Calcutta, Dec. 7: Small and medium enterprises (SMEs) need to have a long-term business plan and be aware of innovations in products and services to build a viable company.

SME's have emerged as a potent contributor to the country's economic growth, accounting for close to 10 per cent of the gross domestic product and about 30-35 per cent of exports.

However, statistics show that close to 50 per cent of medium, small and micro enterprises (MSMEs) close down within three years of their inception. The companies face multiple challenges, including limited access to collateral-free finance, lack of knowledge and awareness about business processes and compliance needs and inadequate go-to-market strategy.

'Only 7 per cent of the MSMEs are financially included. The mortality rate is also very high. When the business kicks off, there is very little to lose. The fear of failure is mute then. When it starts scaling up, the business model is tested out. It is here that the appetite for making mistakes goes down. The only asset they had was enthusiasm. When the need for process orientation comes in, they miss out,' said K.V. Srinivasan, CEO of Reliance Commercial Finance.

He was speaking at Infocom 201, an ABP Group initiative.

According to Srinivasan, the product lifecycle of any idea is increasingly getting smaller and therefore an entrepreneur must be in touch with what is happening in the ecosystem. There are examples where leading corporate houses have failed to make the cut as they did not move to a new idea. Moreover, 90 per cent of these enterprises do not register themselves and fail to stick to compliance norms. As a result, they fail to gain the trust of funders.

'Among SMEs, the issue is that most do not benchmark themselves against peers,' said Ashish Chauhan, managing director and chief executive of the BSE.

Even if these companies generate seed capital, they do not have a sustainable model to cover operating losses, said Ambarish Dasgupta, partner and head of management consulting of KPMG in India.

SME Awards 2014

Infocom this year introduced The Telegraph-Infocom SME Awards 2014 with the objective of encouraging, recognising and projecting the SME initiatives and entrepreneurial success achieved across eastern India. Six categories of awards were given out to 14 companies. The categories ranged from the most dynamic growing SME, the most innovative SME, SME with an international presence, the best SME start-up turnover to the best SME of 2014 and outstanding entrepreneur of the year.

'The objective of hosting the SME awards has been to provide a special platform to project innovative and extraordinary entrepreneurs in the SME sector in eastern India. Through this initiative we will not only be projecting the developmental potential of the SME segment but also empowering the SME business leaders with inspiration, ideas, valuable insights, knowledge and most of all, a forum that will encourage the creation of new SMEs,' said D. D. Purkayastha, managing director and chief executive officer of ABP Pvt Ltd.

Infocom has also joined hands with IIM Calcutta to bring in the first edition of a three-day leadership development workshop for senior leaders of the industry. In addition, the Infocom CIO Connect programme brought together 100 chief information officers across the country and from Bangladesh.

Infocom 2015

The three-day conference at Infocom 2015 next year will be held between December 3 and December 5.