Budget Potpourri for SMEs

The year 2012 has witnessed a lot of political upheavals and financial uprisings are also expected in the year ahead. The Indian finance minister Pranab Mukherjee in his recent budget speech has offered a variety of moves to boost the small businesses sector.

The FM has mentioned that the government would source about 20 per cent of their purchases from the micro and small enterprises sector. This is expected to encourage the growth of this sector. The government has hiked the service tax rates from 10 to 12 per cent which may contribute to an overall hike in prices of various commodities. Encouraging the field of agriculture, it has provided duty relief to it. Similar attempt has been extended to other troubled sectors including infrastructure, railways, roads, civil aviation, health, nutrition and environment. Also, the agricultural credit has been promoted to Rs 5,75,000 crores.

Service tax would be based on a negative list with all services being taxed except for a list of 17 items. Some sectors have also been exempted from the taxation. A common tax code is planned which will combine the Central Excise and Service Tax.

Providing more sops for SMEs, the turnover limit for mandatory tax audit has been raised to Rs 1 crore from the previous Rs 6o lac. This would encourage growth among the SMEs which can utilise the necessary relief.

With regards to special SME industries, tax rebates are extended to sectors such as steel, textiles, branded readymade garments, labour-intensive sectors producing items of mass usage, low-cost medical devices and semi-mechanised units producing matches. Similarly, energy saving devices have been encouraged along with plant and equipment needed for solar thermal projects. The budget announcement also brought a special smile to MSMEs working in the handloom, power loom and leather enterprises who received a special waiver. The FM has also proposed weighted deduction for expenses related to skill development which will assist the MSMEs in investing more on skill development supporting quality production.

Government is planning a series of measures keeping in mind the need for infrastructural development and achieving a high rate of growth. Thus, resource raising would be facilitated in the coming financial year for SMEs. The government would be investing about Rs 5, 000 crores in setting up on an India Opportunities Venture Fund along with SIDBI to offer easy equity to MSMEs. This is in addition to setting up of Bombay Stock Exchange (BSE) & National Stock Exchange (NSE) SME exchanges. There would be an exemption on capital gains tax for property sales which are focused towards investments in SMEs. This can greatly solve the issue of funding for SMEs which are starting out or the ones which are planning to expand their business.

Also, the government is planning to come out with the Goods & Sales Tax (GST) in August 2012 which is expected to address the issue of multiple taxes faced by the Indian MSMEs. The MSME industry is eager to know about this implementation which will accelerate the growth of SMEs in a big way. 

Employee Retention - Invest, Reward, Respect

The success of any budding or existing SME lies in its team of dedicated and productive employees working with it. As a management initiative, it is necessary to retain potential employees and reward them from time-to-time. A study has established that 62 per cent of SMEs face hurdles in recruiting and retaining staff over a period of time.

Invest in your employees
Often, companies invest in a wide amount of infrastructure to train their employees for better production and losing them because of a lack in retention skills can prove to be a big loss. SMEs especially need to prepare their HR processes to save themselves from losing valuable employees. Also, competitors do not hesitate in poaching potential workforce from other companies and may cause damage to the companies by offering their employees better incentives. 

Retain your employees with competitive wages

Competitive Wages
There are a number of ways in which an organization can retain their trusted employees. Paying competitive wages is one of the most important methods to hold existing employees. Also, providing your employees a reasonable amount of flexibility in their jobs can prove to be beneficial. A variety of benefits such as changes in schedule, fixed shifts, leaves for personal matters and family-supporting initiatives can also be crucial. Long-term employees need to be appreciated for their long service. Encouragement to them also proves to be a good example for other employees who realize that the company appreciates their commitments. Simple incentives such as health insurance, benefit packages could support them in making a decision to be with the original employer. It also offers the SMEs an additional advantage over the competition.

Respect your employee
Another key area in employee retention is respecting the employee and offering them space and support. Individualized work desks, promoting healthy relationships, and providing supportive trainings are some of the steps which can be taken by a company. Promoting interpersonal communication is also crucial for supporting existent and new employees. Various communication initiatives such as focus groups, attitude surveys, hotlines, etc. can help them in corresponding about their needs and requirements. A good employer must know what his employee wants. 

Make it transparent with your employee

Retention bonuses are another important step in retaining an employee. SMEs often face a lot of difficult situations such as mergers, acquisitions, financial difficulties, etc. It is vital in those times that companies release retention bonuses to support their employees and retain them. Also, it is better to release the amount over a period of time rather than pay it as a lump sum.

Managing a new hire
In worst cases, one may have to lose out on trusted employees and can benefit from new hires who would be more eager in their performance, would be cheaper to afford and can grow up to be a potential addition to the workforce. The only cons to a new hire would again be the question of reliability and standard requirements for training and nurturing which may take precious time of the employer. 

It is always difficult to find skilled workers and more so, in the times of a tough competitive market and financial meltdown. It always makes sense to retain one’s most effective workers.

NIESBUD partners with International Finance Corporation for MSMEs

The National Institute for Entrepreneurship and Small Business Development (NIESBUD), which is an autonomous institution under the Ministry of micro, small and medium enterprises (MSME) has collaborated with the International Finance Corporation, which is a member of the World Bank Group, for undertaking various projects in regard to entrepreneurship development in this country.

A memorandum of understanding (MoU) has been inked and NIESBUD will partner with the IFC in conducting training of the trainers (TOT) programme for boosting the training skills of the MSME trainers.

For more information: http://news.indiamart.com/story/niesbud-partners-international-finance-corporation-msmes-155248.html

Expert Speak: Mr. Ajay Wahi

SMEs: Do a regular dipstick on SWOT 

Achievements are to be savored. Enjoy them, but do not let them make you or your leadership complacent, because nothing stays the same. We have the recent experience of the global recession of 2008-09 to go by, in which many global giants went under completely. And these are the same global giants who taught the world what SWOT meant! But it seems they initiated the concept and grew complacent, eventually stopping the SWOT analysis and thus fading away.

Therefore, doing SWOT analysis should be very much a part of our life. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. For instance, for a particular SME, its strength may be a very good product; weaknesses might include poor customer support, which would endanger the company and/or its future growth; the Government abolishing sales tax on sales of its product might present the company with an opportunity; while a competitor might have announced the launch of a similar product, which would be a threat to the SME in the future.

However, all this is true only at a point in time. One year, or even one month after the above SWOT analysis, the scenario might be different, because change is the only constant; hence the need to do regular SWOT analyses.

SWOT analysis offers many other benefits as well!

1. As an SME, you are growing and dealing with many opportunities, and rushing all the time. Unless you take time off to assess the situation you are in, you may find you are running around, but are not reaping the full benefits of your effort. So you need to track your progress, and SWOT helps you do this.
2. SWOT analysis forces the leadership to keep abreast of developments in technology, market, economy, competition etc. As a result, the management gains more knowledge, giving them greater power, for knowledge is power!
3. It ensures that each member of the leadership team is working towards a common goal. Conducting frequent SWOT analyses helps in aligning the working of each department towards a common organizational goal.
4. Sharing the conclusions of a SWOT analysis with employees enthuses them as they see the company as one with clear-cut objectives.
5.  Lastly, a SWOT analysis is a key tool for a reality check. Remember, something that was an advantage 3 months back may be a threat now. Your advantage was that you sold a lot more than your competitor, but did not take care of your client support whereas the other competitor sold half but had satisfied clients. So if you don’t take a break from sales and improve your client support, you could effectively land up gifting your clients to the competition too!

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India is a fast expanding economy and there are rapid changes in our industrial policies, export benefits, SEZ regulations, foreign players’ entries etc. Simultaneously, political, financial, economical, regulatory, and competitive aspects are changing so fast that we need to do SWOT regularly to know how such changes will impact our company.

This dynamism and fast pace is a wonderful opportunity for an SME because an SME being lean can react fast whereas larger companies are slower to respond. The telecom sector is a case in point. Because of regulatory and competitive changes, Bharti and Reliance who had a field day with less competition now have 13 competitors and it is the new ones who have upset the giants by announcing war-like tariffs!!  

Caution:  SWOT analysis should be conducted frequently enough for it to be useful, but not so often as to use up all employees’ energies doing SWOT alone!

Actions from the SWOT analysis must be given weightage so the SME focuses on those actions which will make the most difference to its future growth. 

Sum Up:  SWOT lets us be proactive, anticipating the future.

The company and employees are intellectually challenged, and can make plans which are practical and achievable, and form the basis for solid growth of the SME.

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