Tuesday, January 21, 2014

Success criteria for SME in India

Common life cycle phases for all businesses are known to everyone. They normally start with;

        Organic growth phase:
Quantum growth in demand for the product or services, high volume of sales out, less marketing cost, easy money and profitability.

        Beginning of consolidation phase:
High volume of business with high sales and marketing cost, Profitability is almost maintained.

        Consolidation phase:
Volume of products and services start declining, moderate profitability, volatile market conditions, very high sales and marketing cost.

    End of consolidation phase:
Very few big players (companies) and specialty product / service organizations will survive in market, profitability will shift from high volume sales out of products / services in to low volume sales out of high-end products and services and replacement market will open up. Crucial survival issues will crop up for small and medium size companies. Merger and acquisition will increase.

My observation is that in India, most of the business owners of small and medium size enterprises (SME) have their success parameters traditionally based on their own early retirement or on how much amount they will get when they sell their business. There is third factor which is “appreciated value of the business premises”. So when consolidation phase is started, they become confused about where your business is going, start becoming directionless and start feeling exhausted with the unproductive work load.
Decision to scale up or scale down their business solely depends on their own capability for embracing the risk, learning from past mistakes, energy and interest.

Bhartesh Sagar

January 21, 2013

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