Turning around a failing business- A pragmatic approach
Many SMEs believe in an infusion of more funds to revive the failing business. The fact is the solution lies beyond money.
In the previous blog, we analysed a business in cotton ginning business, which went into distress in just two years of its inception. We identified the reasons for failure are poor thought process and absence of detailed planning at the beginning, lack of internal control, poor quality control at the procurement stage which is the key success factor in the cotton ginning business, lack of oversight by the family elders over scion of the family who leads the business, etc.Read more
“I want to shut down by two-year-old venture because it is a failure”
Many entrepreneurs who diversify are finding difficult to sustain the new venture. The source of pain lies in the poor planning at the beginning.
Recently I met an entrepreneur from Maharashtra who has been very successful in his business of textile fabric manufacturing. The present turnover exceeds Rs 200 crores. The journey started with a small capital about 40 years back and it reached the significant level today due to perseverance and extremely sensitive to the quality of products. He is highly respected for delivery of his products on time and rigorous approach to quality control.Read more
A realistic DPR- Tool to win the confidence of potential stakeholders.
If DPR is prepared for the project with realistic assumptions and with the active involvement of promoters, it can help the promoters to strengthen their case to convince the potential stakeholders.
Recently I met a friend who has been very successful in an agro-based venture. He has been planning to expand the horizon his business into multiple links in the value chain to provide an integrated platform to farmers and consumers to experience superior value proposition in the transactions.Read more
Risk Management as a part of start-up planning- A process to ensure the sustainability.
Making risk assessment as a part of new business planning will lead business on the road to success for SMEs in India
Recently I had a new client seeking to set up a food processing unit in his hometown. He wanted a full pledged DPR (Detailed Project Report) analysing the issues, challenges and the opportunities. After all, he is not new to this business. He has been running the same business in a rented facility for 15 years which the owners wanted him to vacate.Read more
Is working capital denied?: Explore options
Many a time when there is no or less working capital financed, the SMEs tend to curse the at the fate than looking around for possibilities thus aggravating the distress.
In the previous fortnight, we had discussed the evils of starting a new project without proper arrangement for sufficient working capital under the blog titled: Starting a new project without tying up working capital – A suicidal act for SMEs.Read more
Starting a new project without tying up working capital – A suicidal act for SMEs
Many SMEs start a new project by taking a term loan and for working capital, they count on the assurance of banker to sanction at later date which is suicidal if not materialised.
Recently, I met an entrepreneur from Gulbarga who had set up a dal processing unit and which remained in the standstill for four years. He has been running a small business which was taking care of all his needs and also over the period of years, he has accumulated savings to fund his dream project of setting up a dal processing unit in Gulbarga. The region is very much known for producing a huge quantity of pulses, mainly Toor Dal.Read more
Enduring distress is rewarding in the long run for SMEs
Many SMEs cave in before the pressure of financial distress. However remain focused on the business will help overcome the distress.
I have two contrasting cases of SMEs who took exactly opposite direction while dealing with financial distress. Incidentally, the trigger for distress is same that the sudden pronouncement of demonetisation.Read more
Feasible financial projections- A precursor for realistic expectations
SMEs need to restrain from over overambitious numbers while starting/growing their business and realistic assessment of parameters is paramount to manage the stakeholder’s expectations.
Recently there was an appalling news report that a food major is locked in a fierce boardroom battle with equity investors who made a substantial investment in his new food venture. The bone of contention was the inability of the company to reach the expected level of valuation that would have facilitated a profitable exit for the investors who stayed invested for more than five years and looking for an exit. The valuation is low because the company did not reach the projected milestones in terms of revenue, reach and profitability, it is observed.Read more
Vague policies of lenders- A source of the annoyance of SMEs in India
Vagueness in policies adopted by lenders is depriving many potential SMEs to access credit especially Govt schemes in India.
Recently I met an entrepreneur who has been running between the banks and financial institutions for raising a debt of Rs 1 crore. He has been struggling for six months to secure a loan to meet the requirement of the new project which is under implementation.Read more
Increasing Cash flow based lending- A positive for SMEs
Many Bank and NBFCs are aggressively launching new platform /products for increasing lending to MSMEs by leveraging the cash flow. This obviates the need for collateral security, which is a positive development.Read more