Silly Mistakes Indian MSMEs and Startups Make Compared to Their Western Counterparts
India is home to a thriving ecosystem of Micro, Small, and Medium Enterprises (MSMEs) and startups, with over 63 million MSMEs contributing to around 30% of the country’s GDP. Indian entrepreneurship is on the rise, driven by innovation and government initiatives like Make in India and Startup India. However, despite this momentum, many Indian MSMEs and startups find themselves in difficult situations due to a range of challenges, including avoidable mistakes Indian startups make. Interestingly, these mistakes often contrast sharply with how Western startups and MSMEs operate.
In this blog, we explore some common missteps Indian businesses make, compare them to practices in Western countries, and suggest corrective methods to help Indian MSMEs and startups navigate their journeys more effectively.
1. Lack of Business Planning and Forecasting
Indian MSMEs’ Challenge:
Many Indian startups and MSMEs often dive into business without sufficient planning or long-term vision. While initial enthusiasm drives quick market entry, the absence of detailed financial projections, risk assessments, and growth strategies can quickly derail them. According to a study by IBM Institute for Business Value, 90% of Indian startups fail within the first five years due to a lack of innovation and business planning.
Western Approach:
Western startups generally emphasize business planning as a critical step. They leverage detailed market analysis, financial forecasting, and contingency plans. Even at the smallest scale, Western businesses often prioritize a data-driven approach.
Corrective Measure:
Indian MSMEs should adopt a more structured business planning approach. Startups can benefit from business mentors or incubators to create financial projections, risk matrices, and market strategies. Government initiatives like Startup India can provide guidance on creating effective business plans.
2. Undervaluing the Importance of Technology
Indian MSMEs’ Challenge:
Indian MSMEs, especially in rural or semi-urban areas, often rely on outdated technology and traditional methods. This reliance on legacy systems hinders growth and scalability. According to a NASSCOM report, only 38% of Indian MSMEs are digitally savvy, limiting their competitiveness in both domestic and international markets.
Western Approach:
In Western countries, even the smallest businesses invest in the latest technology, whether in automation, cloud computing, or digital marketing. Adopting technology is seen as essential for efficiency and scalability.
Corrective Measure:
Indian businesses need to embrace digital transformation. Leveraging affordable cloud platforms, digital marketing tools, and automation can enhance operational efficiency. MSMEs can seek government subsidies or grants for tech upgrades under schemes like MSME Digital Saksham.
3. Lack of Financial Discipline
Indian MSMEs’ Challenge:
Poor financial management, including improper record-keeping, cash flow mismanagement, and mixing personal and business finances, is a major reason for the failure of Indian startups. Almost 55% of Indian MSMEs lack proper financial literacy, leading to funding challenges, especially during scaling phases.
Western Approach:
Western MSMEs and startups prioritize financial discipline and ensure separate business accounts, regular audits, and compliance with financial regulations. They also focus on cash flow management to avoid liquidity crunches
Corrective Measure:
MSMEs in India should focus on financial literacy and adopt simple accounting tools like QuickBooks or Tally to maintain records. Seeking financial advisory services or workshops on financial management can help avoid unnecessary financial hurdles.
4. Ignoring Legal and Compliance Issues
Indian MSMEs’ Challenge:
Many Indian MSMEs and startups fail to recognize the importance of legal compliance, including tax filing, labor laws, and intellectual property rights. The Global Competitiveness Report (2022) highlights that 67% of Indian startups overlook legal compliance, leading to penalties and operational disruptions.
Western Approach:
Western businesses are typically diligent in ensuring that legal compliance is a priority. Startups in these regions often consult legal experts to ensure everything from trademarks to taxes is handled appropriately.
Corrective Measure:
Indian MSMEs should invest in legal consultations or workshops on compliance. Organizations like India SME Forum offer resources and guidance on regulatory requirements. Additionally, focusing on acquiring intellectual property rights can protect business innovations from competitors.
5. Overreliance on Family-Owned Structures
Indian MSMEs’ Challenge:
Indian MSMEs are often family-owned, with decision-making power concentrated within a small group. While this fosters trust, it can stifle innovation and scalability. In many cases, succession planning and modern business strategies are neglected.
Western Approach:
In the West, MSMEs, whether family-owned or not, focus on creating professional management structures. Decisions are data-driven, and businesses actively seek external expertise and innovation.
Corrective Measure:
Indian MSMEs should focus on building professional management teams and delegating decision-making. Incorporating external advisors, consultants, or mentors can bring fresh perspectives and help scale the business.
6. Inefficient Marketing and Branding
Indian MSMEs’ Challenge:
Marketing is often seen as an afterthought for Indian MSMEs, many of whom rely on traditional word-of-mouth or limited advertising. Only 27% of Indian MSMEs actively engage in digital marketing, leading to limited brand visibility and customer outreach, according to Statista.
Western Approach:
Western startups prioritize branding and marketing from the get-go, with a focus on online presence and social media engagement. They also leverage customer analytics and feedback to refine their marketing strategies.
Corrective Measure:
Indian MSMEs should embrace digital marketing, including SEO, social media, and email campaigns. Platforms like Google My Business can provide an affordable way to increase online visibility, while investing in branding can create lasting customer relationships.
7. Inconsistent Customer Service
Indian MSMEs’ Challenge:
Customer service is often inconsistent in Indian MSMEs, leading to customer dissatisfaction and loss of business. Indian startups lose nearly 30% of their customers due to poor service, according to a survey by HubSpot.
Western Approach:
In Western countries, MSMEs place high importance on delivering consistent customer service, understanding that customer retention is more cost-effective than acquisition.
Corrective Measure:
Indian MSMEs should focus on building strong customer service protocols. Implementing feedback mechanisms, training staff, and creating a customer-first culture can enhance loyalty and increase business longevity.
Correcting the Course for Indian MSMEs and Startups
Indian MSMEs and startups have immense potential, but by addressing these common missteps, they can significantly improve their chances of long-term success. Embracing technology, fostering financial discipline, ensuring legal compliance, and investing in professional management and customer service are essential steps for growth.
By learning from the practices of their Western counterparts and making the necessary adjustments, Indian MSMEs and startups can not only survive but thrive in an increasingly competitive global marketplace.
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