The COVID-19 pandemic has hit hard all the industries, especially Micro, Small and Medium Scale Enterprises (MSMEs). Higher cost, low fresh demand, fixed expenses, and limited cash are the few factors jolting the sector now. Anticipating that getting back on track will take a long time, the MSME sector in Gujarat is adopting an aggressive business restructuring model. 36% business units are reducing the fixed costs heavily; 22% of units switched to multi-tasking process to get the maximum output from minimum manpower at low cost.
These are the finding from a market survey carried out by Surat-based Stratefix Consulting. Stratefix, one of the fastest-growing management consulting firms in India, had reached out to more than 100 companies having a turnover of Rs. 10 crores to Rs. 100 crores and conducted a survey in the first two weeks of July 2020.
Speaking on this survey, Chirag Patel, Founder and Partner at Stratefix Consulting said, “Due to COVID-19 pandemic, businesses were affected during the lockdown and post the unlocking too, most of the industries, especially MSMEs are facing a challenging time. Our intention for the survey was to know what their current business situation is, which challenges they are facing and what efforts they are putting in to recover from it.”
As per the survey findings, more than 85% of businessmen are focusing on business restructuring. 36% of business units are cutting down the fixed expenses. Due to limited new income opportunities and to make the future provisions, they are bound to restrict themselves spending money on unnecessary expenses. 22% participants opined that they are implementing ‘Maximum Work, Minimum Workforce’ model. To reduce fixed expenses, many workers have been laid off. Moreover, many units are facing a shortage of skilled workers hence they are opting for multi-tasking culture wherein a few workers are given major work responsibilities.
18% of companies believe that due to weak new demands, they are not getting new customers. Hence, these companies are offering the best services to their old customers to retain them. Every business demands a reasonable risk but 14% businessmen believe that this is not a time to take any kind of risk. 10% respondents are focusing more on IT and Automation processes and trying to make the system dependent on machines rather than humans.
“To understand why the business units are focusing on business restructuring, we conducted an in-depth study and landed on two major factors. First, there is a lack of new opportunities in the market. Demand flow is very low hence scope to take the business to the next level is limited. Second, cash on hand is also limited. As new sales are not happening, the flow of income is also restricted. Running a company with a small working capital is a challenging task therefore the companies are bound to go for business restructuring. This model can fetch good results at a lower cost and also a need of an hour now,” said Mukul Goyal Founder and Partner at Stratefix Consulting.
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