Today, the world is at the precipice of a major shift. Economies are slowing down, inflation is rising, and central banks are preparing for a downturn. Globally $11 Trillion has been wiped off stock markets already, and investors across the board are becoming bearish. Indian market’s story is no different. The rupee is at an all-time low, prices are up, foreign investment is drying, and venture capitalists are tightening funding. It looks like we are on the verge of another recession. But what does all this mean for the small and medium businesses (SMBs) in India?
Condition and challenges of Indian businesses
SMBs are in constant competition with not just other small businesses but also with the large enterprises in their industry. To compete successfully, they need access to capital and a skilled workforce. They need to get innovative with their offerings and create enhanced experiences for their customers. And sometimes, even doing all of this is not sufficient.
India was home to 25.13 lakh SMBs in 2020 that contributed significantly to its GDP. However, many of them had to shut shops because of the pandemic and the remaining are still dealing with its aftereffects. And just when it looked like the economy was on its way to recovery, the Russia-Ukraine war derailed the economic trajectory. Yet, all is not lost for the SMBs and even a recession can provide opportunities for growth.
How can SMBs overcome this situation?
Darwin hypothesized that an organism’s ability to adapt to a changing environment guarantees its survival. This is just as true in business as in life. No one would understand this better than an SMB owner who navigates a sea of change every day. A crisis disrupts the status quo, influences customer behavior, and provides opportunities for growth that are hidden in plain sight. It’s the perfect time for innovation. And by innovation, I mean digitization.
Here’s how digitization solves the top concerns of SMBs:
Capital Crunch: While governments, banks, and other financial institutions provide attractive financial schemes, SMBs are unable to make the most of them. They lack the ability to calculate expenses and forecast revenue. Digitization allows businesses to receive live revenue reports and projections and make changes well in time.
Customer Acquisition: Digital tools give businesses an unparalleled understanding of their target customers’ needs. They can then tailor their solutions accordingly. Digitization also allows businesses to shorten the sales cycle and onboard their customers quickly.
User Experience: Digitization arms businesses with contextual information and impactful insights that help them curate customer experience across touchpoints. They can easily personalize every single communication and even create promotions targeted at specific users by understanding their position in the buying cycle.
Workforce: While companies look at hiring a skilled workforce, they can use digital tools to train their current staff on the latest skills and technologies necessary for their business.
Operations: Digitization helps eliminate redundant manual processes and frees up your teams to take up the most critical work. Automation also simplifies complex business processes and drives productivity and efficiency.
Security: Creating a centralized, cloud-based, and access-controlled repository of their customers’ data allows businesses to protect it from bad actors and comply with global data security regulations.
But simply implementing a digital solution might not be enough. A recent study found that up to 70% of digital transformations are unsuccessful. A major reason is the lack of internal engagement and insufficient capabilities to sustain change.
SMBs need a partner that handholds them through the transformation and guides them every step of the way. The right partner understands SMB challenges and delivers a made-to-fit solution to minimize them.
Tips for new-age businesses to survive
When investments are in a slump, both large and small businesses face the same challenges. However, their scale determines how they react. SMBs do not have the same resources as larger businesses and must become more agile, implement a digital strategy, and embrace collaboration to emerge stronger from the slump.
They can gain agility by continuously innovating, taking feedback from their target audience, and iterating to meet market trends. Implementing a digital strategy will help them remove operational friction, improve decision-making, and reduce costs. Encouraging both internal and external collaboration will help solve complex problems, create a learning environment, and foster team spirit.
As per a recent survey, 37% of households, impacted by the economic downturn, have started moving away from big brands and are choosing locally sourced no-name alternatives to reduce their expenses. B2C SMBs that can capitalize on this trend by adopting digitization and personalizing their services will retain these customers even after the market recovers.
The article has been written by by Ketan Sabnis, CEO and Co-founder, Kylas