5 Reasons Why Your Business could be Stagnating

Updated: Jun 28, 2021


Business growth means different things to different people. Most business executives see growth as something that increases their organization brand image, and value most especially in terms of profitability. Lack of business growth is a nightmare that could threaten everything a business represents; these include its vision, mission, reputation, brand, staff, investors and other stakeholders. Growth is a vital component of life designed by nature for continuity. The phrase ‘Stagnant water stinks’ is equally applicable in the business world. When a business stops growing, though sometimes unknowingly, it starts dying automatically. This indeed is catastrophic and could jeopardize everything the organization represents. The brand, investment, trust, and long years of sacrifice by all stakeholders could be at a loss.

The importance of SMEs to the Indian economy cannot be over-emphasized. SMEs for the last few decades have contributed immensely to the growth of the economy. Based on the latest report from KPMG1, there are 51 million SMEs in India employing over 117 million people. In view of this, there is an urgent need to take a pragmatic approach to address issues responsible for lack of growth in SMEs businesses and to provide remedies to such.

We would be considering five reasons and solutions for lack of growth in SMEs business in India.

1. The Pitfall of Maintaining Status Quo and Change Resistance

“It is tough when markets change, and your people within the company don’t.” – Harvard Business Review.

The greatest enemy of the best is the good. A lot of businesses today are struggling to grow because of their underestimation of maintaining the status quo and their resistance to change. Status quo is the enemy of new ideas, innovation, invention, and change. It leads to a state of complacency that can limit business growth. Many SMEs executives today in their bid to avoid mistakes prefer to continue with the status quo.

According to the CEO of Boston Consulting Group, Rich Lesser2, “the biggest mistake a successful company can make is tolerating those that want to preserve the status quo.” Subsequently, there is a need for executive leaders in organizations to always explore ways of modeling their business and leadership skills. This would make them respond faster, better and ultimately place their businesses in a more economic position compared to their competitors.

2. Poor Digital Technology Drive among SMEs

Poor digital technology drive is affecting the growth of SMEs in India. SMEs account3 for only 30 percent of the entire India spending on IT. 68 percent of SMEs4 in India as at early 2017 operate their businesses solely offline, says Google. These definitely would limit their market reach and sales. It would equally affect both the efficiency and productivity of their businesses. Subsequently, more time, cost, and resources are expended in achieving results that digitization and internet could do in a lesser time and cost. Buying and selling become easier, faster, and cheaper for businesses that operate online. E-commerce, which is another dimension of digitization, can increase a business market reach, sales and revenue. According to a study4 published by Google and KPMG in 2017, SMEs in India with online presence grew their revenue twice as fast in 2016 compared to those without.

3. Lack of CEO Involvement and staff in Marketing

“Marketing is too important to be left to the marketing department.” – David Packard (Co-Founder Hewlett Packard).

Marketing and hiring of key staff are two business functions that every CEO needs to be involved in. Result oriented and effective marketing demands that every staff be involved directly or indirectly depending on functions in business marketing. It is marketing that attracts prospects to your business. Many SMEs in India today that cannot afford to hire a full-time Chief Marketing Officer (like some large corporations) are struggling with their marketing strategies. The marketing strategies of many SMEs can best be described as archaic, lacking innovation, and without any appeal that can attract prospects and retain customers. The ability to convert prospects into customers would increase the revenue of your business. Business executives need to take a special interest in the organization marketing strategies. They need to understand it, and how it can support their long-term goals. The business environment is bound to get more competitive with the increase in globalization, and advancement in Information Technology. Subsequently, a pro-active approach on best ways of reaching prospects and customers needs be adopted. In addition, SMEs leaders should leverage on the power of the World Wide Web, and the influence of digital marketing; using devices and applications that include mobile, social media, email to further increase their market reach and grow their business revenue.

4. Weak Organization Design and Structure

“Poor organizational design and structure result in a bewildering morass of contradiction; confusion within roles; a lack of coordination among functions, failure to share ideas, and slow decision-making bring manager unnecessary complexity, stress, and conflict.” – Gill Corkindale (Harvard Business Review).

According to Dr Indrajit Dube8, Dean of RG School of IP Law, Indian Institute of Technology, Kharagpur, out of 2,211 SMEs studied in India, 86 percent still operate their businesses on an informal organizational structure. With 87 percent indicating that there is no separation with ownership and management.

Most SMEs in India still run a centralized organizational structure9, where the owner makes most decisions. It is not uncommon to find some SMEs owners inviting their friends and family members to take up sensitive positions in their businesses without due consideration to their competencies and professional suitability for such roles. Bad organizational structure often results in miscommunication, low productivity, high employee turnover, and business stagnation. Subsequently, business owners and CEO should make competencies and professional suitability the primary consideration in appointing people into key managerial positions. In addition, decentralizing a business would aid faster decision-making among managers and subsequently enhance growth. Proper delegation of authority and empowering people down the line is an absolute must.

5. Poor Customer Service

With 51 million SMEs in India, satisfying and retaining your existing customers should be one of the most important things your business needs to get right.

There are many companies in India for whom “Customer is not king.”, and as such does not deserve special treatment10. This is in variance to the belief in progressive, customer centric organizations that holds customers in high esteem. This perhaps might be responsible for lack of growth in some SMEs businesses. The effect of poor customer service goes beyond the loss of revenue; your business goodwill and reputation are negatively affected. Most Customers simply walk away and tell their friends, family members to stay away from your businesses. The advent of the WWW is a threat to organizations with poor customer service. The internet offers customers more options to spread the word around.

Subsequently, business leaders need to have a change of approach to their customer satisfaction drive. It is important to frequently measure the customer satisfaction levels, preferably through a third party. Based on the outcome, training on customer relationship management needs be provided to all Staff, especially those in customer care service.

Bringing it Home

Lack of growth in sales and revenue of a business can threaten a business existence. This could lead to loss of key staffs, reputations, and many other opportunities. SMEs leaders must lead their organizations in their quest for growth.

Leaders must resist the status quo, embrace technological change, get involved in marketing, put in place the right organizational structure, and lastly re-orientate their company’s approach to customer satisfaction.



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