The author is Executive Vice President, Wadhwani Advantage at Wadhwani FoundationMore From The Author >>
Survivability Of Small Businesses And Beyond
The relevance of sustainable business practices has increased in the post-COVID world
One doesn't survive and therefore grows. One grows and therefore survives.
Small and medium-sized enterprises In India and globally ought to learn. They are expected to grow anywhere between 10 and 12% by FY22. The star performers are expected to grow anywhere between 15 and 22% by FY22. The Laggards are expected to grow anywhere between 4 and 7% by FY22.
Should you find yourself a small and medium enterprise entrepreneur, do you want your business to be a star performer in your industry or face painful death? Anything in between, over some time, will gravitate towards two ends of the spectrum, leadership towards stardom or eventual precipitated death.
Growth is survival
Empirical evidence shows that even a minuscule growth rate of 2 to 3% results in the survival rate chance improving by over 60%. Compare this with a situation that the organisations' longevity has been rapidly declining for the past 70 years of business history.
Globally, small and medium-sized enterprises have shown survival rates better than the large corporates And start-ups. While 3 of 4 startups survive fewer than five years, the small and medium-sized enterprises have survived for surprisingly long, some surviving for decades and some surviving for centuries. As famously known, the Japanese and oriental firms have had a fantastic reputation for building longevity twice or thrice times better than their Western counterparts.
Three business practices distinguish the firms that would grow and the firms that wouldn't, post COVID-19 mayhem, in 2021 and beyond.
These practices would be visible in value chains that are critical to India's GDP and employment growth, namely food processing, automotive, textiles and apparel, electrical and electronics, construction products and finally, manufacturing services such as logistics, in addition to financial services, digital entertainment and communication goods and services.
Choose your playground
Entrepreneurs would do better to choose their playgrounds, afresh, anew. My interactions with the entrepreneurs suggest that those entrepreneurs who have used this period of crisis as the best time to recast their very reason for existence have begun witnessing the best chances of growth in 2021-23, not the best chances of survival remainder of 2021.
Think growth, not survival
Secondly, it is about an entrepreneurial mindset during and after a crisis that is fixated on growing and not surviving. My experience suggests that the entrepreneurs who are worried about survival when struck with calamity and stay there long perform worse than those focused on growing faster. It is natural to be down, but it is essential to up again, fast enough, not to exist alone, but to grow.
Therefore, evidence suggests the protracted anxiousness would result in early death.
Thirdly, the small and medium-sized enterprises that would choose to have asset-light growth would win better than the small and medium-sized enterprises that would want to expand their asset sizes with the vision to grow fast in future. This implies that the ownership of the assets needs to be distributed among the contenders. That is hard but necessary.
This calls for effective partnerships between the small and medium-sized enterprises in chasing demand, resulting in a growing together, then competing fiercely to win in the marketplace. We estimate that the partnership led growth for small and medium-sized enterprises would enhance the chances of growth and, therefore, survival by 1/3. This involves taking steps to forge new relationships faster than ever, both on the demand and the supply sides.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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