Are SMEs Fulfilling their Potential? | SPJIMR

Are SMEs Fulfilling their Potential?

M Suresh Rao

Author: M Suresh Rao

Date: Thu, 2017-05-04 14:26

From media coverage it would seem that the future of Indian business has been revealed and it's all about New Age Ventures. Technology backed with innovative business models, set up by first gen entrepreneurs sourcing not just growth but prototyping too with external capital.

The reality is vastly different. The brunt of our business continues to be carried out by Small and Medium Size Enterprises from the manufacturing and service sectors managed by family business owners or first time entrepreneurs. The new generation ventures are the visible tip of the iceberg hogging all the attention.

The best of the SMEs bring with them a mindset typically Indian that enables them to be sustainable in the competitive world of business. The characteristic aspects of this attitude are:

  • Commitment to the venture by the owner(s) that straddles time, patience and money. The family or the partners work together allocating functional responsibilities and are led by an  accepted business head who is generally the senior most in age and experience.
  • There is  an unstated yet commonly accepted vision for the business. This brings in a transparent, hard-working organisational culture that does not have to undertake 'Retreats' for organisational revival.
  • A keenness for financial self-sufficiency which drives both operational and growth initiatives. The strategic choice is for risk-taking within  'affordable loss' limits, rather than maximising enterprise valuation.
  • They have mechanisms to  continuously bring in change with continuity. They understand the lethal impact of complacency on the profits and sustainability of the business.
  • A deep sense of pride in the company and its values. Again, the pride is derived not from the valuation the firm commands but from the recognition the brand receives. It comes from the esteem the owners or partners are  held in by the stakeholders - from customers to staff to trade, banker and society.

Of course, not all SMEs display all these features. That explains why SME success is pyramidal in real life. An appraisal of the  success factors confirms that 

  • None are genetic, all of them are generic, it is not that only a particular community is blessed with them. Without these essential factors for business sustainability, every business will land in trouble sooner or later. If the top management does not have the ability to adapt to the changing business environment, growth will become a casualty leading to quitting of the best employees and ossification of the enterprise.
  • All of them can be learned by entrepreneurs who have shown the basic competence to develop their business from start-up to  small business stage such as knowledge and skills to manage the finances of the business  as an efficient corporate manager would. A good understanding of business finance raises funding options and reduces dependence on the CA.

Owners who are profitable yet chose to remain small by choice are a different breed. They could be seeking work-life balance or personal growth beyond business.

Let us now focus attention on the many SMEs who do not have all the success factors for sustainable growth. These are the small business owners that are:
-    Finding it difficult to grow
-    Facing margin squeeze
-    Feeling "business as usual" is  not the way forward
And are looking for a solution.

Invariably, the solution boils down to upgrading MANAGEMENT SKILLS to the level required for the growth stage of the enterprise. The gist of management is serving a growing number of customers profitably. This is not rocket science, unless technology has indeed come to be the critical success factor for business survival. Question any SME entrepreneur on why (s)he is finding it increasingly difficult to cope with the challenges of running the company and the responses will indicate  the  widening gap in management bandwidth. Look at it this way: at the SME level, business is getting more competitive by the day, so  you have to 'win' over customers, retaining good staff is tough so you have to 'win' them over, finance is scarce so  you need to 'win' over your key stakeholders. The list of challenges is not exhaustive. They can wary, however, the solution is the same: a better way of managing the venture. 'Winning' in each of these situations requires application of tried and tested management knowledge and insight customised to the context.

It is not anybody's contention that attributes like passion, perseverance and patience are not significant to business success. Rather, these attributes are pre-requisites to management competence. It becomes the purpose of the enterprise team to channelise these attributes towards the goal of profitable growth through effective management. 
Can you teach management to an entrepreneur? The knowledge, skills and attitude that facilitate business success at different stages of the enterprise lifecycle are well documented and can be delivered through Management Development Programmes to the growth seeking entrepreneurs.

SME entrepreneurs have come through the grind of creating a venture out of an opportunity they sensed. They have prototyped the product, created the facility to make and market the  product, have a core  team and money to carry on current operations. They simultaneously take pride in what they have achieved and  are apprehensive of how to scale up profitably.
This is the ground situation today facing a large number of small enterprise owners at the lower end of the growth pyramid. A situation that can be overcome with a mind-set change that enables the entrepreneur to see himself primarily as a CEO of his venture. A CEO who finds it beneficial to equip himself with the knowledge, skills and attitude for effecting the transformation.  

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Every business starts small. There are numerous successful enterprises in the country that operates successfully and have become popular nationwide. While there are others which have failed when tried expanding business. Why? Whether the difference can be spotted? As the article states there are owners who are extremely profitable yet chose to remain small by choice are a different breed, is the work-life balance they are looking for or the apprehension of scaling up ? Not to deny with, there are challenges and so apprehensions. However, strategic approaches can be brought in for sustainable growth these enterprises to utilize the full potential of the resources available to them. And this would require changes that would impact an organization’s ability to scale and operate further. When a business is small, there are limited stakeholders and so the information resides with them is easier to manage. As and when it expands, it creates turbulence due to factors such as structural changes in place; technology is needed to scale-up, and automation that is required to operate. In order to accommodate with the rapidly changing requirements, if the owner of the enterprise is able to accept the change, it could lead to sustainability. Otherwise the journey stops. This pattern of change mindset can be witnessed even in large established firms, which have gone bankrupt only because they could not sustain the organization with the shifting environment. Although thousands of small businesses are established each year only a small number remain are able to expand their businesses. Common contributing factors to the failure of these small firms are a lack of consideration given to the development of a goals and objectives, strong business plan, organizing and resourcing for the new projects and growth of people assets- nothing much but management skills, skills which can be trained and applied. A planned approach to the management and training of SMEs management will surely benefit not only from a competitive position in the market but also be well placed to regulate to changing and often undefined effects in the business environment.

The article rightly points towards the ground reality of India as of today.The pragmatism that any SME owner would have used while setting up his business can be much useful while scaling up too.With industries achieving high level of productivity it is imperative to scale up rather than treat it as a choice.This scaling up could be in terms of distribution channels,volume of production,new markets, etc.With changing regulatory requirements,better information sharing through digitisation it is essential to scale up ones own skills too which will help the business owners able to adapt fast and steer themselves clear of headwinds.

There are always two ways to approach a situation, either to wait for something good to happen, or to take charge and make the change happen. The success of a business could not be left to chance, the former case. As rightly pointed out in this article, it’s imperative for SMEs to upgrade their skills to survive and grow, particularly in today’s hyper competitive environment. It has become increasingly difficult to predict from where competition may come-in, and eliminate your business even before you realize. I believe that answer to the problem is much more than that offered by a Management Development Programmes; a possible solution could be to connect bright minds in industry with SMEs, pitching the deal as the chance to make a difference for the former. Having managed/ consulted companies of large scale, the solution design and perspective building would be quick to impart and have an immediate impact. The industry connect may also bring along access to other critical resources, and network. The remaining gap has to be bridged by technology – which could play a pivotal role to unlock value. The current environment, where several companies offer customizable and affordable solutions for SMEs, is surely a big plus. However, it’s important for SMEs to recognize the potential, and adopt the technology. This “mindset” change can again be encouraged by industry experts. Therefore, both the things combined can help SMEs to renew themselves, become agile, and grow rapidly.

Thank you professor Rao for giving good insight of the key success factors for SMEs. The best of the SMEs brings with them the typical Indian mind set of doing family own business in a highly competitive environment. You also shared key attributes and attitude which makes and SMEs most successful. • Sharing responsibility and managed by the senior most and most experienced person • Transparent, hardworking culture • Becoming financially self-reliant and continuously looking for the growth but sustainable and conservatism in leveraging finance • Continuously upgrading the required skills and being competitive to maximise the profit • Sense of pride by creating big brand image not only for making profit but also giving employment to many All SMEs do not do well in the business because they are not passionate and hard-working to achieve some milestones in terms of profitability and creating corporation brand Fundamental challenges of SMEs • Not ready to upgrade in skill and knowledge as well as not ready to adapt changes • Complacency • No clear goals • Understanding market dynamics and being conservative to change My Views: The article lacks in facts and providing data to substantiate their SMEs understanding. It is more of an opinion and theoretical. The author should provide lots of data on SMEs, Primary & Secondary data in terms of industry wide success & failure rates and their reasons. The opportunity and challenges and how SMEs can fully exploit the potential of world’s fastest growing GDP. The government of India’s policy to promote SMEs and provide supports. Even though some the ventures fail we should encourage SMEs to grow as it provides maximum employment to highly populated country. SMEs are the pyramid of any country’s growth.

SMEs have played a very important role in growth and development of Indian economy in last five decades. They emerged as highly vibrant and dynamic sector in Indian Economy and because of that power only they are considered to be as a backbone of Indian economy. They are playing major role in employment, growth and shaping the future of the India. As per the report from "Master Card" (Micro Merchant Market Sizing and Profiling Report) released in year 2016, 45% of India's GDP is govern by these SMEs and they are employing 46 Crores of People. This data itself shows the power of SMEs to the Indian economy. So from the above figures there is no doubt that SMEs are very critical and playing a vital role in the development of India. But still one thing needs to answer, is SMEs are really using their full potential ? Are Government is having enough support to these SMEs? Are SMEs not only looking for their growth but also at the same time they are thinking about nation ? Are SMEs creating better work environment and following all the laws and doing their business with ethics ? These are the question need to be answered if we really want to unlock the real potential of the SMEs. As mentioned in blog all business starts from scratch and then only move to the top. In this journey very few companies go to the top where as majority remains or restrict themselves as SMEs. This need to be analyzed. The major hurdle which SMEs or any new starters are facing 1. financial support 2. Proper guideline and management skills. 3. Awareness and easiness of government’s policy, rules and regulations. As mentioned in blog that these are not rocket science where we need to work very hard, but these are very essential things where we need to divert our focus. These are the things where not only people but also government to pay their attention. Government need to make their process more simple and sophisticated so that a Lehman person can also understand it very easily. Also there should be enough opportunity should be available in form of higher education, soft skills and other types of managerial skills to help these entrepreneurs to grow in their field. So in short to unlock the potential of SMEs not only government but also society and others to come forward to support them.

The article brings good clarity about the reality of SME Industry in India. SME has contributed to economic development in numerous ways such as employment creation in rural and urban area, goods and services at affordable price and sustainable development to the economy as while. It has been noted that the current era is of new age venture which is backed by advance technology and having support of external finance. However, the major contribution is from Small and Medium Size Enterprises which is mainly run by the family business owners or first time entrepreneur. The author has explained the typical Indian mindset while running the SME and characteristic aspect of SME. SME industry is mostly driven by family businesses and are led by the senior most member in the family. They are more focused on self-financing to avoid the risk and aiming at sustainable growth rather than maximizing enterprise valuation. On one side there are few SME who are profitable and decide to remain small and seeking for work life balance and personal growth. Whereas on another side, there are some SME who do not have success because of they are finding that the margins are narrowed, widening gap between management bandwidth, not upgrading the management skill. Further, SMEs are also facing a number of problems such as inadequate and timely finance from banking industry, skilled manpower, non-availability of suitable technology, identification of new markets. To make the SME successful, there is a needs of planned approach to train the SMEs Management, change their mind set from limited scope of family business to bring dynamics in business.

Prof Rao has explained the SWOT of SMEs very nicely. Their contribution towards the economy is significant. Their conventional method of working has been supporting them to sustain business even in tough competition. We do see more of SMEs and MSMEs are family owned business. But their aggressiveness is very high. I have seen many SMEs growing fast with owners who didn’t have any management education to earn business or manage it. Although management education will definitely break the conventional working style of SMEs, it will also take SMEs to another level. There are lot of developmental work happening around these segments. Organizations like CII, FICCI and SIDBI are involved in improving the infrastructure, working of these SMEs. Due to their old style of working, many of these SMEs has been identified as energy guzzlers. So breaking old style is very important. To do that it’s important for management institute design courses that will suit their developmental need.

This article gives very good message to new generation SME entrepreneurs, especially how they can achieve profitable & sustainable business growth by effectively using their new idea’s along with traditional way of doing business. In recent times, we have seen that many of the new generation businessmen are coming with the many innovative and great business idea’s however majority of them are struggling to achieve the profitable business growth in long run. Some of the critical reasons for their failures are; Current generation SME owners tends have a short-term mindset, they are aggressively focusing on expanding the business base even though they are making losses, apart from these reasons they are also facing conventional problems like inadequate and timely banking finance, skilled manpower, limited capital and knowledge, non-availability of suitable technology, and follow-up with various government agencies for approvals and to resolve problems etc. So, to make the SME business model more successful and sustainable, owners/ entrepreneurs need to equip with the very good knowledge, skills, good experience, approach with the mix of traditional and modern way of doing the business.

Thank you Sir, for giving good insight of the key success factors for SMEs. SMEs have played a very important role in growth and development of Indian economy in last five decades. They emerged as highly vibrant and dynamic sector in Indian Economy and because of that power only they are considered to be as a backbone of Indian economy. They are playing major role in employment, growth and shaping the future of the India. As per the report from "Master Card" (Micro Merchant Market Sizing and Profiling Report) released in year 2016, 45% of India's GDP is govern by these SMEs and they are employing 46 Crores of People. This data itself shows the power of SMEs to the Indian economy. So from the above figures there is no doubt that SMEs are very critical and playing a vital role in the development of India. But one still thing needs to thing whether SMEs are really using their full potential, are Government supporting them enough, are they only looking for their growth or they are also thinking about nation, are they creating better work environment and following all the laws and doing their business with ethics These questions need to be answered if we really want to unlock the real potential of the SMEs. As mentioned in blog all business has to starts from the scratch before they realize their full potential and move to the top or perish. Very few companies go to the top, whereas majority remains or restrict themselves as SMEs. This needs to be analyzed. The major hurdle which SMEs are facing today are financial support, Proper guideline, management skills, Awareness and easiness of doing business while following government’s policy, rules and regulations at the same time.

Thank you Prof. Rao for articulately presenting the ground reality of today’s scenario. There is no doubt in saying that SMEs have always been recognized as the backbone of Indian economy responsible for significant growth in Indian businesses. SMEs are taking lead in filling up the unemployment gap in industry. They constitute the bulk of industrial base and contribute significantly to the GDP of the country. Going by the stats of FY2014, the SME sector alone has contributed 17 percent to India’s GDP while accounting for 45 percent of the nation’s industrial output. As mentioned in the article itself, SMEs bring with them an attitude which helps them sustain in today’s highly competitive environment. This attitude includes the drive to self-finance its ventures and operations, commitment to the venture by the owners which in stills in them a sense of pride which further drives them to make their business large and more sustainable. But, some how they are not able to achieve this entirely. One of the key factors definitely is not being able to upgrade the management skills to the level that would make the business flourish. Efficient managerial skills which are changing with time are extremely important to identify new emerging markets, great leaders with an open mind to change and adapt to the latest needs are important, keeping up with the frequent changes in technology and automation and leading the team efficiently towards shared goals. Also one thing that these SMEs lack is the process oriented approach, even today in many SMEs there is no adherence to laid done processes and things happen and change from person to person. Focus on process standardisation and adopting quality standards like ISO 9000 will help them to streamline the processes and will yield high results. Once this is realized, SMEs will be able to come back with a bang.

In the above article Prof. Rao rightly pointed out the key challenges which are responsible for a sluggish growth of SME sector in spite of subsidies offered by the government. The importance of SMEs in the Indian economy wherein the GDP was traditionally dominated by agricultural sector, is highly significant for faster economic growth. There has been a recent shift in sector wise contribution towards India’s GDP in the past decade from primary sector to secondary & tertiary sector, well supported by the initiatives like make in India, digital innovation, GST implementation etc. These can serve as the drivers for the Indian SMEs to grow at a faster pace. In line with views presented in the article, the changing mindset towards entrepreneurship, which grabs all the media attention, leaves the manufacturing & service sector SMEs predominantly in the hands of family managed businesses with limited resources & semi-skilled work force. This further limit the growth of SMEs as per the ambitions & commitment of the owner. The sustainability of any SME in the current competitive world surely depends upon its management’s ability to adapt to the constantly changing business environment. Capitalizing on the GST implementation hence becomes a key opportunity to grow. The traditional way of doing business with the ongoing reputation of the company within the stake holders has seen a complete turnaround with technological advancements and digitalisation. The real question still persists as to whether SMEs are fulfilling their potentials or not. The key here for the SMEs is to manage the venture in a better way achieving consistent growth in economic value for the stakeholders and utilizing their resources to the fullest. SME being a key focus area for the government is likely to experience a more conducive landscape going forward. This step is likely to provide the sector with momentum so as to achieve larger contribution in the country’s GDP.

'Make in India' campaign of the NDA government is gaining momentum and so are the expectations on the Indian MSME's. With this higher level of attention the Indian MSMEs seem to have a greater responsibility on their shoulder's The article already states about the increasing gap in the management skills and the varying ambitions. While a whopping 45% of India's GDP is governed by the MSMEs (as per a 2016 Report by MasterCard) and wastage of time is proportional to the rate of increase of the gap, naturally the moot point becomes what we are doing to fulfil this burgeoning gap which always has a cascading effect across all the levels in the industries. How should India come out of the quagmire of mismanaged life and resource? For me the solution lies in the art of converting intellectual capital into financial capital. The Government should encourage consultancy companies to hire personnel with years of experience in consulting MSMEs outside India. Management people who have spent years on understanding and solving problems for the MSMEs and family owned businesses in primarily in Europe, USA and the gulfs are the ones who would be capable of taking up the responsibility of pulling all the strings together and create an ecosystem of financial, technical and business excellence expertise. The MSMEs could then benefit from such a pool of talents to LOOK FORWARD.

As stated by Dr. M Suresh Rao in this blog, small and medium scale enterprise sectors are indispensable ingredients for today’s healthy Indian economy. Medium and small sized businesses constitute of over 90% of the total number of businesses across the country and are largely responsible for contributions to employment and other value addition. However, the contribution of these businesses is well below their potential owing to the internal inefficiencies and constraints in the business environment. SME’s play an important part in promoting and bringing reforms and have a keen interest in policies that benefit a balanced playing field. A thriving SME sector consisting not only of a particular community but an empowered strong middle class that can serve as a sound economic governance and as a constituency for seeking reforms. The smaller and medium sized businesses are comparatively more vulnerable to deterioration than larger businesses even though they tend to be flexible and more adaptive to change. Their resources are fewer and more sensitive to government policies and harassment when times are hard. Access to finance is one other great challenge that these businesses face which affects their development and growth. Alignment and collateral issues affect SME’s disproportionately and the financial agencies perceive them as less stable and riskier than what they actually are. It is important to create conditions where small and medium sized businesses can thrive and succeed which is very fundamental for growth. SME’s are also important for maintaining an economic balance along with the restructuring of government owned firms and for a greater competition. A prospering SME sector is the heart of economic growth and sustainability.

In an era when the flashlight is on new age entrepreneurs and ventures, such an interesting article on the relevance of “old” SMEs could not be more felicitous! As very aptly captured in the article, a clear distinction is made between the SMSEs managed by families and startups by young, new age entrepreneurs. At this juncture, it becomes crucial to differentiate between a businessman and an entrepreneur. A businessman is someone who sets up a manufacturing unit (or a service unit) in lines with an existing idea or product which is mostly proven successful. On the other hand, an entrepreneur is someone who takes the path less trodden and goes on to try something new. So Dhirubhai Ambani was more an entrepreneur, while Mukesh Ambani is more a businessman. In recent times, there has been a boom in new age entrepreneurs chiefly in the service sector, and they routinely attract attention on social media. Traditional family managed SMSEs are not considered cool and are losing their sheen. Owing to a lack of glamor the SMSEs are also one of the worst affected in recent times, and has been facing perennial problems. When it comes to government dealings and getting licenses, a poor SMSE owner has to make a tough choice between unnecessary administrative obstructions and bribery. The ones who cannot afford corruption are already behind competition due to delays, and the ones yielding in to the demands have to squeeze their profit margins, albeit with a pinch of salt. Lack of infrastructure fuels this stigma, exacerbating the problem. Some industrial areas of Uttar Pradesh still see power cuts of around 4-5 hours per day- how can we expect a plant to run 24x7 in such conditions? Clearly, a lot needs to be done for facilitating the SMSEs, as they are the ones producing ‘real’ output contributing to the GDP. Why should one bother so much about SMSEs? It is because they are the primary pilots of the Indian economy. They account for more than 45% of the total manufacturing output in India, and employ more than one thirds of its workforce. No wonder that they are considered to be the backbone of the Indian economy. Although with the advent of GST, things are expected to improve. This new taxing structure would enable SMSEs to explore new territories within India for business which were earlier prohibitive due to the regressive taxing structure. But by and large, the government seems to be busy catering to the new age startups and entrepreneurs. Sadly, only a handful of these startups are in the core manufacturing sector. Most of them are service providers- ranging from crèche on demand to online grocery. All of them depend on goods produced by SMSEs, while none wants to get their hands dirty trying it out and actually manufacturing them. I can imagine a world without Flipkart and BigBasket, but it is difficult to imagine a world without the small manufacturing units who make the real items we use in our day to day lives, selling which, the e-commerce industries are thriving.

Dear Sir, a Great article written by you. I feel that the SMEs are extremely important for the economy. SMEs form a major part of the secondary sector of India and have been a driving force of economic development in India. Stating the things that work for SMEs and things that lack in an unsuccessful enterprise was very insightful. I completely agree with the fact that the managerial skills are very important for the growth to happen in the stagnant enterprises. However, I believe that there should be a futuristic vision about the sustainability of the business and have a ‘Plan B ‘if things become subtle. I do realise that there are many passionate, well- educated graduates and post graduates who are good at analysing the market conditions and understanding the opportunities that are available and tap them. But I believe that there is a lack of futuristic vision and entrepreneurs nowadays are just being impulsive graduates who want to make quick money by tapping on the opportunity in the market than to analyse the long term sustainability of the company or have ‘5 years or 10-year’ plan for its functioning. I am not denying the fact there are people who are long term oriented and want to build Blue chip companies in a long run but the short-term life of the SMEs/ startups that are entering the market are only hinting towards the contrary. I may not be particularly right but with the current scope of my knowledge, I believe this is the scenario. Also, the fact that the SMEs must grow and move to a bigger sector and new companies must enter the SME sector. The reason being too much of anything is not good and same goes for the case of the SME companies, if there is a lot of clogging of SME companies in the economy, there will not be enough growth and they will actually decrease the economic growth. Also, the decline in SMEs will affect the economy as it is an essential part of the growth of the economy. Apart from the leisure of time required or work-life balance, I believe that the risk appetite required for moving up the ladder is much higher. Enterprises operating at a larger scale are prone to much risks and uncertainties. The motivation to operate in lower risk strata is much higher than enjoying the economies of the large sector for many companies. I feel that operating as a larger sector is a different ball game all together. It requires much more managerial expertise that is not entirely present in all the current SMEs to the extent desired. If not executed well, growing up in the large sector will only make you fell flat. In these highly volatile global economic markets, it gets even risky. So to conclude I believe, SMEs are essential for the economy and if planned well with a futuristic long term vision, achieving their full potential is totally worth it and if not, they are already in their best game

Thanks a lot, Sir!! This article provides an accurate and profound understanding of the problems faced by typical Indian SMEs, particularly highlighting the mental drivers in the minds of first or second generation family business owners. The blog also nicely focuses on the mental blocks that usually Indians have of caste-specific business skills and that business skills cannot be learned. I would like highlight one more mental block which I have observed, being involved in a family business, is lack of trust in other people, apart from family members. There is an insecurity while delegating primary responsibilities to people. This insecurity may be about lack of dedication from the assigned person or about him/her having improper intention. This insecurity bares them from expanding on a large scale. As the business head, who is the senior most in age and experience, usually has a risk-free attitude towards the firm, thus limiting the potential of these companies. I would also like to point out that apart from managerial skills, many external factors also seem to come into play, hindering or supplementing (depending on the industry) the progress of Indian SMEs. One of the latest examples of this would be GST. While MNCs or Large companies have already prepared for massive realigning of warehouses and supply chain, SMEs though many being involved in local distribution, would not be able to quickly change their supply chain, as it is handled by the third party for most of them. Also, they would be now facing severe competition from MNCs as there has been a severe decrement in the TAX burden for MNCs, as compared to SMEs. Also, SMEs dependent on agricultural products as raw materials and those in services sector are going to face higher tax burden. SMEs, usually to avoid tough competition from MNCs or other large companies, cater to a niche segment. In India, to suffice these niche markets, there are two options, one being SMEs and other is Importing the product. Due to increasing levels of globalization and better technological advancements in developed countries, the products imported are much cheaper and better regarding quality, cannibalizing Indian markets which earlier belonged to SMEs. The market is quite limited because of the involvement in a niche segment, adding to the challenges for SMEs. Financing is one of the major problems faced by Indian SMEs. Loans being easily available from banks, have a cumbersome process of application is not preferred by some. Also, typically being from middle class or upper middle class, they have this wrong notion that any debt is not preferable, and involves an enormous amount of risk. Other factors like lack of awareness and information as these companies usually hire CAs for all accounting purposes, lack of infrastructure, marketing channels are also major hurdles into the path of progress for these companies. To conclude, lack of managerial skills doesn’t encompass all the factors required to have a successful small or micro-scale enterprise, and there are many external factors which may not be in their favor.

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