Even as tech and automation become an increasingly important part of the daily lives of people and large businesses, words such as artificial intelligence, machine learning and more are now being introduced for small and medium businesses (SMBs) as well. The future of the digital economy is pinned on tech adoption by SMBs, which will bring this huge part of the Indian economy into the 21st century. Along the way, tech will streamline operations, help increase reach, improve employee productivity and engagement as well as enhance the customer experience.
Broadly speaking, technology in business operations is crucial for the growth of SMBs in India — not only because it will help them compete with big businesses, but because SMBs tend to have too many revenue leakages and overheads.
With the right adoption of tech comes benefits such as:
- Reduction of turnaround time: With the help of machines and automation, more work can be achieved in much less time
- Increase in revenue and profit: With technology, SMBs can see 2x growth of their revenues and profits. In addition to that, tech allows small businesses to reach a wider network and sell across borders
- Increase in productivity: With improved measurability across operations, businesses will have better control of where resources are being spent
- Increase in efficiency: Simply put, computers increase precision and reduce errors. Right from manufacturing to finances to sales and marketing, today tech is enabling better efficiency across the industry
But at a primary level, the challenge is to improve this understanding among small and medium businesses. The relatively larger and newer SMBs are first in the queue for adopting and understanding tech, but small businesses are still building up the infrastructure or learning about what specific applications are relevant for them.
Tech Giants, Startups Come The Aid Of SMBs
With 52 Mn of the 75 Mn SMBs in India having access to PCs or smartphones and internet connectivity, one would imagine tech adoption would be high among SMBs. But the reality presents a different picture altogether.
A Zinnov report found that the most common use case for this is payments through UPI or wallet-based apps, while the use of online discoverability—websites, social media and more—trailed closely behind. Not many are actually using SaaS tools or software to improve business operations.
To help SMBs in adopting tech and easing operations for them, while also tapping the potential of this large segment, many startups and tech giants are providing easy-to-use tech and support to these businesses.
Many SMBs have become habituated to managing their finances and payments on papers and notebooks. They also tend to not have a formal channel of financing for both their assets as well as the working capital. IFC report of 2018 revealed that overall demand for finance by SMBs was around INR 87.7 Lakh Cr.
Naturally, many digital lending and fintech startups are now providing solutions to SMBs with a focus on bringing easier access to credit for managing the working capital requirement. Among these the most prominent names—used most widely by the SMBs—are of startups such as KhataBook, Zoho, Razorpay, Capital Float, Lendingkart, BharatPe, Instamojo and more.
“I think what has been most beneficial is the timing as well as the user interface of our product. Most SMBs give up on tech because of the complexities that come with it. To make the app extremely simple to use we took a lot of cues from popular apps such as WhatsApp and more,” Ravish Naresh, cofounder and CEO, KhataBook.
Procurement Of Goods
Procurement of raw materials at a competitive cost is also one of the major challenges for the SMBs. Capital is already a major issue for the SMBs in India, and raw materials required by these businesses for their operations are either very costly or hard to procure altogether.
As a solution to these issues, many companies and startups have entered the segment. From big companies such as B2B goods and services marketplace IndiaMART to startups such as online procurement platform Adurcup for restaurants to NinjaCart which is helping small retailers procure fresh farm produce and more.
“Starting from solving the procurement needs for restaurants, we also started helping them with the billing and other needs. While there is a lot of growth that has happened over the past couple of years, even then a lot of infrastructural work needs to be done to achieve that growth. These days a lot of startups are working towards that,” said Kumar Kushang, cofounder, Adurcup.
While the penetration of the internet and ecommerce has helped SMBs reach a wider audience and cater to more people and markets across India and globally, that is just one part of it. To complete any commercial transaction of physical products, logistics play a crucial role. And this is where tech-driven logistics startups are helping the SMBs.
Countering the last-mile delivery challenges as well as reverse logistics management to keep the customer satisfied are many startups such as Rivigo, Delhivery, Locus, Wefast and more. Even the government marketplace (GeM) is providing logistics services to the SMBs.
Once an order is placed and delivered, it is important for a business to track the sales, so as to strategise, maintain and, if needed, improve their performance. Once a customer is acquired, businesses struggle with retention, keeping them engaged and getting repeat business. Both these aspects come into action after the sales are made and are vitally important for any business to grow and scale.
To engage, retain and attract more customers startups such as Easyrewardz, Zoho, Reelo and more are helping SMBs measure the customer feedback through real data.
“There are over 14 Mn small and medium businesses (SMBs) and MSMEs in India who are still unorganized and run traditionally. The customer experiences at these businesses have not changed for decades. They don’t know who you are when you walk into the store and have no way of inviting you back. Basically, business is left up to chance most of the time,” Parin Sanghvi, founder, Reelo told Inc42.
Startups are also providing businesses with solutions to track and maintain their sales record are many such as Zoho, Freshworks, NowFloats and others.
“It is important to note that for the majority of the merchants and businesses on our platform, KhataBook is the first piece of business software that they have ever used in their life. In fact, they have just come online in the past year or two,” Naresh said.
Dilip Vamanan, cofounder of Seller App, which is enabling small retailers embrace ecommerce and sell their products on Amazon, explained that SMBs struggle because they don’t know how to use tech. “Not only the user interface of the software but it is also hard to gain that trust of SMBs that what tech they are using are for the growth of their business. It is after they see the positive impact on their revenue and other aspects of their operations, that they trust any software solution.”
Unlocking The SMB Potential
Over the last half of the previous decade, SMBs have come to realise that they can not only rely on startups in their adoption journey but also look at the work being done by tech giants who are catering to the SMB segment. Tech giants such as Dell, for example, are providing not only discounted products and tech support but have also put in place Small Business Advisors and set up a Small Business Solution Centre for the SMBs.
In addition to that, it also rolled out a new budget offer for SMBs, that provides these businesses with free Zoho subscription, 10% cashback and more with its Vostro 5000.
Even the government is proactively promoting the growth of the sector. This is evident in the measures proposed by the government in 2019 and 2020. The budget released by Nirmala Sitharaman has called SMEs vital “to keep the wheels of the economy moving”.
With the focus of the startups, tech giants and the government alike, SMBs today have the right enablers to upgrade their operations in a relatively faster time and fulfil the ambitious digital economy goals of the Indian government.