WHY DO SMALL INDUSTRIES REMAIN SMALL? — PART 1
Minish Umrani (Industrial Consultant)
MSMEs in Maharashtra are the backbone of the state's economy and make an important contribution to economic growth and development. According to the FY21 annual report citing the NSS 73rd Round survey, Maharashtra had around four million MSMEs providing employment to around ten million people.
Ideally, an enterprise that begins as a MICRO unit should grow into a SMALL unit and then into a MEDIUM enterprise. Yet we see very few businesses making that journey. In fact, during a pandemic such as COVID-19, the mortality rate of micro units also rises.
Many MICRO units struggle to cross the ₹5 crore turnover level and become SMALL units. Similarly, many SMALL units find it difficult to cross ₹50 crore even after operating for years.
Why does this happen?
I believe the success and growth of a business depend heavily on the objective behind it.
If the purpose of a business is simply to earn enough money to run the household or live comfortably, then naturally the entrepreneur keeps chasing that limited objective. It is like a middle-class family head struggling every month to balance expenses. From the first to the tenth or fifteenth of the month, there is tension about salaries, taxes and bills. Worker absenteeism, suppliers asking for payment and customers being requested to release money become routine problems.
Many micro units operating at ₹1–2 crore annual turnover may have experienced exactly this. Larger units have these problems too, but they are more visible in micro enterprises.
On the other hand, I have also met micro businesses with limited objectives that run comfortably year after year. Customer payments arrive on time, suppliers are paid on time, workers' salaries and taxes are paid, and the business runs smoothly.
Their level of anxiety is sometimes similar to that of a middle-class father worrying because his child in Class 10 is not studying properly. Such entrepreneurs often run businesses with annual turnover of ₹3–4 crore quite comfortably.
In reality, they are not entrepreneurs in the true sense; they are employed as the heads of their own businesses. Since ₹1–2 lakh comes home every month as their effective salary, they live comfortably like an upper-middle-class family.
There is nothing inherently wrong with that. Their business may also grow slowly, like a tortoise, year after year, and everything may appear fine.
But the objective of any business should ideally be to create prosperity.
If the objective is merely to earn a few lakh rupees every month, the focus naturally remains limited to that. But if the objective is much larger—for example, “I will sell my products across Maharashtra, across India or across the world”—then the entrepreneur has to work harder and remain focused on growth.
An ultra-small enterprise often begins simply as a livelihood business. Someone discovers that he can make a particular product, so he sets up a small factory to manufacture it.
I am talking here about an entrepreneur, not merely a businessman. A businessman may trade anything. An entrepreneur is often interested in making something. If he is technically strong in a particular area, producing and selling a product gives him technical satisfaction. He is willing to put in enormous effort for that satisfaction.
Once the initial struggle is over and some money begins to come home every month, he starts settling down. His attention gradually moves towards the household—buying a house, a car, funding children's higher education, and so on. He may even take a loan for an expensive car.
At that point the business has achieved stability.
This is often where the growth of micro and small enterprises stops.
A stagnant business may eventually disappear during the entrepreneur's lifetime or in the next generation. Once the entrepreneur reaches a comfortable level, the income starts satisfying him. A kind of complacency develops, which he may label as “fear” or “mindset.”
He may then begin blaming his employees for the lack of growth. But he created the business. Shouldn't driving its growth and running it with discipline and determination be his own objective?
Instead, it becomes emotionally satisfying to complain that his employees do not have the same objective. That is how a form of “industrial laziness” develops.
Another reason, I believe, is an entrepreneur's tendency to remain satisfied with too little—a kind of “frog-in-the-well” mindset.
When people become satisfied with what they already have, the hunger to achieve more disappears. Once settled, some small entrepreneurs effectively become employees in their own factories and turn their attention to spirituality or other interests.
Many small entrepreneurs have never seen the wider business world—or deliberately avoid seeing it. They convince themselves that “their business is different” and manage their small enterprise like a small family household.
Another reason is a narrow vision and lack of ambition.
They do not regularly visit other factories, study what is innovative there, understand which practices are more profitable, and bring those ideas back into their own businesses.
Friends, where do you stand?
Is your business objective limited, or are you trying to achieve something much larger?
Do you merely want your business to be ₹10 crore, ₹50 crore or ₹100 crore—or do you have the ambition, even the hunger, to reach those levels?
If yes, read the next part.
.... PART 1 ENDS
Minish Umrani (Industrial Consultant)
MSMEs in Maharashtra are the backbone of the state's economy and make an important contribution to economic growth and development. According to the FY21 annual report citing the NSS 73rd Round survey, Maharashtra had around four million MSMEs providing employment to around ten million people.
Ideally, an enterprise that begins as a MICRO unit should grow into a SMALL unit and then into a MEDIUM enterprise. Yet we see very few businesses making that journey. In fact, during a pandemic such as COVID-19, the mortality rate of micro units also rises.
Many MICRO units struggle to cross the ₹5 crore turnover level and become SMALL units. Similarly, many SMALL units find it difficult to cross ₹50 crore even after operating for years.
Why does this happen?
I believe the success and growth of a business depend heavily on the objective behind it.
If the purpose of a business is simply to earn enough money to run the household or live comfortably, then naturally the entrepreneur keeps chasing that limited objective. It is like a middle-class family head struggling every month to balance expenses. From the first to the tenth or fifteenth of the month, there is tension about salaries, taxes and bills. Worker absenteeism, suppliers asking for payment and customers being requested to release money become routine problems.
Many micro units operating at ₹1–2 crore annual turnover may have experienced exactly this. Larger units have these problems too, but they are more visible in micro enterprises.
On the other hand, I have also met micro businesses with limited objectives that run comfortably year after year. Customer payments arrive on time, suppliers are paid on time, workers' salaries and taxes are paid, and the business runs smoothly.
Their level of anxiety is sometimes similar to that of a middle-class father worrying because his child in Class 10 is not studying properly. Such entrepreneurs often run businesses with annual turnover of ₹3–4 crore quite comfortably.
In reality, they are not entrepreneurs in the true sense; they are employed as the heads of their own businesses. Since ₹1–2 lakh comes home every month as their effective salary, they live comfortably like an upper-middle-class family.
There is nothing inherently wrong with that. Their business may also grow slowly, like a tortoise, year after year, and everything may appear fine.
But the objective of any business should ideally be to create prosperity.
If the objective is merely to earn a few lakh rupees every month, the focus naturally remains limited to that. But if the objective is much larger—for example, “I will sell my products across Maharashtra, across India or across the world”—then the entrepreneur has to work harder and remain focused on growth.
An ultra-small enterprise often begins simply as a livelihood business. Someone discovers that he can make a particular product, so he sets up a small factory to manufacture it.
I am talking here about an entrepreneur, not merely a businessman. A businessman may trade anything. An entrepreneur is often interested in making something. If he is technically strong in a particular area, producing and selling a product gives him technical satisfaction. He is willing to put in enormous effort for that satisfaction.
Once the initial struggle is over and some money begins to come home every month, he starts settling down. His attention gradually moves towards the household—buying a house, a car, funding children's higher education, and so on. He may even take a loan for an expensive car.
At that point the business has achieved stability.
This is often where the growth of micro and small enterprises stops.
A stagnant business may eventually disappear during the entrepreneur's lifetime or in the next generation. Once the entrepreneur reaches a comfortable level, the income starts satisfying him. A kind of complacency develops, which he may label as “fear” or “mindset.”
He may then begin blaming his employees for the lack of growth. But he created the business. Shouldn't driving its growth and running it with discipline and determination be his own objective?
Instead, it becomes emotionally satisfying to complain that his employees do not have the same objective. That is how a form of “industrial laziness” develops.
Another reason, I believe, is an entrepreneur's tendency to remain satisfied with too little—a kind of “frog-in-the-well” mindset.
When people become satisfied with what they already have, the hunger to achieve more disappears. Once settled, some small entrepreneurs effectively become employees in their own factories and turn their attention to spirituality or other interests.
Many small entrepreneurs have never seen the wider business world—or deliberately avoid seeing it. They convince themselves that “their business is different” and manage their small enterprise like a small family household.
Another reason is a narrow vision and lack of ambition.
They do not regularly visit other factories, study what is innovative there, understand which practices are more profitable, and bring those ideas back into their own businesses.
Friends, where do you stand?
Is your business objective limited, or are you trying to achieve something much larger?
Do you merely want your business to be ₹10 crore, ₹50 crore or ₹100 crore—or do you have the ambition, even the hunger, to reach those levels?
If yes, read the next part.
.... PART 1 ENDS
Found this useful? Talk to us about your own factory plan.