Change is an integral part of any entrepreneur‘s journey. In the business as usual scenario, changes are defined by new trends, by the need to introduce new products led by customer requirements or to comply with new government regulations. It usually doesn’t require the interference of external parties, except easy access to business credit and a few highly specialised consultants to guide you on that journey.
If the change is internal, the environment and expected outcomes are within the comprehension of the MSME entrepreneur, like yourself. Since you have a deep understanding of the business you’re running, there is little chance of failure.
However, if the MSME business owner decides to venture into a completely new business line, the one he has little knowledge and no experience of, chances of failure become manifold. Transition risk is a significant risk for MSMEs.
Diversification at a time with external threats and a rapidly changing economy has to be backed with expertise, financing services, knowledge and calculated risks leading to not just sustainability but also growth.
The nationwide lockdown as a result of the pandemic paved the way for an array of opportunities for MSMEs to diversify by creating new products or services, catering to an evolving market, exploring alternate channels to reach existing customers or venturing into new industries. Accelerated move by certain highly adaptive companies towards digital healthcare and telemedicine brought in a lot of moolah. Restaurants turned to cloud kitchens, airlines turned into restaurants, payments turned cashless and yoga was being taught online. Digitization and automation of products and services quickly went from ‘good to have’ to ‘need to have’ for MSME businesses and entrepreneurs in India.
Most businesses face risks of downturn and diminishing revenues when it caters to one product or market. During economic uncertainties, MSMEs become more susceptible to risks than their bigger counterparts. Diversifying into different products, industries and markets not only helps to boost revenue but minimise risks associated with business uncertainties.
To diversify into a profitable business, entrepreneurs have to ensure risk analysis, careful decision making as the ecosystem is drastically evolving, peer learning from like-minded entrepreneurs, MSME financing amongst other things. Let’s look at some of them below.
The success of your first venture was defined by your dedication, passion and attention to detail. Your subsequent ventures require the same care. The vision of the leader and the day-to-day involvement of the entrepreneur in the operations is a potential advantage in the implementation of a new venture. Get to 360 degrees preparedness and meticulous analysis of the opportunity.
Many times diversification is driven by the irrational perception of the potential of business, rather than validating it by facts and numbers. Beware that third-party advisors may not be in the best position to suggest what works for you, they may lack the understanding of your strengths and how you can capitalize on a market opportunity. So, if you are working with a third-party to help you develop an idea and a plan, make sure you choose the right company and share everything they need to know about you, your current business, your future ambitions, to help them lead you to a lucrative business idea. Study the business plan thoroughly before consenting to it.
Some businesses, surprisingly, initiate the plan without financial closure leading to midway stoppage of the work. Business plans get shelved due to lack of business financing. The financial distress in the new venture seeps to the existing one affecting both the present and the new venture. It may lead to loss of momentum in the well-run company. Cash credit partners like Bizongo ensure that these roadblocks are removed by helping MSMEs with business financing at a swift speed through their strategic partnership with a multitude of businesses providing finance to help in working capital management.
Mr. Arsh Gupta, Director of Rational Business Corporation, was able to reduce cost by 15% and increase revenue by 25% using Bizongo's technology-backed solutions. His paper-based stationery products have thousands of SKUs, a channel sales network of 10,000 retailers and 1200 distributors spread across the country. He also has a 40% share in the ticket paper manufacturing for Indian Railways. Managing this massive scale of SKUs and people was a big hassle for Mr. Gupta. He used Bizongo’s Procure Live Platform to streamline his SKUs, maintain correct product descriptions, update prices regularly, procure raw materials faster, reduce lead time and efficiently manage his entire supply chain. Apart from the massive boost to business, he was able to reduce cash flow to vendors from 90 days to 5 days! The reduced time boosted profits which could be shared as cash discounts back with the vendors. These positives changes in business gave Mr. Arsh Gupta and his company an excellent reputation in the market.
Diversification doesn't come easy. If your current teams lack the bandwidth to take on additional responsibilities that comes with diversification, then you need more people. It is important to get the right people in your wagon for business success. A well-defined HR strategy will help you get these employees and leaders who will work passionately to ensure that your diversification plan succeeds and that you are able to shift your focus in a new area or generate an additional revenue stream that is even stronger!
While the HR team will ensure you have the right people in your crew, leaving the responsibilities in the hands of the professionals is not enough. Regular independent audits will bring in the checks and balances and reduce the likelihood of shocks in business.
MSMEs have proved to be the backbone of the country due to their adaptability and opportunity-seeking nature, combined with innovative spirit. This naturally leads to active conversations on diversification amongst growth-ready entrepreneurs, who help each other explore new opportunities and share their exciting stories of possibilities. In this rife scenario, MSME financing plays a pivotal role in accelerating plans and executing dreams. Bizongo’s experience in enabling business financing for MSMEs in India has helped multiple businesses realise their growth. Our financing systems through lender partners are hassle-free and help all sizes of MSMEs execute their plans without delays. If your plan is ready, the right people are hired, and you’re raring to go, contact Bizongo for an accelerated business financing process and start your journey towards business diversification today.