The declining rate of GDP growth in India is showing signs of an economic slowdown in the past few months. At 5%, the Indian economy is currently at its slowest. So, is the economy failing? We are not sure, but it is a good idea to keep your business ready for the armageddon.
According to a report by the Hindu, around 30% SMEs have either shut down completely or partially.
India has over 48 million small businesses and generates jobs for over 60 million people in the country. But the MSME sector faces many challenges, and it is not easy to overcome them. For a sector where over 49% of MSMEs are still using traditional methods of lending, the primary concern is being in crippling debt when a recession happens.
Trends that can help small businesses during an economic slowdown:
Smarter funding options:
There is easier access to private and public funding for small businesses that are starting out. If your business is looking to set up during an economic slowdown, do not hesitate. The Government has urged NBFCs to increase credit limits and provide credit to small businesses for lower interest rates.
Also, there are over 500 private equity funds, 150+ venture capital funds and newer forms of online funding which help small businesses grow.
Businesses Going Online:
Over 75% of MSMEs feel that technology will help them handle any challenges in the future. With over 1 million merchants using Instamojo alone as an online payments solution for their business, it is only a matter of time before the MSME sector goes online, completely.
During an economic slowdown, small businesses need security. Technology can help business in the form of AI – helping businesses reach out to a wider audience.
NASSCOM, India’s industry association for the IT and IT-enabled products has formed an SME Council for its SME members.
Increase in Co-working spaces:
During an economic slowdown, the last thing your business should worry about is where you will continue your operations. For many startups in tier 2 and tier 3 cities, co-working spaces are a boon. With a co-working space, you do not have to worry about high operational setup costs. There are over 180 co-working spaces in tier 2 cities, you just need to choose the right one. Co-working spaces provide for all the operational requirements, legal know-how, CA facilities as well as mentoring options to a new enterprise.
Tips to keep your small business afloat in a bad economy:
Keep your cash flow in check:
The most overlooked form of capital requirement in the MSME sector is working capital. You need to keep up positive cash flow for your business to continue operations smoothly, so
Keep up with your customers – especially the high-payers
Customers can play a big role when it comes to keeping things in check for your business. Who are your loyal customers? This is where having an online presence really helps. There are tools that can help you keep track of your customers. At this time, implement smart loyalty marketing strategies to increase customer trust. Stay on top of marketing trends – what are customers looking for, how can you solve their daily challenges – and act on it!
Do you really need to order expensive supplies? Sell off old inventory that you don’t need. If you have expensive warehousing and shipping facilities, cut down expenses and opt for a cheaper shipping partner that takes care of these for you. Like we mentioned, reduce your real estate needs.
Keeping track of expenses wisely:
We discussed going online, but how do you keep track of your daily accounts? Who needs to pay you? Instead of chasing down vendors for payments and manually entering ledgers, you can avail online apps that will take care of this for you. For example, we recently launched the Instamojo credit book app, an online ledger accounting app that takes care of all your business accounts.