Why aren’t we promoting and supporting pioneers of low-budget enterprises?

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We all like a happy story. Someone poor is now an entrepreneur. He or she has taken risk, is earning more than would have been possible in a full time job, hires employees too.

Eureka!! This is the new North.

Conversely, do we have statistics on how many fail? How many have to shut down within the first year of operations?

“Shop closed”, “not taking orders”, “winding up business”, “premises confiscated by banker”, are some of the banners I came across recently during a visit to some roadside or garage startups. It made me wonder why they have closed down, what might have gone wrong.

I happen to meet many entrepreneurs these days from different walks of life; the stories shared by them are a mix of joys and sorrows. I see a reflection of the same at LabourNet. While we have celebrated our success stories, we have seen shut downs too. 15 candidates out of 300 set out to be micro entrepreneurs. Anecdotally, I would say three to five of them fail.

This truth is painful. We need to collect better data to understand what causes failure.

Do we have statistics which allow us strategize how to support micro entrepreneurship?

With the current trend of hordes of startups being established in the market, it is perfectly natural that not all of them will survive. In fact statistics have started showing that Indian startups have already started failing at an exponential rate.

My present business concerns are focused on igniting micro-entrepreneurship. Micro enterprises are those which are small businesses with minimal employees (sometimes just one) and capital. What makes them tick? How to help them sustain?

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A report on Economic Survey 2015 -2016 released by the Finance minister, Mr. Arun Jaitley, mentions about 126.48 lakh micro enterprises in rural India and 86.76 lakh enterprises in urban India. Clearly most startups are emerging in rural India. While this data only covers registered micro enterprises, there are many more which are not registered either due to lack of information about the same or lack of confidence.

I would like to put forth some thoughts for us to consider.

  • Micro entrepreneurs don’t ever take equity. There is no angel investor. Their decision is often a result of their deep need to earn more. Driving factor is a necessity.
  • Micro entrepreneurs lack mentorship or incubation support. More often than not, this leads to lack of proper understanding of business dynamics and day-to-day business operations such as client acquisition, book-keeping, maintaining of customer database, and so on.
  • Local success stories fuel their dreams and they set out to be entrepreneurs. For instance, if a neighbour has opened a beauty parlour or a small kirana store and doing well, others are motivated to follow suit, leading to overcrowding and failure.
  •  Even small shocks, viz. revenue drop in a single month, small cost escalation, etc. will have these micro entrepreneurs shut shop. This is because of lack of financial mentorship and the fear of losing more money.
  •  Not understanding the importance of collaboration in business. Again, due to absence of exposure to the business world, these small time entrepreneurs are unable to use the power of collective skills and funds.

Question remains: How do we encourage micro entrepreneurs and how do we reduce mortality? Can we work together to fix this problem?

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