There are many SMEs operating in India. Running an SME is not an easy task. It requires hard work, dedication, and taking the right decisions at all times. The SME owner manages many tasks single-handedly and does what is in the best interest of the business. He takes the decisions that will help the SME grow.
Every decision taken by the SME owner impacts the business. It can either take the SME in the upwards direction or hit it hard. That said, it is not possible that SMEs take the right decision always. There are a few common pitfalls that every SME owner tend to make. Read on to know the common mistakes made by SMEs and check if you too are not committing the same.
Not Registering SMEs
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Many SME owners do not register their business with the government and MSME sector. However, this can be against the SME owner’s interest. With no registration, he cannot claim legally to have a business. Yes, if your business is not registered, it does not exist legally. You might be in the same business for years or for your entire lifetime. You will be selling products or services and would be having a loyal host of customers.
But with no registration, you would always be on the back foot. For instance, in case of the company name, product/service, or technology infringement. Registration gives the SMEs an identity and it also protects the business owner from personal liability in situations of an unpaid debt or lawsuit. In addition, consumers and clients also take you seriously. Registration also helps in availing an SME loan easily.
The most important advantage of registering SME in India is that there are several government schemes for SMEs which only registered SMEs can avail them.
Depending on the Verbal Agreement
Many SME owners find ‘I give you my word’ heart-warming and do not go for a legal agreement. However, it will not hold up in the court of law. A legal agreement between the SMEs and its vendor, client, or partner should be legally signed by both the parties. This will diminish the possibilities of legal disputes that may arise in the future. A legal notice will also reduce the risks of ambiguous expectation from any of the parties.
That said, an agreement must be well-drafted and detailed. Help from an expert can also be taken when writing terms and conditions. The SMEs may find this an expensive task. However, it will cover the financial risks that he may face in case of disputes which again will be in the favor of the businessman.
Not Delegating Work
It is true that it is his business and no one in the world knows it better. However, the SME owner is required to delegate work and responsibilities instead of handling everything single-handedly. He cannot be an expert in every field. So, he must not shy away from hiring the right talent and delegating them work and responsibilities that he earlier was handling all alone.
Also, by delegating some work, the business owner will get some time for the work that only he can or only he must take care of.
Right Financial Decision at Right Time
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Many SME owners hesitate in applying for business loans because they want to remain debt-free. They prefer in taking a loan for business from a relative or friend but not from a loan lender. There are many tax benefits of business loans that he can get. These are some financial decisions that are critical for the smooth functioning of the SME in India.
The SME owner can also take help from the financial experts in order to takethe right financial decisions at the right time to benefit his business.
Not Reviewing Strategies
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A strategy is required for every business to get started and thrive. It must include detailed objectives and goals and how to achieve them. Most business owners generally plan a strategy. However, the common that they all do is not reviewing and altering it at regular intervals. Strategies are based on forecasts and not everything goes as planned.
There can be the arrival of a new competitor in the market or a shift. The business may have started manufacturing a new product or service. Or the business owner may have availed a business loan. Well whatever the reason is, it is imperative to modify the strategic plan frequently. They can be reviewed quarterly, half-yearly, or yearly and checked if they are in line with the current reality. All these reviews will help in correcting the plans and strategies that aren’t feasible anymore.
Whether it is registering SMEs, strategizing, delegating work, or tackling a finance issue, the SME owner must rectify all these mistakes if it is accidentally committing them.