The global economy was dealt a severe blow due to the Covid-19 pandemic and nationwide lockdowns became the only measure to control the outbreak. In India, we faced the largest GDP contraction ever in the second quarter of FY 2020–21 at 24%, and it is expected to shrink by a further 7% in the upcoming fiscal year. Being an important part of the domestic and global value chains, SMBs were significantly impacted by the pandemic. Disruptions in their operations, closures of markets/clusters, exodus of labour, blockages in capital access and drastic drop in consumption resulted in several problems for these businesses, ultimately leading to a 20-50% reduction in earnings. In some extreme cases, this led to complete shutdown of certain businesses.
As we move forward to a daunting task of adapting to the new normal, SMBs must seriously consider upgrading the current ways of conducting their day-to-day operations and begin to look forward to a transition from an offline world to a digital world. Nearly 80% of small businesses still rely on pen and paper to record their daily transactions such as sales, purchases, expenses, inventory changes etc. Two major issues that arise from this and hinder an SMB's growth are inefficient decision making due to an information black box and lack of access to a broader customer pool. It also means that SMBs continue to stay exposed to the Covid-19 outbreak and the dependency on traditional offline methods of running their business puts the safety of the community at risk. Furthermore, to turnaround and sustain in the stressful competitive business environment, SMBs should adopt digital ways of operating business as their topmost priority. Digital transformation can vary from one SMB to another, but the core idea remains the same - the integration of digital technologies into all areas of business operations. Digitisation can help businesses automate critical pieces of their business-like invoicing, inventory maintenance and payables/receivables management. It can also help the business owners take data-driven decisions to promote the growth of their enterprise while keeping a strict eye on the performance and health of the current state of their business.
The unorganised SMB sector needs to leg-up and adapt modern ways of operating business, especially if they want to succeed in the long run. Instead of spending time on manual paperwork and suboptimal processes, business owners can focus on collecting and analysing data and making strategic business decisions. There are several easy-to-use and affordable solutions in the market today which can help these ambitious SMB owners take their first step towards digitisation. With these new avenues, SMBs can also look to sell online and expand their customer base to increase revenue potential for their business.
SMBs are the backbone of our economy and play a crucial role in its growth. With the right environment for technology adoption and favourable policies in pursuit of promoting domestic output, the growth of SMBs will certainly accelerate the timeline for building an Aatmanirbhar Bharat and realising the vision of making India a $5 trillion economy.
The author is the founder and CEO of FloBiz