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SME Business Environment and Role of Strategic Consultants - Apohan Corporate Consultants Pvt. Ltd.

SME Business Environment and Role of Strategic Consultants

Apohan Corporate Consultants Pvt. Ltd. > Financial Strategy > SME Business Environment and Role of Strategic Consultants

Complexity of business: Increasing every day & leading to stress

Triple integration in college mathematics was easy

The complexity of a business is increasing everyday on all fronts. It has not remained simple to smoothly carry on with a established business as well. Even if we keep aside the challenges of a new business with unproven business model, running a business in the modern environment has become extremely challenging. There are unpleasant surprises everyday. The problems that have surfaced in the past don’t see their simple end but become more and more complex every coming day.

Is it a happy process to run one’s own business? With full control?

A business by definition is a very complex thing. It had so many aspects. One needs experts understanding to handle these aspects. There are new and complex development on each front every time which lead to stress in the life of a businessman.

Compulsory new learning: An intellectual compulsory tax

Ongoing education: Bachelor in Business Navigation

To keep a business stable, a businessman has to continuously learn what is going on in the market, what is going on in the financial world, what is going on on the technology side, etc. They also have to learn the new compliances, laws, restrictions, orders, etc that are applicable to their business. None of these new development are simple to understand. The value chain of the final delivery of the product including the post sales services is very very complex.

How to run business today?

The Businessman has no choice but to keep on learning all the developments and be up to date. This is a kind of compulsory intellectual taxation.

Brainstorming on long-term strategy: Rarely undertaken

The work of operational routine is very hectic. In the small and medium enterprises, the management does not get time to do strategic brainstorming for the development of the business. Any strategic activity is highly Complex in terms of planning it, detailing it, finding the right kind of agencies to execute it, engaging with these agencies, supervising dear work, getting in depth knowledge of that work, and making a fruitful use of the money for new initiatives. All of this is too time taking and is typically avoided in the hectic schedule. So working for one’s own company becomes boring, drudgery, unattractive and demotivating. Many times, the middle management doesn’t show sufficient enthusiasm and energy to take the initiative taken by the top management to its logical and.

Absence of systems: Prevent increased scale of operations

Octopus of two hands

Many small and medium enterprises are played by absence of proper systems. If the systems are in place for each of the function of the business, it can run smoothly on autopilot mode. Otherwise the Businessman has to intervene in every small and an important activity. Because of absence of systems, there is inconsistency in decisions which further leads to friction in the management or employees. Creation of professional systems in the form of policies for each department, standard operating procedures for each function, professional and Technical training of the staff, monitoring and measurement of work and output, etc always leads to a situation of chaos.

Policy inconsistency: Mother to discontentment, grudge

The company never looks like a happy, stable, organised and clear-cut in treatment company. Due to absence of systems, management has to spend substantial time in resolution of disputes between the employees. There is no clarity of role and hence there is a gap between the employees notion of performance and the management’s acknowledgement of the same.

Risks: Exposure to unknown without mitigation measures in place

In desert in darkness

Indian small and medium enterprises, as Apohan has seen in its survey, not equipped for any unfortunate event or any unfortunate market development. There is a “what if” to each of the functions that take place in a company. The management should identify the things that may go wrong from time to time. It should prepare a list of the adverse events that may harm the existence and profitability of the company. SMEs are not seen identifying their risks, quantifying them, putting in place the measures to mitigate them, etc. So what happens?

The unpleasant part of business surprises!

Till the bad event has not happened, the businessman remains in a tension that such and such event may happen. And one such event happens, he just discovers that he is completely unprepared for that, and this is not the event he was anticipating, for this was not the format of the misfortune he had expected. Wisdom by experience is okay in personal life, but it is too costly in business life. Impromptu methods adopted to manage the risk event generally do not yield the desired results and may spoil the situation further.

Dissatisfactory growth: Despite growing market & all capabilities

Growth removing effect of inflation

Many businesses witness that the other businessmen that started along with them have reached a very advanced stage of progress. But they have remained behind. The attribute this lack of progress to many reasons most of which are external circumstances beyond their personal control. A business is no more fun when it is not growing. That is the difference between a business and a shop. A business must grow in volumes. The growth in revenue because of inflation has no meaning.

Everyone is growing except me!

A businessman is not a businessman who doesn’t have a growth dream. We see many businessmen ruing for lack of growth in the business for many years despite several types of attempts. Taking a bold step in a business and doing a substantially new thing is as good as doing a new business. It may have a little lesser initial friction in comparison with 100% startup, what it is no lesser than doing a new business afresh. The grief of business stagnation becomes pungent and shark when the sector and industry in which the businessman is, start scaling new heights. It looks too risky to put in precious management time, resources, brain and the reserve capital of the company to undertake new growth challenges for the companies not supported by professional management. Business is also a business of courage.

Decline in returns: Financing strategy is unattended

As the business stabilizers and most of the learning is done, a businessman start seeing a new phenomenon. Decline in profit and decline in returns on investment! The costs of all the inputs in the business move up gradually many number of years and the prices remain relatively table or grow less. This may happen due to saturation in the market, entry of competition, technology becoming common, imports and globalisation, substitution of product, efficient use of product by the customer, etc. The business become dependent on unidentified set of customers, it becomes very difficult to bargain for higher prices with them. On the other hand, there seems to be no control on the cost of inputs. One has absolutely no bargaining power in determination of the trends in real estate market, employment market, commodity market, utility market, etc.
If any unfortunate event happens when the profits are already declining, it gives a horrible shock to the business. All these things over a period of time, drain down the energy and enthusiasm of the promoters. They kind of start disliking their own business and want to get rid of it. If there is erosion of the wealth earned in the past and if the liabilities go on piling up, the small and medium entrepreneurs even start envying their employee peers who did not take risk of doing a business.

Consultants: Needed but not useful

Certified professionals or business consultants?

A businessman has many strengths and typically most of his strength are concentrated around technical and marketing areas of the business. He needs assistance of expert professionals to take critical management decisions. Small and medium enterprises typically do not have a network in the Consulting world. Apohan in its market survey has observed that small and medium entrepreneurs always resort to an advice by their chartered accountant irrespective of what is the nature of the management problem. 90% of the chartered accountants are experts only in accounting, audit, taxation and other statutory duties. They lack the perspective of a CFO who understands the business, who understands the problems of the business and also who understand how to solve those problems. Small and medium enterprises either do not appoint company secretaries or even if they appoint, beer role is kept limited to the compliances of the Ministry of Corporate Affairs. The SME businesses do not know how to identify the type of consultant required for a business problem, how to locate such consultant, how to cross check the expertise of this consultant to verify whether he will be able to solve the business problem, how to engage the consultant who a professional service contract, what should be the scope of work for him, how the output of the scope of work should be reviewed, how the consultant recommendations should be implemented, etc. Apohan has observed that small and medium businesses do a lot of due diligence when it comes to checking the price quoted by a consultant, but they pay absolutely no attention towards the details of scope of work and the expected quality of output. Typically in the Consulting industry, the costs of compliance Consultants are very very low and in comparison, the charges of strategic consultants are very high. That is why the SME businesses get puzzled with their quotes.

The Tom, Dick & Harry consultant!
So one can observe a very bizarre phenomenon in the “SME Consulting” space: 1. The Businessman is almost always dissatisfied with the services of the consultant. 2. The SME businessman is generally of the opinion that the appointment of any kind of consultants is wastage of money and time. 3. Consultancy is more about jargon than about any actual useful work. 4. Whatever fast engagement with consultant that can be recollected was unfruitful.

Consultants I need don’t exist?

This leads to a very peculiar situation: 1. The business has potential to grow and the business man has ability to grow it. 2. The Businessman does not have time, money and morale to undertake any challenging growth initiative. 3. The Businessman does not have knowledge and expertise respect to many areas for the new initiative or a successful business decision making. 4. He cannot afford permanent high cost management to carry out these types of activities. 5. Logically, he needs support of professionals and Consultants, either individuals or company. 6. With The Legacy experience, the Businessman concludes that there are no affordable and approachable Consultants in the market for this activity and hence it is not possible to you undertake any such activity.

The supreme league consultants don’t care about us

Now, when this Businessman approaches the consultants that have proven themselves by carrying out strategic growth activities, as that is the only recourse left, he finds that it is beyond him and his budget to engage them. In case of SME businesses, it is not only availability and the price but also the tantrums of the established and successful consulting companies is something that one requires to tolerate. This is mostly because the small and medium enterprises are looked down upon at by the reputed consulting companies employing professionals educated from highly reputed institutions. They are considered as low ticket size, unattractive, unprofessional, unorganised and charmless last priority opportunities. Consulting services typically involve preparation of custom documents and numerous personal interactions. And who would like to cite the credentials and experience of SME companies than of large reputed national and international corporate brands? Hence,  traditionally the focus of the most expert people in the consultancy companies has been away from SMEs that can actually grow into transnational companies.
So what is the net observation? It is a broken relationship! Apohan wants to join this bond. Apohan will be choosy in selecting its SME clients, but it desire to be a delightful Consulting experience for SMEs in India

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