. MSMEs often depend on the informal sector as this is the most common source to obtain cheap labour. These employees lack the technical skillset that is needed for the growth of the companies.
Large corporates also keep on-the-job training for new employees. This upskills the new recruits and helps them get familiar with the job. MSMEs usually don’t possess the money to do this.
How to get talented manpower?
- Check what your competitors are paying their employees and figure out a salary figure that is relatively fair.
- Extend employee benefits like health insurance and paid vacation.
One of the significant challenges faced by MSMEs during COVID-19 is the absence of good marketing strategy for growth. When everything shifted to online model of sales and advertising MSMEs had to shift their marketing tactics. Survival of the MSME sector through COVID-19 depended on developing the most convincing digital marketing strategy. A strong digital marketing strategy needs skilled employees who know all about social media marketing.
While many businesses were already had a digital marketing strategy with social media pages describing their products and services, many emerging businesses had to start from the scratch by building social media pages and creating marketing content for these pages. They had to learn about appealing online advertisements, social media analytics, etc., to get better at digital marketing.
Even the Ministry of MSME stepped in to help the struggling MSMEs. To help MSMEs overcome the marketing challenge, the NSIC (National Small Industries Corporation) under the Ministry of MSME organized frequent workshops to train small enterprises in online and offline marketing of their products and services.
How to solve marketing challenges?
- Hire employees who are experts in the field of digital marketing and have excellent marketing experience.
- Create a digital marketing strategy considering market trends and consumer preferences.
Also Read: 7 Effective marketing collaterals for MSMEs
To sum up
Challenges faced by MSME sector in India are many. MSMEs in a developing country like India are riddled with poor support systems and inadequate exposure. Following the above survival guide for MSMEs can help emerging businesses face any crisis. Always remember to focus on high value activities that bring in the most revenue for your firm and increase the productivity of that department.