'MSME sector needs package due to economic slowdown'

Demand has been made in the Lok Sabha yesterday by the member of parliament (MPs) with the aim to give package to the micro, small and medium enterprises, which have been witnessing problem due to the economic slowdown. 

Reports suggest that members from different parties have made the demand while discussing the Regulation of Factors (Assignment of Receivables) Bill, 2011. Mr Shailendra Kumar (from SP) has requested Centre to establish a special fund to help the MSME sector. 

Gorakhnath Pandey (from BSP) has stated that the MSME sector, which employs many lakhs of people, is facing many problems due to the economic slowdown and there is also requirement to offer subsidy to these units. 

Read more at: http://news.indiamart.com/story/msme-sector-needs-package-due-economic-slowdown-152076.html 

Expert Speak: Mr. GK Pramod

Fundamentals of Business Scalability for SMEs

The Indian Small and Medium Enterprises (SMEs) are carving a niche for themselves in the growing economy of the nation. While their success is fortifying the economy further, it has become imperative for them to maintain a positive growth trajectory.

With this optimism, we will talk about how the Indian SMEs can have an effective business growth (discussed elaborately in the previous blog) with the vital 'Sutras' – Scalability, Sustainability and Profitability'.

We will have a glance and understanding of the Sutras in a practical way by referring to relevant case studies. This will make the entire process of understanding the Sutras more interactive and alive. We will begin with Scalability in this blog and understand its importance.

Scalability

If a Microlevel Entrepreneur is able to increase his/her business by duplicating his/her product/services without affecting the quality of the product/ service is called Scalability.

Importance of Scalability

• Scalability helps Microlevel Entrepreneurs to increase turnover first, and profitability next

Do’s

• Look at scaling up the business, only when the existing business unit becomes sustainable

Dont’s

• Making huge investments in new outlets may be too much of a risk for a Microlevel Entrepreneur

Case Study

We will discuss two case studies – Service business & Product business, to illustrate scalability in a better way.

1. Case Study-1 (Service Business): Mr.Ramesh Patil is a Microlevel Entrepreneur from Belgaum in Karnataka. He is running a Photography and Videography business.

The details of Ramesh Patil’s business organization unit are as follows:

1) Name of the entrepreneur: Mr. Ramesh Patil

2) Name of the organization : OM Shiva Videos

3) Nature of business : Photography & Videography

4) Details of turnover for the past 3 years:

Analysis:

Can Mr. Ramesh Patil create more number of Videography and Photography businesses providing the same quality of service to his customers?

If the answer to the above question is “Yes”, it is called a “Scalable Business”.

If the answer to the above question is “No”, it is called a “Non-Scalable Business”.

In this case Mr. Ramesh Patil can create more number of outlets. Hence this is a Scalable Business.

Challenges in Scalability in Service Business

When you scale up the business you need to ensure that the quality of the service remains the same in all outlets.

2. Case Study-2 (Service Business): Ms. Usha is a Microlevel Entrepreneur from Mysore in Karnataka. She is selling natural fresh juice.

The details Ms.Usha’s business organization unit are as follows:

1) Name of the entrepreneur: Ms.Usha

2) Name of the organization: Sushruta Fresh Juice Centre

3) Nature of business : Natural fresh juice

4) Details of turnover for the past 3 years:

Analysis:

Ms. Usha is a Microlevel Entrepreneur selling natural fresh juice in front of the parks in Mysore in Karnataka. She started one juice centre in a Maruthi van. Today, she has 4 to 5 juice business outlets across Mysore. So, her business is a Scalable Business.

Challenges in Scalability in product business 

If it is a product business, then marketing the product and reducing the price will be the two main challenges.

Scalability: Comparison between Product and Service business

Dear Microlevel Entrepreneur, do you think scaling up Mr. Mr.Ramesh Patil’s business (service business) is easier compared to Ms. Usha’s business (Product business)?

If we observe closely, scaling up of Mr. Mr.Ramesh Patil’s business (Service business) is more difficult compared to Ms. Usha’s business (Product business).

In a service business it becomes very difficult to maintain the same quality of service at all the business outlets. Even if Mr. Ramesh Patil hires a new person, say, by name Mr. Basappa Hallimatti, there will be a difference in the quality of the service provided by Ramesh Patil and Basappa Hallimatti. It is not that scalability is not possible in a service business. It is very important to adopt proper methodology and quality process in all the OM Shiva Videos outlets run by Ramesh Patil.

Bottom line to remember about Scalability

Once the existing unit starts making profits, it is better to scale up the business. Scalability brings stability to the business.

We will continue with the next Sutra – Sustainability, in my next blog. Hope this blog will be of help to the aspiring and existing entrepreneurs. Kindly leave your comments and queries.

The blog has been authored by Mr. GK Pramod, Co-founder, The Second Gear - MBA for Non MBA's Mentoring Module Concept.

To contact the author, e-mail at gk@tothesecondgear.com

Jonson Tapes Glued to Success

Reminiscing about his early years, Mr. Arun Jain, MD, Jonson Tapes recalls how he started the company and the challenges he faced in establishing his new business. "We had to go to each and every customer, industrial houses and educate them how to use our products." His persistence and the belief in his idea led him to become one of the leading manufacturers and exporters of industrial adhesive tapes and insulation materials.

 

 

http://www.indiamart.com/corporate/success-stories/jonson-tapes.html 

Twenty years of hard work and sweat has helped him attain new heights such that today, the company owns well-developed infrastructure facilities, latest process technology based machines as well as a dedicated teamwork.

 

Renowned players have upper hand over lesser known brands in the market. But, its a different ball game for new entrants in the industry who have to start from scratch and build on their credibility amongst their prospective clients and win over their trust. A similar challenge loomed over Jonson Tapes when they began their journey to identify a set of target customers. "When our product demand was very low and the market was very specific, there were no proper means and ways to find out our customers who were actually looking for our products," shares Mr. Jain.

The new age marketing that was slowly gripping the Indian business space also had an impact on Mr. Jain. "With the help of web promotions, our business has grown tremendously in few years. Our workforce has increased, we have taken over some manufacturing facilities, we have added some latest technologies and machines in our units," says Mr. Jain.

Expert Speak: Mr. Ajay Wahi

Recruit for productivity, not for numbers

You will reap rich dividends if you follow this learning to the hilt. A SME needs people who think out of the box, are creative, and are perfectionists. For all critical roles, you need the BEST. So, unlike in large organizations where recruitments are conducted by the dozen, I believe SMEs should recruit only the BEST for critical roles, even if that means some delays in the recruitment process. Do not fall into the trap of recruiting people just to increase staff size. Also, do not rush into recruiting people with lower than required skills just for the sake of delivering products faster. A product made by the best person, even if delayed due to late recruitment, would pose far fewer challenges than an inferior product developed fast by virtue of recruiting quickly the less-than-best person.

Invest time to hire the best

Recruiting the BEST is not easy. You need to make time and put in effort to take multiple rounds of interviews to identify the BEST to whom you will finally offer the position. So the first step is to mentally prepare yourself, your executive team, and others who will be involved in the interviewing process for a number of interviews. Without this mental preparation, you will probably rush through the interviews, and end up selecting someone out of sheer need to select a person. The chances are that such a person will not be the best! And if you don’t get the best, how will your organization become the best?

Streamlining of interview process

Next, you need to streamline the interview process. Ensure everyone is clear about who will conduct the first round interviews, who will participate in the second round, and so on. Often in SMEs, I have seen HR asking the department head what is to be done with short-listed candidates! You need to have complete company-wide clarity if you are planning to take many interviews, so that each step automatically leads to the next one, till the BEST person is selected.

Constitute crisp evaluation criteria

With the interview process set, one needs to chalk out very clearly the evaluation criteria to shortlist/select a candidate. This ensures that the company does not end up taking innumerable interviews without selecting a single candidate. I remember once we had taken over 100 interviews for a mid-level position and still had not made an offer despite a year having elapsed. At first, I was happy that so many interviews were being conducted, since that meant we were trying to hire only the best, till I actually ran through the evaluation criteria, only to be shocked to learn that no one was clear about them! The result: most candidates were short-listed at the first stage, and they were all rejected at the next stage! I then convened a meeting of the HR and various department heads and supervisors. We brainstormed to come up with clear and coherent evaluation criteria, and bang! We short-listed the right candidates and eventually made an offer to the best one.

Diverse interview panel

Depending upon the role you are recruiting for, your interview panel should be broad-based, because if so many interviews are to be conducted, and only a limited few conduct them, the panelists would be overloaded with interviewing duties. So expanding the pool from which the interview panel is chosen not only reduces the load on interviewers, but also motivates others to be good enough to be empanelled, creating a sense of pride and importance. Let’s face it: if the interview process and evaluation criteria are clear and well defined, you can conveniently delegate the interview process to lower levels of the hierarchy.

Collaborative recruitment effort

You can achieve all the above provided your leadership team and other seniors are with you on this journey to recruit the best .Get them together and ask them one question: Would they like to lead teams of many normally-skilled employees, or would they prefer fewer BEST-skilled ones so as to boost the quality of their teams? Most would choose the latter, where high earnings can be distributed among a smaller team of star performers rather than amongst a larger team of average employees. Someone said: A person is judged by the company s/he keeps. That is true for companies too.

To sum up, get the entire organization to realize that for critical roles, it is best to select only the BEST. Then, standardize the interview process, decide on key evaluation criteria, broaden the interview panel, and see interviewers take pleasure in their ability to select the BEST, rather than viewing the interviewing process as a liability.

Caution

You need to correctly identify critical roles before you can apply this learning.

It may take a few weeks to spread this vision across all levels of the organization.

Sum up

The interview process can be delegated to lower levels of the hierarchy. This would speed up the process and enhance quality of the recruit. Employees take pride in their ability to select the Best candidate(s) for the job, and have a personal interest in seeing their recruit succeed.

The contributor of this article is Mr. Ajay Wahi, author of management books like 'and the award for the BEST SME of the year goes to...' and 'Get Noticed Get Promoted'.

He can be contacted at 9810027979 or awahi2010@gmail.com

 

Expert Speak: Mr. GK Pramod

Business Growth & its Relevance for SMES

As a Small and Medium Enterprise (SMEs), we all talk, dream and think about business growth to achieve higher goals in life. But it is as imperative to understand the meaning and relevance of business growth.

We all have our own definitions and meaning of business growth for our company depending upon the business requirements or the success achieved so far or may be the failures from which they have learnt. The sphere of business growth might include increase in turnover, heavy investments, hiring more people, et al, but this is not all. Business growth has a broader spectrum in terms of achievement which a company aims for.

Let us understand the concept with an example so that we may be able to define the business growth strategies for our respective companies.

Ramesh Patil’s Case Study (Service Business):

Mr. Ramesh Patil is a Microlevel Entrepreneur from Belgaum in Karnataka. He is running a Photography and Videography business. The details of Ramesh Patil’s business organization unit are as follows:

1) Name of the entrepreneur:                 Mr. Ramesh Patil

2) Name of the organization:                  OM Shiva Videos

3) Nature of business:                            Photography & Videography

4) Details of turnover for the past 3 years:

 

According to Mr. Patil, the definition of Business Growth would envelopes:

a) Growing the business

b) Increasing the turnover

c) Investing in buying new digital cameras

d) Hiring more people

But if we see Mr. Ramesh Patil’s case, he is only considering very few points related to Business Growth leaving the other vital parameters regarding Business Growth which are mentioned below:

a) Increasing profitability

b) Increasing market share

c) Opening more business outlets

d) Pumping more finances in to the business

e) Diversifying into advertising, publishing, editing and other business areas

Dear Microlevel Entrepreneurs, let us combine and analyse all the points related to Mr. Ramesh Patil’s Business Growth of his Photography and Videography business.

Importance of Business Growth:

a) A Microlevel Entrepreneur gets motivated by Business Growth

b) Business Growth helps in increasing in turnover there by profitability

c) Increasing the customer base

d) Increase market share and market size

e) This helps the Microlevel Entrepreneur to move from Microlevel to Macro level

Key Points to Remember:

a) Prioritize Business Growth Strategy
b) Give importance to existing business and simultaneously sensibly plan for the product/service diversification in the near future

While we have discussed Business Growth in this blog, we will continue in the next blog with the must practice three ‘SUTRAS’ that makes the business growth strategies more effective. Hope the blog has been insightful.

The blog has been authored by Mr. GK Pramod, Co-founder, The Second Gear - MBA for Non MBA's Mentoring Module Concept.


To contact the author, e-mail at gk@tothesecondgear.com

Kindly leave your comments and queries.

Govt needs to offer export finance to MSMEs at concessional rates: FIEO

Centre needs to offer export finance at concessional rate not over 7% for the Indian micro, small and medium enterprises (MSMEs) and 9% for the big business houses with the aim to strengthen exports and also to control the trade deficit, said Mr Ramu S Deora, President of the Federation of Indian Export Organisations (FIEO). 

Mr Ramu S Deora, said, “It is understood that keeping in view the present global downward trend even in England, ECB has offered 25 basis points reduced rate of interest for supporting their export industry. With the abnormal increase in the cost of inputs and packaging material, our exports are day by day becoming uncompetitive nullifying the scope of margins offered by rupee depreciation. It is of utmost important that we have consistency in our reforms and policies in order to maintain our image as a reliable supplier in the global market.”

Read more at: http://news.indiamart.com/story/govt-needs-offer-export-finance-msmes-concessional-rates-fieo-151588.html

Women Power Recognised at ET NOW-IndiaMART Leaders of Tomorrow Awards 2011

Breaking the glass ceiling, Ms. Ritu Singal embodied women power at the ET-NOW IndiaMART Leaders of Tomorrow Awards 2011Ceremony held in Mumbai recently. For exceptionally leading Raglan Group to success, she was recognized as the ‘Woman Entrepreneur of the Year’ at the ceremony. She would cherish this moment forever as the prestigious award was bestowed on her by the Indian entrepreneurship icon Mr. NR Narayana Murthy, Chairman Emeritus, Infosys Technologies.

Enthusiastic yet retaining her calm equanimity, Ms. Ritu Singal, Managing Director, Raglan Group said, "This award reaffirms my belief in my mentor Dr. Daisaku Ikeda's words that perseverance is the key to success. Its my gratitude to ET NOW and IndiaMART.com for recognising my efforts because it will go a long way in making Women in society believe in their potential and capabilities and not feeling defeated in critical moments of life. This award is like a guaranteed seal for Raglan group team for their dedication and sincerity and has inspired me further to be a great entrepreneur."

At the helm of affairs, Ms. Singal’s vision has had a vision for Raglan Group, that of becoming the most loved and respected company and fulfilling the social and professional responsibilities. With this guiding principle, the two companies under the group umbrella - Raglan Infrastructure Ltd. (RIL) and Winner Nippon Electronics Ltd. (WNEL)have been contributing to the construction and textile sectors and experiencing resonating success. RIL has been constructing several construction projects viz residential flats, hotels, commercial complexes, et al whereas WNEL is one of the leading manufacturers of polypropylene textiles and polyurethane textiles.

ET NOW-IndiaMART Leaders of Tomorrow Awards exemplify the true spirit of entrepreneurship by providing a level playing field to women entrepreneurs with this special award.