'MSMEs Must Streamline Their Operations In Order to Drive Growth'

In an exclusive interaction between Mr Chirag Patel, Co-founder, Stratefix Consulting and Mr Faiz Askari of SMEStreet, some interesting and contemporary opportunities for an MSMEs' development are fetched.

Here are edited excerpts:

• What should be the focus of MSMEs to build a strong base in the industry?

Over 63 million MSMEs spread across the country contributed 30.5% to India's GDP in FY19 and 30% in FY20. It also created many employment opportunities however the SME/MSME industry faces unique challenges that are different from larger organizations: 

• Leader Focused Approach : Since these companies are largely founder-led or family businesses, it can be challenging for leaders to focus on everything, especially daily operations
• Struggle at 360 Degree : Entrepreneurs need assistance in strategizing beyond a certain level of growth and scale, as streamlining operations and controlling costs while scaling remains a struggle
• Tough Transitions :  Considering the traditional nature of MSMEs, transforming to a more professional, or even digital ways of doing business, is not an easy transition
• Reluctant to Technology + Unavilability : MSME companies recognize the need to adopt and integrate technology - but they are reluctant to go the distance. At the same time, they have limited budget for adopting the technology, MSME’s have to do good level of compromise in selection of vendor and getting best services.
• Fund and Resource Management : Lack of abundance of fund does not allow to buy or hire high level resources, MSMEs used be to always under pressure in terms of investing in the right resources, with the necessary talent and expertise. 

A significant number of SMEs and MSMEs understand that in order to survive in the new world they need to perhaps completely rehaul their existing operations and business model. This is an opportunity to now set the foundation for the next phase of growth and scale. 

• What was the idea of behind Stratefix Consultancy?

While whole world is trying to make “Good to Great”, We at Stratefix Consulting are trying to dig out the “Raw” diamonds and giving them “Best” finishing.

Corporates can have many more helping hands likewise they can hire and afford Big 4 Consulting firms but for the MSME industry, they don’t have abundance like Corproate and in turn, they are remained untouched.

Apart from that, Problems at MSME’s are completely different than Corporates. To solve their Problems, One has to adopt the life style and Belief of MSMEs.

Stratefix was established exclusively to assist MSMEs across India. Since inception, we have helped over 300 MSMEs in India. What makes us unique is that we study the issues, strategize solutions, and even assist in executing the plan. In essence, we work like an extension of the organization in many ways: 

• Improving the Productivity of Human Resources 
• Streamline the Operations by developing robust systems and processes
• Improve cost efficiency 
• Increase Sales by assisting in the market penetration of existing products and new product launches
• Set up dedicated teams to handle key functions, such as HR, Process and Growth Strategy 
• Developing the right expertise and capabilities within the organization to aid growth. This can involve Right Talent, the implementation of the appropriate ERP Solutions or IT Modernization etc. 

In large enterprises, Consulting firms hold specialization in specific departments only while we take Overall Organizational Transformation. We focus only on MSMEs in metros and non-metro cities because the challenges this segment faces are unique and require a specialized approach.

• What are your strategies in terms of expansion?

India's business consulting market is worth $4.5 billion! However, most of the action takes place in metro cities. There is a huge opportunity for business consultants in the MSME industry, which is mainly found in mini-metros and tier 2 and 3 cities. We want to tap into this market.

Our goal is to transform 10,000 businesses by 2030! We plan to do this by introducing our exclusive Franchise Model across all tier B towns in India.

As India's MSME market represents an enormous opportunity, we are focusing on building teams to work with companies across the country. We want to offer MSME all the services they hear about in corporate jargon. We have plans to expand our services to include strategy audit, M&A consulting, family charters and constitutions, and data analysis.

• What is the scope of MSMEs growing in India?

Over the last five decades, the Micro, Small and Medium Enterprises (MSME) sector, also referred to as the "Engine of Growth," has emerged as a vibrant and dynamic segment of the Indian economy. In India, it contributes significantly to economic and social development by encouraging entrepreneurship and creating extensive employment opportunities at a low capital cost, second only to agriculture. According data released by the MSME Ministry, India has approximately 6.3 crores MSMEs - which accounts for 29% of the country's GDP through national and international trade, and nearly half of the country's exports.

MSMEs serve as ancillary units to large industries, and this sector contributes significantly to the country's inclusive industrial development. MSMEs are growing their sphere across sectors of the economy, creating a diverse range of products and services to fulfill domestic and global market demands.

COVID19 pushed all industries to adopt new technologies and innovate to grow and survive. The Indian government pushed MSMEs to embrace digitisation, by launching the Digital MSME Scheme in 2017 with the aim of educating this sector on how to overcome obstacles through the use of a digital platform. MSMEs are now using social media platforms to grow their businesses as a result of digitization. They are progressively using social media platforms such as Facebook and LinkedIn to engage with customers, build brand awareness, and acquire new customers. Almost all MSMEs are now utilizing digital technology to sustain the current crisis, and the pandemic-forced digital transformation is certain to last forever and improve the way MSMEs do business.

• Tell us about the Employee Compensation Survey. 

We recently conducted a study to understand/gauge the compensation expectations among MSMEs in FY'23. A survey of 2000 MSME employers and employees in the found that:

• Majority of the Directors / Co-Founders / CEO / Business Owners intend to give their employees a raise, but the level of the raise differed
• On the contrary, in light of the COVID-19 pandemic, employees felt that they deserved a raise for staying loyal to their employers.

Over the past several decades, the MSME sector has been the engine of economic growth in India. For MSMEs to succeed, they need to attract, retain, and develop talent. However, they face many obstacles when it comes to People management because of a lack of resources and a deficient HR management system.

We conducted a survey to study employee and employer compensation expectations in the MSME segment. The survey produced interesting insights both from employers' and employees' viewpoints.

Over the past two years, small businesses have suffered significant losses and struggled to stay afloat. However, understanding the importance of having the right talent on board:

• 68% of companies are willing to give their employees a salary increase of 7-10%
• 26% of businesspeople are willing to give a 10-12% pay raise
• 6% of employers are prepared to offer more than 12% in salary increases.
• Despite the cash flow crisis, MSME companies intend to give raises around Diwali this year - anticipating a complete recovery.

As a result of the dynamic business environment over the last two years, employees expect pay hikes and rewards for remaining loyal to the company during the tough time of past 2 years. According to the survey:

• 72% of employees expect a salary increase of 10-12%; 28% expect a raise of over 12%.
• If not given a pay increase, 58% of employees will consider switching jobs
• Employees also expect their benefits to be reinstated

Recruiting, retaining, and developing talent is the biggest challenge for MSMEs. While they understand the importance of investing in talent and expertise, the non-existence of an HR department or robust HR policies puts them on the backfoot.

FY’23 will present tremendous opportunities for MSMEs to grow and scale. Businesses and employees were both working hard to stay afloat over the last two years. I strongly urge businesses to consider increasing the compensation of their employees, as good talent is hard to find.