Can Startup’s solve the MSME ( SMB) business challenges on a larger scale?

Out of the 63.3 Million MSMEs, 99.4% are Micro ( < 5.0 crores) , 0.52 % ( < 50 crores) and Medium businesses are just 0.8%.

Like farmers in Agriculture with fractional acreage, MSMEs are too fragmented. Micro and Small business entrepreneurs are always fighting to survive ( forget thriving) considering the scale of operations, supply chain & demand challenges, and most importantly non availability of working capital and growth capital at interest rates <10%.

Larger players have been consolidating and becoming bigger and are there are hundreds of examples. Relatively successful smaller players get acquired by larger players or they merge with each other.

PVR and INOX ( large multiplex cinema chains) with more than 50% of the market have merged together as they found the growth getting stagnated considering the OTT challenge.

Aggregation through mergers and acquisitions is happening everywhere. In this scenario, there is no option for MSMEs to do the below or end up closing the operations unless one has an extremely niche product or service.

CAN STARTUPS HELP MSMEs?

- To consolidate some of the operations so that can achieve a certain scale?

- Enable mergers so that they can thrive instead of just survive?

- Help in increasing demand and generating revenues?

- Optimize the costs on the sourcing side by aggregating all players together and sourcing competitively?

- Provide working capital based on creditworthiness but under 10%

APART FROM PROVIDING

*Digital solutions and going ONLINE

*Accounting & digital payment solutions?

* Capital at a very high double-digit interest rate?

* Logistics to optimize delivery costs?

UNTIL THEN THE 3C MANTRA for MSMEs is to COLLABORATE, CONSOLIDATE & CONQUER together.

*** COLLABORATE: Share resources — warehousing, sales & distribution team, and if possible manufacturing as well. Ex: An auto-component or FMCG company in the South can leverage the support of a company based in the North, West & vice-versa instead of going it Solo.

*** CONSOLIDATE: After collaborating with each other, explore and consolidate and get the benefits of shared procurement benefits, faster loans/capital, and growth in revenues with joint sales & distribution OR merge their companies and beyond to become a medium-sized business.

*** CONQUER: Adopt technologies, digitize the operations and win the market together.

Small it seems is no longer beautiful! Scale matters.