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
Labour welfare and Growth of SMEs
Practices relating to working conditions, safety and health, skills development contribute positively to the welfare of SMEs in India.
May Day is celebrated in most part of the world as a symbol of creating awareness about better labour practices in the workplaces. It is an appropriate time to understand the firms’ labour resources and capabilities, and contributions, as do external interactions – i.e. the diverse market and regulatory/ institutional contexts that condition competitive advantage and survival for SMEs.Read more
Diversification strategy for SMEs: Better the research lesser the risk
Diversification into newer areas is good for entrepreneurs. However thorough research is needed to mitigate the risk in the new venture.
Last week I met an entrepreneur who had been running an oil business for more than two decades. Recently he took a decision to diversify the business in order to ensure sustainable cash flow and derisk himself from the industry related challenges because the oil extraction industry is undergoing a steady transformation towards brand orientation and it requires a larger capacity.Read more
Amendments to IBC 2016- A comfort to SMEs under distress
Proposed amendments to allow the promoters to become part of the resolution of stressed business will support quick revival MSMEs under the new law.
Recently Govt has formed a committee under Secretary of Corporate Affairs to review certain provisions of Insolvency and Bankruptcy code 2016. The review panel called for sweeping changes in the law aimed at easing insolvency rules for small enterprises and providing relief to home buyers by treating them as financial creditors while deeming the amount raised from them for real estate projects as financial debt.Read more