Auto component SMEs should scale up operations to strengthen productivity, says Vinnie Mehta of ACMA

The automobile space as a whole is growing at a rapid pace but the margins of the auto component SMEs are consistently becoming thin, said Vinnie Mehta, executive director of Automotive Component Manufacturers Association (ACMA) in an exclusive interview. Despite the various challenges witnessed by the auto component SMEs, this sector will reach $110 million by 2020.

 

What is the role that ACMA plays for the SMEs engaged in the auto component sector?

Vinnie Mehta: The Automotive Component Manufacturers Association of India (ACMA) is over 50 year old industry body. We represent over 650 members and close to 70% of the membership come from the small and medium enterprises (SMEs). In fact, whatever ACMA does, it is primarily in the interest of SMEs. We play a prominent role in shaping the industry conducive policies and also carry out various business development initiatives such as buyer-seller meets for the original equipment manufacturers (OEMs) and Tier-1 suppliers. ACMA continues to play a very important role in the promotion of the industry and business development. We successfully run the ACMA Centre of Technology (ACT), which spearheads the drive for quality, productivity and technology. We have highly qualified councillors on our rolls for the said purpose. We are actively involved in trade promotion, technology upgradation, quality enhancement and collection and dissemination of information which has made ACMA a vital catalyst for this industry's development. The other activities include participation in international trade fairs, sending trade delegations overseas and bringing out publications on various subjects of topical interest to the automotive industry. We also undertake cluster programmes with definite roadmaps, which could be company specific i.e., it depends upon the state of evolution of the company. The periodicity of the new cluster development programmes depend upon 6 months-2 years based upon local maps. We also organise events and trade shows and bring out studies periodically to track the health of the sector. ACMA is represented on a number of panels, committees and councils of the Government of India through which it helps in the formulation of policies pertaining to the Indian automotive industry.

What are the current projects being undertaken by ACMA?

Vinnie Mehta: Right now, two in-depth studies are being carried out with the aim to look for opportunities beyond traditional manufacturing. The first study focusses on ‘how auto component sector can become a hub for R&D and product development’ and the second study is on 'analysing Indian auto Component industry's competitiveness and identifying emergent opportunities'.

Please elaborate on the performance of the SMEs in the auto component sector?

Vinnie Mehta: During the financial year 2009-10, the size of the auto component sector was at $40 billion, while the exports were at $5.25 billion. This industry continues to grow at 14%. Although, the auto vertical as a whole is growing but the margins in the auto component space are increasingly becoming thin. The situation is more stressed out for the SMEs. There are quite a few challenges which are impacting the SMEs – access to easy capital, cost of capital, availability of skilled manpower, inadequate infrastructure etc. What needs to be understood is that the SMEs should scale up operations, which will in turn help strengthen the productivity levels.

It is believed that the auto component makers are hit with various roadblocks (rupee depreciation, high interest rates and petrol prices) amid the global slowdown? What’s your take on it?

Vinnie Mehta: It is time we internalise the fact that although overall demand curve for the sector will rise, there will be few ups and downs from time-to-time. ACMA envisions that the auto component sector will touch $110 billion by 2020 out of which $80 billion will come from the domestic market and another $30 billion from exports.

The auto component makers have been demanding uniform standard for auto components for both original equipment makers (OEMs) and after sales to combat counterfeits in market. Do you think it will help the sector?

Vinnie Mehta: The counterfeiting market in India is growing rapidly and it is a major concern for the organised sector as this problem is spreading its wings. This market is growing at 15-20% per annum and causing lot of worry for the organised players. The counterfeiting problem has gained pace in India an also causing considerable loss to the government. The size of the counterfeit market stood at Rs 33,000 crore during the financial year 2011-12. ACMA in this regard has created a White Paper and submitted it to Ministry of Road Transport and Highways, Bureau of Indian Standards. One way of tackling the counterfeit market for aftermarket products is by mandating standards, especially for safety critical ones, as currently there exists no such standards.

Can you throw some light on the main challenges witnessed by the SMEs in the auto component sector?

Vinnie Mehta: Few of the key challenges which are impacting the growth of the auto component SMEs are access to capital coupled with its cost. In markets such as the US, Japan, Europe etc the lending rates vary between 0-3% as compared to 17-18% for Indian SMEs. SMEs are under the strong grip of many problems such as absorption of technology, manpower availability along with infrastructure challenges. Most of the SMEs in India are a one-man-army and therefore, depth of management is also an issue.

How far do you think that the government policies and initiatives are working in favour of the SMEs and the sector as a whole?

Vinnie Mehta: The government especially the Ministry of Micro, Small and Medium Enterprises (MSME) has been very supportive of ACMA initiatives. ACMA has proposed the setting up of Technology Upgradation Development Fund under the aegis of the MSME which has found acceptance for the 12th Five Year Plan. We hope this will soon be realised.

Do you think that Foreign Trade Policy will help the industry overcome the challenges?

Vinnie Mehta: We are happy that recent supplement to the FTP has been favorable to the automotive sector. In the product focus scheme, 5 new auto component products have been added, while in market linked products focussed scheme out of 46 new products that have been added, 23 are auto components. This move will definitely help promote exports from the auto component sector.

India's handicraft exports climb 17.5% to $2.7 bn during FY12

Country's handicraft export advanced by 17.56 per cent to $2.7 billion during the financial year 2011-12 as compared to the same period in 2010-11, as informed by the nodal body of handicraft exports today.

 

The country witnessed the growth despite the sluggish demand in major importing markets like the US and Europe. 

The US and Europe together account for more than 60 per cent of the country's total handicraft exports. 

During the financial year 2010-11, the exports stood at $2.3 billion, as per the figures of the Export Promotion Council for Handicrafts (EPCH). In the last fiscal, the growth was mainly driven by growing demand in new markets like China and Latin America. 

Read more on: http://news.indiamart.com/story/indias-handicraft-exports-climb-175-27-bn-during-fy12-158365.html

Govt's five major schemes push for SME growth

Micro small and medium-sized enterprises (MSMEs) play a vital role in the growth of a nation. It is often said that small units are highly responsible for driving innovation and competition in various economies. Presently, the sector is accounted for 17 per cent in Indian GDP, which is expected to grow to 22 per cent by 2012.

Indian economy gets 45 per cent of manufacturing output and 40 per cent of exports from the SMEs as per the ministry estimates. Not only this, the sector employs 60 million people, creates 1.3 million jobs every year and caters to both national and international markets with the production of more than 8000 quality products.

Having been the key growth driver of the country economy, the MSME sector lacks the required cooperation from the government which in turn confines the growth of the sector in the domestic and global markets.

However, there is a slew of government schemes and sops offering enhancement and support to the business activities of the small units, but a majority of small traders fail to avail them due to lack of mindfulness and awareness about the schemes.

Here are five key financial assistance schemes being offered by the government to intensify the growth of the small scale units.

1. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)

The Ministry of MSME and Small Industries Development Bank of India (SIDBI) have instituted a trust named Credit Guarantee Fund Trust Micro and Small Enterprises (CGTMSE) for the implementation of Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE), which was formally launched on 30th August, 2000 and became operational from 1st January, 2000.

The scheme is aimed at providing collateral-free credit to both existing and new micro and small enterprise (MSE). The plan covers term loans and working capital facilities of up to Rs 100 lakh per borrowing unit and can be prolonged without any collateral security or third party guarantee to a new or existing MSE.

In case those units covered under this scheme go sick due to the factors beyond their control, the scheme also allows the lender to stretch the rehabilitation assistance. If the credit facility surpasses Rs 50 lakh, it may still be covered, but the guarantee cover will be extended for credit assistance of Rs 50 lakh only.

2. Credit Link Capital Subsidy Scheme for Technology Upgradation

Credit Linked Capital Subsidy Scheme (CLCSS) provides technology upgradation assistance to the SMEs primarily in the small scale industries (SSI). All entities, including sole proprietorship, partnership, cooperative, private and public limited companies, are eligible for the scheme.

The maximum limit of eligible loan for SMEs under the scheme is Rs 1 crore. It comprises a subsidy rate of 15 per cent.

The scheme was first launched in October, 2000 and was revised in September 2005. Under the revised scheme, the admissible capital subsidy is calculated with reference to purchase price of the plant and machinery.

3. Mini tools room and training centre scheme

In an endeavour to assist the manufacturing sector, the Government of India provides assistance to the state governments in setting up the tool room facilities, the backbone of the manufacturing sector as they create dies, tools, moulds, jigs, fixtures, gauges and precision components which are the essential elements for the operations of the production units.

Read more on: http://news.indiamart.com/story/govts-five-major-schemes-push-sme-growth-158127.html

Is lending a good idea for MSMEs?

As a Micro,Small & Medium Enterprise (MSME) head you would be worried for options every time you plan for expanding the business or conducting new processes in the organization. These MSMEs are one of the most important contributors in employment generation, promotion of entrepreneurship, wealth distribution and backward area development in India. However, they face a lot of hurdles due to their limited resources in manpower, finance, infrastructure and reach in the market. So where can the MSMEs generate or borrow funds from?

A Mix of Challenges and Opportunities
MSMEs face competition both from internal as well global competitors in times of globalization. Investments in technology & innovation often vie for an extra investment which needs to be provided from time-to-time. Having an extra amount for expansion and development could be a vital difference in the company’s future. There are a number of capital lending agencies working in India which could include banks, financial institutions, private investors, money lenders, etc.

How to approach these Agencies
Traditional finance agencies such as banks rely on documented sources of information, interviews, visits along with the knowledge and expertise of the individual managers in assessing and monitoring a certain business.

While approaching a lending agency, a good credit rating, secure financial statements and stable collateral could work towards your advantage. Many small business lenders often rely on personal credit history of the proprietor while giving the loan. So, the conditions can vary amongst various lending agencies. Risk assessment in a MSME varies greatly from a bigger company as the owner’s assets can also be listed as part of the SME. They often operate in the informal manner and thus listing their financial history can prove to be quite difficult. Keeping a strong financial process within the enterprise could benefit you in getting easy finances. Some lending companies may also demand for shares in your enterprise or prefer an internal agreement for a percentage of the company profits which can be negotiated at your end depending upon your need for the money.

With the advent of credit rating, getting your enterprise rated would also prove to be a good move. The credit rating agencies often have a list of banks and financial institutions on their panels. Getting a good rating would automatically make you eligible for a loan and that too at a reduced interest.

All’s Going Well
Today, as a MSME you have a better chance to avail finances with the launch of the new SME Exchange. You can enlist the organization on the Exchange and avail equity from the market. The latest budget has also provisions for an exemption on capital gains tax for property sales which are focused towards investments in MSMEs. The government has also set aside 5000 crore rupees to establish an India Opportunities Venture Fund along with SIDBI to offer easy equity to MSMEs.

One has to understand that companies such as Microsoft also started as a typical MSME and have reached an important milestone of being the richest enterprise presently. MSMEs can easily collaborate, merge and develop into larger organisations without much complications regarding documentation and thus prove to be perfect vehicles for instant growth. Thus, a gap in financing should be the last problem on your list with a variety of options for you.

Savvy enough to enjoy ETF purchasing?

The Indian economy has seen a rapid flux in recent times and the role of SMEs cannot be negated in this situation. As an SME, you have to be ahead of the rest with some wise decisions in an investment-centric environment. If you are looking for a safe bet, then focusing on gold exchange-traded funds (ETFs), a traditional choice of enterprising individuals and households, could be a solution for you.  

What it does

ETFs work like shares except for the fact that they are backed by physical holdings of a commodity. Similarly, gold ETFs enable buyers to own gold without any physical possession. ETF purchasing assures the SMEs who can use them to hedge gold commodity risk. It can also work as industry ETF and help the SME in gaining exposure to the gold mining industry. Gold ETFs can also be useful as a hedge for regional risk or be supportive in gaining foreign exposure.

Gold ETF

From where you can buy ETF

India has over 10 ETFs which are backed by various mutual funds which are supported by financial institutions and banks amongst others. Some of the popular ETFs included Benchmark Gold ETF Gold BeEs, HDFC Gold Exchange Traded Fund, ICICI Prudential Gold Exchange Traded Fund, KOTAK GOLD ETF, Religare Gold Exchange Traded Fund, Axis Gold ETF, etc.  All ETFs charge an expense ratio and management charge for their services. These could vary from 1 per cent to 3 per cent depending upon the asset management company. You can read the offer document of each of the companies and make a decision for yourself. The trend in India is upstream against the global situation where gold has witnessed an all-time drop in their demand for gold ETFs. 

The ETF advantage

ETFs are expected to witness a surge in the coming times. Thus, as an SME, you can easily earmark part of your profits, without worrying about the duration of the investment – long or short. You can easily hedge a part of the portfolio and gold ETFs prove to be a viable path in the presence of pressing inflation. Gold, especially guarantees financial insurance for many investors. Even the first month of the New Year has reflected an explosive growth for gold funds. You can make purchases in small denominations with the smallest ETF unit being one gram of gold. Also, since there is no physical delivery of gold, hence one need not worry about quality of the gold. You are also not bothered about storing the gold as there is no physical entity. The ETFs can easily be resold or traded on the exchange. 

ETFs – the other side

On the other hand, as an investor, you may be required to submit long term or short term capital gains tax on gold ETFs when you make a profit. The asset management company is in charge of your gold ETFs and hence a mistake on their decision to invest could lead to losses for you. Also, there is a possibility of tracking error between the gold price and gold ETF which may lead to deductions. Another threat is the liquidity which may result out of lack of volumes in the gold ETF trade. 

The numbers as they stand today

India’s investment in ETFs has risen to whopping 30tonnes in 2011 as compared to 15tonnes mark in 2010. SMEs have invested in large numbers with 50 per cent of total ETF purchases reported by companies. As per the experts’ opinions, gold, despite its vagaries and fluctuating volatility is still presumed to be a viable option for companies that want to boost their investment portfolio. It is also considered as a safe bet by many Indians and good protection against inflation which has been dictating the Indian economy for quite some time.

The BSE SME Exchange is here

The month of March 2012 witnessed a remarkable moment for the Small & Medium Enterprises (SMEs) with the launch of an exclusive Stock Exchange, supported by the Bombay Stock Exchange (BSE). The much discussed project was initiated by the BSE and NSE to offer an alternative stage for SMEs to raise capital for their growth and progress. The BSE SME exchange shares a common platform and infrastructure with the BSE whereas the NSE launched its version ‘Emerge’ with an online version.

More freedom for SMEs
The SME Exchange marks a new beginning for all small and medium-sized businesses in India which were introduced to this concept in the past one year. It is believed that Indian SMEs lack information regarding equity capital, stock market and funding options besides banks. Their dependence on banks and private lenders can now be easily replaced by this new initiative. The SME Exchange is expected to provide equity financing which can lower the debt burden of the listed companies, resulting in lower financing expenditures and a healthier balance sheet. This can help SMEs in developing their business from expansion to acquisition. Another important contributing factor is the visibility of the company which would be boosted by such an exchange and offer them access to the capital market. It also prepares the SMEs to grow and break into the bigger exchanges. Start-up issues related to many SMEs can also be solved by the presence of an exchange.

The Exchange and its operation
Various exchanges such as AIM (London), TSXV (Canada), GEM (Hong Kong), KOSDAQ (Korea) and NASDAQ (USA) were observed and studied to adapt their salient features and best practices. The SME Exchange would involve a minimum of 50 investors and Rs 50 lac post-initial public offer (IPO) paid-up capital. Listing would be compulsory for companies which have Rs 50 lac to Rs 10 crores and companies which have a paid-up capital between Rs 10 crores and Rs 25 crores have an option to list either on the SME Exchange or the main exchange.

Welcomed with open arms
The Exchange has received an encouraging support from various segments of the industry including manufacturing, textiles, IT, agro-based enterprises, and construction, among others. Even merchant bankers have expressed their interest in the initiative. Focus is on encouraging investments from small industrial towns and cities such as Dehradun, Jamshedpur and Haridwar, for raising capital from the SME Exchange. Tier-II and Tier-III cities are expected to be a big market for the SME Exchange.

New beginnings
The listing of BCB Finance marked the start of the BSE SME Exchange. Six SMEs have been already approved to enter the capital market and seven more are expected to follow suit. The target is to include about 10 by the end of the fiscal year and then extend up to 100 in the coming 18 months. An estimate puts the number of SMEs at a whopping 30 million, out of which about one million have a potential to be listed on the SME Exchange.

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. 

Delayed GST - major cause of worry for MSMEs, says IndiaMART CEO Dinesh Agarwal

With the ongoing pre-budget phase of Union Budget 2012-13, the most fertile minds of Indian Micro, Small and Medium Enterprises (MSMEs) are already discussing desired outcomes for next fiscal and bringing forth their recommendations.

Underlining his recommendations for the Budget, Mr. Dinesh Agarwal, Founder and CEO, IndiaMART.com, shares, "The MSME sector, having contributed tremendously to the Indian economy, has always lacked requisite support from all quarters. The time is ripe to support and equip them to establish their strong foothold in domestic and international markets.

Many believe that credit crunch is the biggest worry for MSMEs. However, they overlook the fact that higher and multiple taxes, and compliance with multiple departments are the key challenges for them due to their small set ups and thin management. We request the hon'ble Finance Minister to simplify and unify taxation for MSMEs in this year’s Union Budget. Also, consolidation of multiple departments will help address issue of compliance. It will help MSMEs rise above pertinent issues of conforming to several norms and lengthy, time-consuming paper-work.

Also, the delay in GST implementation has marred hopes of many MSMEs. They fear that now it may get rolled out in a much complicated form, not in its original shape. To tackle this, a pragmatic approach towards faster implementation of GST is required.”

Mr. Makrand Appalwar, CMD, Emmbi Polyarns Limited, Mumbai, also finds faster GST implementation as the most important requirement today and urges government to kick start it at the earliest.

Mr. Agarwal adds, “Essential infrastructural necessities such as land, power, connectivity, et al may seem to be very basic, but in reality they are extremely crucial for MSMEs’ growth. For this, more industrial zones with reasonable land prices must be announced while continuous power supply must be made available to factories, manufacturing set ups of MSMEs.” Mr. Dinesh Kotian, Partner, Ace Heat Tech, says, "Every enterprise aims to grow bigger and so do SMEs. Expensive industrial land comes as a major hindrance along with high interest rates in company's expansion plans. Steps should be taken to offer subsidized land and interest rates to SMEs. Also, a substantial number of SMEs have their setups in outskirts of cities. Unfortunately, basic infrastructural requirements like road connectivity, power supply, etc. are not in good condition in such areas. Government should pay attention here as well." Adding to this, Mr. Appalwar says, "Development of port infrastructure is very vital as the efficiency of exports depends majorly on it. We have a single port operational here in Mumbai and if any fault happens at the back end, entire operations suffer."

On the other hand, Mr. Agarwal praises government’s efforts for bringing effective policies that have helped build ‘communication infrastructure’ in country in the last 15years. He states, “What is now required is better and low-cost broadband services across the country, especially in tier-II and tier-III cities. This would allow MSMEs to utilize enormous business opportunities present online.

Strong steps are required from our government to free MSMEs from the credit crunch worry too. Execution of priority sector lending policies for MSMEs demands rigorous approach. Also, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) needs to widen its ambit and cover more MSMEs which can avail collateral free financing. This will help entrepreneurs to overcome financial hurdles while setting up their projects or scaling up.

We also look forward to extension of facilities (such as Zero Duty Export Promotion Capital Goods (EPCG), Status Holder Incentives, etc.) for exporters under Foreign Trade Policy till March, 2014 instead of the current time line i.e. March 31, 2012. This will encourage MSMEs to achieve higher export figures.

We hope to see a budget that addresses key requirements of MSMEs in terms of basic infrastructure, simplification of taxation, easy access to funds, among others.”

Your Company Deserves to Have a Logo

A logo represents a symbol which is used to create awareness about an entity. It is employed by a wide variety of businesses, enterprises to symbolise their agency, product or even mark certain achievements in its history. However small you believe your enterprise is, there is always a tomorrow and you’re going to need a logo sooner or later.

 

Why create a logo
Small & Medium Enterprises (SMEs) can benefit from the presence of brand logo which would reflect the face of the company. It also enhances potential customers and marks the crucial first impression for the business in front of potential partners and business houses. It narrates the kind of people or the type of company which it is recognised as. Often, logos are designed on the basis of the name or function of a particular enterprise. Designed using graphical codes and symbols, they are made attractive and eye catching. Often, brand recognition and marketing is closely related to the presence of a beautiful logo. The better the logo, the more people will recognise a company; the more the recognition, the better goodwill for the agency.

Elements of a Logo
A logo can be distinctively divided into about three distinct elements, namely pictogram which represents a symbol or icon related to the company, the wordmark which mentions the name of the company and a tagline or baseline which mentions a brief description of the company or product. For example, the brand Nike has a pen stroke representing a check for pictogram with ‘Just Do It’ as the tagline. Considering Nike represents a sportswear brand, the logo reflects its relation to the field of sports.

SMEs can opt for typographic logo such as Kellogg’s or IBM which represent the company logo written in designer text format. Other firms go for figurative logo such as Apple or Shell which have a figure representing their brand. While there are companies such as Adidas or Reebok which have a combination of strokes representing their brands which can be termed as an abstract approach to logo design. 

 Making a logo that stands out
While designing a logo, care has to be taken to keep the design as simple as possible. Too many complicated graphics may turn the design into an eye sour and it may also become a ridicule for the company. Clarity of representation along with that of thought is a must for a successful logo design. The colours to be adapted for the design need to be bright and vibrant reflecting the right blend of brightness and contrast. Bold colours in a messy combination can ruin the design also.

Before designing, the agency also needs to observe trends in the industry and look at logos of competitors. Logos which appear similar could lead to losses for both companies. The logos should essentially reflect the company and hence a presence/mark of the company needs to be a part of the logo. Placement of the logo is also vital and SMEs should emphasize the symbol in all their correspondences and associate it with their various initiatives.

A wide variety of graphic designers and web experts are now churning out logos for upcoming SMEs. Advertising agencies also specialize in logo design although they would charge an exorbitant sum for the same.

Let the logo communicate your company's ethos, values and vision. Let it stand for your company and establish an identity in the market.

SMEs & Taxation

Small & Medium Enterprises (SMEs) make up for a majority of businesses and a bulk of employment in developing countries and thus their taxation process becomes a subject for discussion. They are one of the most rapidly growing business segments and thus should be aware of information regarding taxation.

Registering for tax
Any SME or a new business needs to be registered with the government to avail any kind of tax incentives offered by the government. The company must be primarily be approved by Registrar of Companies (ROC) to begin business in a country like India. Registration also qualifies the SME to attain a taxpayer identification number (TIN) which is a pre-requisite for conducting business operations. They also need to register for a permanent account number (PAN) and pay VAT or sales tax. They also need to be member of Employees Provident Fund Organization (EPFO) and Employees State Insurance Corporation (ESIC). 

Paying the right taxes gives your company better value

Each state of India has a separate registration which is covered under Shops and Establishments Act. Stamp duty also needs to be paid at the time of registration. Even though the tax details are a bit complicated, tax compliance is necessary for smooth operations of business. Also, to set up a new business or to get licences for the same, SMEs need to visit various authorities both at State and municipal levels. The procedures could involve the participation of a wide variety of agencies regarding building permits, land use approvals, power and water connections and obtaining final occupancy certificates, etc.

Making use of tax benefits
Besides setting up, there are regulations which govern the hiring of labour and employees for a particular organization. These regulations vary according to the size of the company and are often very strict pertaining to employee rights. SMEs can benefit from a range of tax benefits which the government has allocated to encourage their growth. For example, new businesses can avail a substantial reduction in employer NI (National Insurance) contributions.

They can also utilise capital allowances for buying an asset such as cars, tools or other equipments related to the business. They do not need to deduct the expenditure from their trading profits and can claim a capital allowance for the same. This can also be used for various expenditures related to converting space for commercial benefit, investing in research and development and other heads which can be diverted to boost production. Topics such as research and development are also encouraged by the government and SMEs can enjoy additional tax benefits on their investment in that sector. Many SMEs in the export-import sector are also eligible for paying excise duties.

To continue a long term business, any SME should be competent in its accounting. The services of a reliable and efficient professional is a must. Also, besides the proprietor’s tax returns, payroll taxes of the employees also need to be filed. Most of this information is filed on a quarterly basis and advanced filing always get some incentives offered by the government. Three kinds of financial statements are presented for the accounting which includes balance sheet, income statement and the cash flow control.

There is a famous saying, 'A stitch in time saves nine'. So, know your taxes, plan their returns wisely and harvest satisfaction & mental peace later.

Expert Speak: Mr. GK Pramod

Vitality of SWOT Analysis of Microlevel Enterprise

What is SWOT analysis of Microlevel Enterprise?
SWOT analysis of Microlevel Enterprise is to understand all the Strengths, Weaknesses, Opportunities and Threats and list them down among the four quadrants of a graph. After categorizing them, we have to convert the weaknesses into strengths, threats into opportunities and opportunities into strengths.

Importance of SWOT of Microlevel Enterprise

• This would help Microlevel Entrepreneur to understand about his organization.
• This would help to increase their confidence level.

Methodology for conducting SWOT Analysis 

Step-1: As a management expert, call selected microlevel entrepreneur to one place, and brief them about SWOT analysis of their organisation. 

Step-2: Ask them to think and list down all the strengths, weaknesses, opportunities and threats of their organization on a sheet of paper. This may require 1.5 to 2 hour.

Step-3: Organise a One-On-One discussion with these microlevel entrepreneurs to understand their organisational SWOT. Ask them questions as mentioned below:

• Why do you think these are your organization Strengths?
• Why do you think these are your organization Weaknesses?
• Why do you think these are your organization Opportunities?
• Why do you think these are your organization Threats?

  
Step-4: Facilitate entrepreneurs to think patiently so that SWOT analysis pertaining to their organisation becomes effective. 

Step-5: Ask them to make a presentation about his/her organisation SWOT. Allow them to analyze organisation SWOT.
 

Step-6: Convert organisation’s weaknesses into strengths, threats into opportunities and opportunities into strengths.

Case Study-1:

Charan Singh (Product Business):

Mr. Charan Singh is a Microlevel Entrepreneur from Jalandhar in Punjab. He sells fertilizers.

Details of Charan Singh’s business organization unit:

Here is the SWOT analysis of Charan Singh’s organization post a long One-on-One session with the expert:

 

SWOT Analysis of Charan Singh’s organization

Author’s Key Points:

• Be truthful to yourself when you do the SWOT
• SWOT is a very important activity
• CEOs/Growth Strategists should encourage microlevel entrepreneurs

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
 

Leave your comments and queries here:

MSMEs want Centre to offer access to sufficient credit: FISME

Indian Micro, Small and Medium Enterprises (MSMEs) have requested Centre to offer access to sufficient credit, which is important for survival and growth of SME production. 

 

The Federation of Micro, Small and Medium Enterprises (FISME) in the budget proposal to the Union Finance Ministry has stated that the venture capital and private equity funds are required by the SME sector to commence new ventures and surge the current ones.

The securitisation of trade receivables is likely be introduced to allow the bond market to develop and also lure funds in large volumes and at concessional rates in the interest of MSMEs.

Moreover, FISME has said that Non-Banking Financial Companies (NBFCs) can help to offer finance to the micro and small enterprises, but they are required to be actively boosted via supportive policies.

Read more: http://news.indiamart.com/story/msmes-want-centre-offer-access-sufficient-credit-fisme-156338.html

Expert Speak: Mr. GK Pramod

Know Yourself - SWOT Analysis of Microlevel Entrepreneur

What is SWOT analysis of Microlevel Entrepreneur? 

SWOT analysis of Microlevel Entrepreneur is to list down all his/her Strengths, Weaknesses, Opportunities & Threats among the four quadrants of a graph. Once we do this, we have to convert the weaknesses into strengths, threats into opportunities and opportunities into strengths.

Importance of SWOT of Microlevel Entrepreneur

• This would help microlevel entrepreneurs to understand about themselves completely.
• This will increase their confidence level.

Methodology for conducting SWOT Analysis
  
Step-1: As a management expert, have all concepts pertaining to SWOT clear at your end and come prepared with the expected Q&As. Call all selected microlevel entrepreneur to one place, and brief them about SWOT analysis.  

Step -2: Separate all entrepreneur. Make them sit, think and list down all the Strengths, Weaknesses, Opportunities and Threats about their individual personality on a sheet of paper. This may require 45 minutes to 1 hour. 

Step-3: After doing this activity, organise a One-On-One discussion of microlevel entrepreneur with them to understand their personal SWOT. Ask them questions like:

• Why do you think these are your personal Strengths?
• Why do you think these are your personal Weaknesses?
• Why do you think these are your personal Opportunities?
• Why do you think these are your personal Threats?

Step- 4: Facilitate entrepreneurs to think calmly so that their personal SWOT analysis becomes effective.

Step- 5: Ask them to make a presentation about his/her personality SWOT. Allow them to analyze his/her personality SWOT.

Step- 6: Discuss, analyse and brainstorm together to convert his/her weaknesses into strengths, threats into opportunities and opportunities into strengths.

CASE STUDY: 1
Charan Singh (Product Business):

Mr. Charan Singh is a microlevel entrepreneur from Jalandhar in Punjab. He sells fertilizers. 
                   
Details of Charan Singh’s business organization unit are:

His personal SWOT is as stated below:

Let us now do SWOT analysis of Mr. Charan Singh’s case study.
                          SWOT Analysis of Charan Singh

Author’s Key Points:

• Be truthful to yourself when you do the SWOT
• SWOT is a very important activity
• CEOs/Growth strategists, please encourage the microlevel entrepreneur to do a proper SWOT analysis

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

Leave your comments and queries here:

Get Your Licenses Right Entrepreneurs!

The small and medium enterprises (SMEs) are accepted worldwide as the engine of economic growth. They help in promoting equitable development. High employment potential at low capital cost is the major advantage offered by the sector. The labour intensity of the SME sector is much higher than that of the larger enterprises.

SMEs constitute over 90 per cent of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. They play a pivotal role in the overall industrial economy of India too. In recent years, the SME sector has consistently registered higher growth rate compared to the overall industrial sector. 

Grab your licenses on time

SMEs located anywhere in the world need to be registered with their concerned governments. They are required to register under the concerned act governing their existence. For example, in India, the agencies have to be registered under MSMED (Micro Small Medium Enterprise Act) 2006 which categorises SMEs as per the nature of activity. Enterprises can be registered as manufacturing, service industry. This grouping can be further divided as per the size of the firm as micro (investment upto Rs 25 lakhs), small (investment between Rs 25 lakh and Rs 5 crore) and medium (Rs 5 to 10 crores) enterprise. 

SMEs can register under MSMED Act and submit various documents regarding the market potential of the product, technology aspect, plant and machinery requirement, land and building requirement, among other things. Registering with the government provides SMEs with incentives such as credit guarantee scheme, priority sector lending, capital subsidy, reduced customs duty, power tariff subsidies, tax exemptions, etc. which can help them in saving on finances. 

Registration also confers an official status to the enterprise which can utilize it to get into mergers and partnerships with international firms. These firms also find the registered bodies trustworthy for expanding their business in newer markets.

Communication is Essential

Interpersonal communication can involve a wide variety of modes of communication including oral, written and other non-verbal forms. But the most common reference to interpersonal communication is the spoken form where the two individuals are sitting, face-to-face. Business organizations generally conduct such communication through staff meetings, formal discussions related to projects or services, employee performance reviews within the office. Other forms include client meetings, employment interviews or sales visits which are conducted outside the office.

Relevance of good communication
Interpersonal communication is necessary for any organization, especially for small and medium enterprises, which must supervise and coordinate with a variety of other organizations. It is inescapable and also irreversible. Communication, in any form, cannot be defined as simple. It is a complex process which cannot be reversed. It has a good chance of failing if not considered properly and it can also be confusing in many cases. Clarity is a must and care must be taken to keep it optimum. Maximum information also leads to maximum difficulties for the consumer. Also, interpersonal communication has a definite context. 

Let your customer know that he's important

Ways of communicating
There are different styles of interpersonal communication which can be classified as one-way or two-way as per the transfer of information. In a two-way communication, two or more parties are involved in a constructive exchange. Companies can apply both forms as per their requirement. While one-way communication refers to a more controlling and directive mode, two-way relies on a more interactive approach. Primarily, there are six types of communication adopted in business settings, namely controlling, egalitarian, structuring, dynamic, relinquishing and withdrawal.

Do it right with the customer
Conducting a successful form of interpersonal communication with the customer is necessary for any SME to progress. The disconnect between the customers and company can prove to be the biggest barrier in a company’s progress. Good communication ensures happy customers, efficiency in output, productivity and an unmatchable synergy within the enterprise. This form of communication also ensures that the company is made aware of the various modifications and improvements required in each of its various products. A good enterprise has to understand customer’s thoughts, feelings and grasp their situation better to respond to their needs and expectations with the company and its products.

The flaw of repetition
Repetition is another important aspect of effective communication as customers need to be informed correctly about the products and services of a particular enterprise. Useful details and necessary information needs to be imparted from time-to-time to the customers. Listening to your customer is a necessary part of the communication. Effective listening also involves understanding both verbal and non-verbal signs and intent of the customer. It also helps SMEs in responding in a more holistic manner to the customer.

As someone rightly puts it, interpersonal communication can be compared to a two-way street where on one side, the companies have to listen to customers and also speak in the right and responding manner to them. Communicating effectively also ensures a loyalty from the customers. After all, any customer would prefer an organization which dedicates its time in understanding his needs, which contributes to the rise of an organization. 

Brand Building via Crowd Sourcing

Small & Medium Enterprises (SMEs) are prime players in any economy and its progress in a big way. Yet, many of these enterprises often abstain from brand building exercises. Industry experts attribute this absence to lack in infrastructure, capital, management, among other things. Often, SMEs are found busy in making products rather than branding or marketing them to their consumers which could often push them back in the competitive market.

Creating an identity
Branding prepares an exclusive identity for an SME and prepares it for competition in adverse marketing situations and also cements a strong connection with their customers. One needs to understand that potential customers recognize brands through a variety of media including visual communication (logos, colors, imagery, etc.), communications (websites, brochures, sales representatives, etc.), and behavior (relationships with customers, partners, employees, government, society, etc.). Also, in case of SMEs, branding could very well refer to their specific products and services which need to adhere to certain levels of quality. Brand refers to the way the customer knows the company and its business. Within the company also, interactive workshops and training sessions need to be conducted to apprise them about the brand.

It helps the customer in differentiating its services and makes the SME exclusive in its audience. It also supports the organization in generating a positive image and also contributes to the healthy growth of an organization. It also helps SME in connecting with future clients and build future associations. They also play a vital role in consumer decision making process as loyal customers often stick to their preferred brands.

Using technology to our benefit
Modern technology also offers SMEs a wide variety of choices to boost their customer base by brand building across various media. SMEs can organize a wide group of people to perform their special tasks related to branding and marketing which were earlier performed by specific individuals. The process termed as crowd sourcing is gaining popularity and is preferred choice for many brand marketers.  

While crowd sourcing is beneficial, it's important to do it right

With social media on the rise, brand building exercises have to be more intensive and planned in their execution. Once the branding is achieved, SME can benefit from its goodwill. With their limited resources and limited budget, 'crowd sourcing' can be a viable solution for many companies.

Crowd sourcing campaigns need to be planned carefully or it can prove to be a big disaster for the company. One needs to be precise in their brief because once the information is transferred, it travels to further customers in the way it was published before. There is no room for errors. SME should also be open to offer incentives to the customers who may be attracted to a particular company because of the prizes offered. The customer also needs to be assured that he is not overwhelmed with company’s promotion drive which may also result in a negative impact. 

Crowd sourcing offers innumerable ways of promotion and one needs to be precise in their choice. Even though it involves a wide range of consumers but the process needs to be treated in a professional manner.

'Buyer Seller Meet' - A platform by IndiaMART.com for SMEs in Healthcare sector to Network & Grow

The medicine and pharmaceutical industry in India is truly cutting edge. It has seen plethora of advancements in the past few years. Messe Duesseldorf India Pvt. Ltd. endeavors to constantly remain in the forefront of the changes, sweeping advances in the field. In association with MEDIC and IndiaMART.com, India's largest online B2B marketplace, as its online media partner Messe Duesseldorf has put its best foot forward with the support of Indian associations such as AIMED (Association of Indian Medicals Device Industry) and IAPMR (Indian Association of Physical Medicine and Rehabilitation), as well as vital international institutions to bring the medicine and pharmaceutical industry under one roof at Bombay Exhibition Centre (BEC) in Mumbai via 'Medial Fair India 2012'. 

But, what actually would interest the Small & Medium Sector Enterprises (SMEs) of healthcare sector here will be the 'Buyer Seller Meet' which IndiaMART.com will be organising in partnership with Messe Duesseldorf India Pvt. Ltd. Before delving deeper on what this meet has in its store for Indian SMEs active in healthcare sector, lets get acquainted with Medical Fair India 2012.

A Curtain Raiser
Medical Fair India 2012 will provide an interactive platform for the entire medical fraternity to gather under one roof and celebrate the technological advances in the field of medicine. It is a three day celebration of diagnostics, medical technology, rehabilitation, medical equipment and components. In fact, such a meeting is much more than just a scientific interaction. In addition to facilitating the exchange of expertise and knowledge, the fair provides an invaluable opportunity for the sellers to exhibit their equipments to the buyers.

It is anticipated that over 311 exhibitors from all over Asia, Europe and USA will attend the event showcasing the technological advances equipments and health care products to more than 5000 visitors. This event will also witness footfalls of entrepreneurs from various SMEs across the sector apart from industry leaders. As a matter of fact, for the very first time in the history of medical fairs in India, there will be a US pavilion with the Illinois State Office, the Minnesota State Office and the US Commercial Service participating, as well as group exhibitions from the Czech Republic and Japan.

Upholding Traditions: Where Buyers Meet Sellers
Partnering with Messe Duesseldorf, IndiaMART.com will organize a 'Buyer Seller Meet' alongside the fair. This meet will provide an exclusive platform to buyers who will come with their specific requirements and sellers who will showcase product samples of their respective companies. IndiaMART.com will make arrangements for pre-fixed meetings between buyers and suppliers of medical products as well as it will ensure that every buyer gets to meet multiple numbers of suppliers. The objective of this meet is the cultivation and promotion of various businesses across the field of medicine, creating prospects for exchanging of views on the development in instrumentation, establishing contacts and face to face meeting with prospective buyers. This meet not only gives a golden opportunity to Indian SMEs in healthcare sector to explore a whole new world of healthcare products & services but also a perfect platform providing enormous future prospects, latest trends and exclusive networking with the companies from the same industry.

Health & Welfare
The medical fair aims to direct the health care group giving them an opportunity to gauge trends and developments in medical industry. It gives them a chance to meet decision makers from India and abroad, whose and who of medical fraternity as well as renowned doctors & veterinarian surgeons. The fair tries to accomplish welfare of the buyers and sellers belonging to health care groups and pharmaceutical industry at its best.

Welcome to Mumbai
So, IndiaMART.com welcomes all manufacturers, exporters, importers, purchase managers, doctors, et al to be a part of this mega event in Mumbai, the bustling and lively city of India which is enjoying both an excellent economical climate and blooming healthcare services sector. Come and join IndiaMART.com at 'Buyer Seller Meet' where it opens gateway for Medical & Healthcare sector to a better tomorrow.

'Buyer Seller Meet' Schedule:

Date: 2nd - 4th March, 2012
Time: 10:00am - 04:00pm
Venue:  Bombay Exhibition Centre, Mumbai

Fill up your buyer's registration form by clicking on the link below and get a Face-to-Face interaction with suppliers of medical products:
http://trade.indiamart.com/mailer/ts231111/medical-fair-india.html

For more information, please visit:
http://www.biztradeshows.com/medical-fair-india/

Innovate to Sustain and Grow

Globalization has brought many markets together and presently, the competition does not just rest within a single country. Products and services from various enterprises located across the world are competing on a single platform. In times of such competition, the success of any particular company is gauged by the speed at which it can innovate goods and bring them to the forefront.

What is innovation?
Innovation defines the ability of any agency to benefit from the breakthroughs of scientific achievements and convert it into practical solutions for marketing. A combination of efficient flow of technology, ready supply of finance and adequate business skills are the three pillars which can boost an SME. 

Teamwork makes it easy for you to innovate

Many SMEs keep on repeating their processes and often fail to innovate and thus eventually lose to competition. SMEs have a huge potential to innovate and are well aware of their market. They are familiar with their manufactured product and user expectations and can utilize the opportunity to innovate. Lack of funds is also another deterrent for many SMEs.

Engage relevant talent
To improve their status, SMEs can even hire an innovation coach who would share his expertise to prepare the innovation process. They can also hire exclusive R & D professionals for new product developments and dedicate an entire wing for the same. They can outsource the research work at a much cheaper rate.  Many low end SMEs may not be able to innovate as per their requirement. They should improve their efficiencies in HR, finance and customer management systems to support themselves.

It has been proved that firms which invest a good amount of their profits in developing innovation or R & D turn out to be at the top of their list in production. SMEs also need to understand the various SOPs offered by the government or policies which can be utilized by them to fund their R & D projects.

Spread good humour
For bringing innovation one has to understand its benefits and also venture into new collaborations to initiate innovation. An SME has to invest in promising innovators who can boost and contribute with greater ideas in the existing set-up. A work culture suitable for innovation has to be cultivated and results are expected to show with the passage of time. It has to be reflected in various segments within the agency including in its management. It is a group phenomenon and never an individual attempt, thus, the team has to be nurtured to express their views and encouraged to be creative.

Innovation also demands a certain dedication in terms of manpower, resources and finances. SME needs to prepare their employees by sending them to workshops, seminars and conferences where they can pick up handy tips. Senior staff are often found to be antagonistic towards innovative ideas and implementations and they also need to be kept in the loop regarding new processes. Ideas have to be worked upon in a collaborative manner and supportive people are required within an agency to support new initiatives. Fostering innovation is hard, but innovative SMEs are cut out for a larger canvas.

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.