Don't equate SMEs to Start Ups. For God's sake!

In many conversations, one sees Start ups and SMEs are taken in the same breath. In fact, Start ups are perceived to be the urban cousins of SMEs. They are run by technocrats from hallowed schools, the owners are suave, are courted by the media, and of course they are chased by marquee investors. They carry heady valuations (why is a mystery!) and win quite a few awards instituted by business press in myriad categories. Why, the Government too had a program called Start Up India!

SMEs on the other hand are perceived to be poor village cousins. They are also run by technocrats from hallowed schools, owners are suave but not courted by media and definitely not by investors. If at all, they are shun by bankers as high risk! Nobody bothers to value them and of course there is no award function worth their name by anybody - forget pink papers.

But Covid 19 has exposed the underbelly of the start up world.

1. The most valuable start up in the transportation space has sacked over 5000 people
2. A college drop out darling in the hospitality space is doing similar number of pink slips
3. A food delivery start up whose owner won many awards that had the who's who of corporate world on the jury is terminating a few thousand people

The carnage is not ending and there are stories daily, of large number of sacking with well- worded press release by Unicorns. All this in just 70 days of disruption!

Despite the same disruption, the SME owners are struggling to run their enterprises. Nobody is talking of termination of employees. If at all, they are engaging employees for payment deferment. Most owners have made up their mind to fight this out. They have been in the game for long enough to fold up and go.

The difference between the Start up and SME is that the SME is largely closely held and the equity shares are with the person or the family or close friends/ partners. So the 100% risk of business is with the ownership. They have built assets on the ground and keep investing what they earn from the business to sustain, grow and scale. SMEs don't suddenly arrive on the scene and attract money. They have built it brick by brick over the years. So they swim or sink with their enterprise.

As a consulting organisation focussed exclusively on SMEs, we are witness to the resilience and tenacity of the owners. They are seeking solutions to overcome this phase. Many of them are planning to relook at their strategy, processes and organisation structure to convert this crisis into an opportunity.

Like in life, success does not come to those who are strongest, most admired, most well funded business but those that are willing to stay the course, adapt and adjust.

This crisis too shall pass but the SMEs will come out in better shape, more confident and better prepared for the next one. And they would continue to carry the burden of the economy on their shoulders unlike Start Ups!