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Mentoring And Consulting – The Twin Enablers Of SME Growth

By December 19, 2018 No Comments


2018 was a busy year. We met with over 250 small scale entrepreneurs and other stakeholders from the ecosystem including government bodies and industry associations. During one of these meetings, I met two brothers who were running a ~10Cr ($1.5M) auto component manufacturing unit in Faridabad. Established by their father in the 60s, their business was fairly stable, with several customers. That said, the brothers – one focused on operations and the other on clients/strategy – were ambitious and wanted to double their business in the next 2-3 years.

They didn’t know how.

This anecdote highlights both the absence of and the critical need for mentors for entrepreneurs of small and growing businesses, in India and other emerging economies. This in direct contrast to start-ups, where founders of start-ups are (usually) well served with a large, diverse and vibrant enabling ecosystem of mentors, advisors, ‘angels’ and VCs.

Most entrepreneurs in the small and growing businesses have possibly scaled their business to their and their teams’ ability. Ambitious entrepreneurs – hungry for growth – are eager for help, advice, knowledge, expertise and networks to take their business to the next level.

The local networks that entrepreneurs traditionally rely upon, while crucial in helping establish the business and reach initial levels of scale, may not be optimal to enable further growth. The entrepreneur is often limited to informal advice and expertise – a phone call or a meeting to their uncle or old friend. By the very nature, the advice often tends to be subjective & colored by perception, history & emotion.

We have seen mentoring advice work when it’s

* relevant

* based on mutual trust and respect

* unbiased and removed from emotion

* private and confidential

* continuously available

For example, the mentoring required by an entrepreneur based in Bangalore was diverse and varied – reflecting the nature of problems she and her partners faced in scaling their business.

Over six months in early 2018, she required three different mentors:

  1. A senior entrepreneur who, over 30 years, had scaled his business to a successful IPO. He served as a huge source of inspiration and provided key inputs on business model and metrics, and on best practices to handle stakeholders (customer, employee, labor union).
  2. A business advisor who has evaluated 1000+ businesses over the last 25 years as an investor. He provided significant input on future business ideas, and on the structural elements for a successful JV.
  3. An entrepreneur CA (chartered accountant) who, a few years ago, exited his manufacturing business of several decades. He is now a full-time mentor to small and growing businesses, brings perspectives from across sectors, helps identify mistakes before they arise, and is an expert in financial modeling.

In addition, she hired two consultants who helped her in devising and implementing a 3-year business strategy, and in setting up modern HR performance management systems based on KPIs.

This brings us to the second enabler for SME growth.

An apocryphal story (below) highlights the importance of consulting and subsequent support to implement suggestions. In the late 90s, India’s charismatic and well-respected PM was listening to the MD of a premier consulting firm. This was the conclusion of a long exercise, where several partners and senior consultants had spent significant time evaluating the strategies India should take for the new century. At the end of the hour, the PM said, “Gupta-ji, yeh to theekh hai, lekin yeh sab hoga kaise?” (This is alright, Mr. Gupta, but how should we do this?).

Similarly, while high-level strategies can be devised to answer ‘what’ to do, for small and growing businesses, it’s equally important to address the ‘how’.

Also, most entrepreneurs, while deeply aware of their domain, often lack an appreciation or formal education on other business matters, for e.g., the financial aspects of running a business. The business may not (yet) generate enough cash to hire a full-time senior person. Thus, the need for the 2nd role that is crucial in navigating the path to success – that of a consultant. Hiring consultants via short-term well-defined projects, with deep subject matter experience, allows the entrepreneur to buy (vs. hire) and infuse best practices into the business.

In Conclusion

Entrepreneurship is a tough and lonely journey, with the entrepreneur constantly battling on many fronts. It’s important to build networks that enable you to navigate this journey.

Both mentors and consultants serve complementary roles. Usually, the mentor has limited time, offers advice and reviews action taken, and doesn’t take a fee. The consultant works for a fee and is best deployed for a well scoped (time and output) work contract. Often, the entrepreneur confers with the mentor to how best to leverage the consultant.

To get back to the two entrepreneur brothers who were trying to figure out the way to double their business in 3-years; they were introduced to a mentor, based in Mumbai, who from 2007 to 2017, was the CEO of a ~1200Cr ($170M) Tier 1 supplier to automotive OEMs.

They initially connected via conference call, a first for the entrepreneur brothers. Based on the call, the entrepreneurs decided to take four immediate actions:

  1. Hire a process consultant to review operations including factory layout, process flow and costs.
  2. Conduct a customer review exercise; both external – where they would meet their top existing customers to understand value prop – and internal incl. customer- and service-line profitability analysis.
  3. Hire a design agency to redesign website and create world class collaterals
  4. Select a business strategy consultant in 3-months who would help build a comprehensive business plan and complete a business process (cash flow mgmt., customer acquisition, others) audit.

As a result of the call, they were also introduced to the Tier 1, for evaluation as a potential vendor.

The SME ecosystem in India still has a long way to go. Accessing mentors or using consultants is still not intuitive for entrepreneurs of small and growing businesses. That said, growth-oriented entrepreneurs are seeking them out and adopting best practices, especially as they learn from and interact with their more informed peers, and their export partners/customers in more mature economies.

Anubhav Gera, Vice President – NEN at Wadhwani Foundation.

Read more: Business World

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