Sir, you have achieved so much from winning various prestigious awards to mentoring start-up entrepreneurs. How you see the growth of small and medium enterprise (SME) sector and its prospects in India?
Dr. Yasho V. Verma: SMEs prospects in India are huge. In a growing economy of India, SMEs are more common in rural areas presenting job employment opportunities are needed most. Indian SMEs are expected to grow to $88 billion by 2017. Since few years India has also witnessed a boom in technology startups adding to the SME segment. Last year there were 200 startups funded and initiatives like Nasscom's 10,000 startups are also to encourage further growth of the segment. Flipkart and Snapdeal are examples of how SMEs can turn into a billion dollar company by using advanced platforms of technology.

In most of the developed economies, like the US and EU, SMEs form the backbone of its economy. In India too we said that SMEs are the backbone of our economy, beside that we have largest ratio of sick SMEs. What do you think are the biggest hurdles before a start-up entrepreneur?
Dr. Yasho V. Verma: The SMEs turn sick due to the attitude of an entrepreneur more than the actual hurdles they have to face. If they have done their ground work well, laid a strong base backed by market intelligence and research, appointed strategic advisors, put in place the right and best business models and ensure all basic requirements are met to get the right set of talent to work for them, they will turn into performing ventures rather than sick units. The quality of both products and services should be dealt as highest of priorities and never be compromised. Entrepreneurs should not run their ventures like a trading company only looking at making short terms gains and the fear of exiting haunting them. They should know that patience and perseverance will only help them get closer to their vision.

Presumably, the physical hurdles seem lesser today than probably 5 years back, few of them that come to my mind immediately are:

- Initial hiccups or teething problems: A startup is like a ship in a vast unending ocean and it needs a lighthouse to direct it through rough waters, at least till the time the newly formed captain learns the tricks to steer it well. These days it is becoming more of a trend that top managers are leaving their well paying jobs to start their own. But what they may need immediately is a Mentor that guides him to find best of the resources - capital, manpower, infrastructure, long term vision, short term objectives, cash flows, communications and profitability. The first phase is the most critical where a startup needs to know basics like which type of ownership to opt, how to register a startup legally, what scale to predict and laying of a route map to reach the goals with timelines to achieve reasonable milestones. There are incubators and accelerator programs easy to find and follow on the web.

- Funding, Infrastructure and Operations: While there is better availability of information to reach out to angels and VCs, it is a job of a financial consultant and a legal advisor to guide a startup on receiving funding from a source. The share of investments between the owner and the investor and also the ratio of debt vs. equity needs to be clearly chalked out to assess the risk capital or gains. Interest rates are also negotiated. Infrastructure may mean access to telecom connectivity, office space and all things that fall under physical existence of the startup. Also, operational management issues like arranging data-servers, storage, inventory upkeep, logistics and power backup may look petty things but may actually be a big cause of delivery delays and hurdles. In case of a private company registration, identifying and bringing together a board team may also be taxing for a startup. A Board of strategic group of advisors may help right from laying foundation to hand holding till the company starts making profits.

- Stringent Regulatory framework: Other than the interest rates on funds accumulated, firms are mandated to pay income tax on the premium charged while selling shares to stakeholders, though this may avoid money laundering, it may affect the investments in startups. Besides, there are a lot of legalities to look into right after registering a company under a certain kind of ownership. There may be lesser paperwork and tax related issues in a proprietorship, but for PLC, LLC things start going complex.

- Market assessment and USP: Indian consumer is arguably more discerning as they are extremely price sensitive and competition is cut throat, selling premium brands is a hard selling game. To be able to assess and arrive at product and service delivery, it is a huge task deciding what may work in a competitive market that provides you with a workable idea to get your product differentiated or one gets a market that is distinct or niche. A proper market gap analysis today is done by bigger companies through data intelligence.

And what one (SME) must keep in his/ her mind before starting a new entrepreneur?
Dr. Yasho V. Verma: For startups to turn into profitable entities, it is of significant importance to first work on a healthy long term business model not based on the urgency of making immediate profits but the idea to sustain the momentum by improving revenue capabilities focusing on quality of both services and products. A startup must get all legal formalities in place and look into all matters pertaining to manpower, incentives and minimum wages, no actions or lack of it must flout laws.

Any kind of capital whether it is seed money or it is working capital is a one of the big challenges of Indian SMEs. How you analyze this issue and what would be the best possible solution for that?
Dr. Yasho V. Verma: As mentioned earlier, this does not hold true any longer. There are banks and also independent funding bodies allowing loans at reasonable rates to promising ideas that are eventually turning into startups. Its all about the right approach to go with to VCs, angel investors to get them convinced of your idea. Money once starts rolling, there is no looking back.

How you canvas the Union Budget 2015-16 in the context to small scale industry?
Dr. Yasho V. Verma: Last year's budget had placed the identity of 'startups' at the core of economic discourse where the government made innumerable promises and allotted a dedicated Rs. 10,000 cr startup or SME fund. We do not yet know how the fund is reaching out to its actual recipients. Transparency and implementation along with the speed to deliver the assurances remain as key determinants in assessing the success of a budget.

There are some positive aspects of the budget for SMEs and startups:

-       Atal Innovation Mission has been created -- under Niti Aayog, Rs. 150 Crores allotted for promoting network of world class innovation hubs. Details are being worked out.
-       Panel to study removing multiple permissions to start a business
-       There are visible efforts to streamline tax system for equitable tax implications borne by all parties including manufacturers, dealers, facilitators (e-commerce sites etc) and   consumers. VAT related ambiguity should go in sometime as GST is already on its way for a roll out and hence we see the increased percentage on VAT applicable from April onwards.
-       A new bankruptcy code is tailored for SMEs is on its way, it should help in cleaning up.

Some not so positive aspects of the budget or areas that still remain wanting are as follows:

-       Issues regarding plethora of regulations and compliances required for entrepreneurs in starting up a business is not addressed. On an average, there are at least 2 startups formed everyday and there should be easy mechanisms to encourage their survival and sustenance.
-       The ease of doing business in India under following heads need further attention:
         a). Listing of startups in India or abroad
         b). Matters pertaining to taxation on angel investors / VCs

While in the initial years of starting, SMEs may need a lot of handholding in areas of manpower, expertise in business operations, progressive regulations, for SMEs to prosper, it is suggested Government also lays emphasis on following areas:

Single window clearance system with time limit: It will certainly help reduce time costs if help desks are created to provide support for Labour, Municipal and other local registrations and compliances. The process of applying and registering should be as much online, transparent and time bound to avoid inordinate delays.
Tax Concession Zones: a). There must be geographies earmarked where tax concessions can be offered in manufacturing zones, this may also involve state governments. b). Taxes must be applied to an organization as a cut off or a certain reasonable percentage of the revenues they make.
For startups: a). There should be income tax benefits till a startup reaches a certain sustainable size and reasonable revenues. b). For an initial period of let us say 5 yrs or so, even if they are making profits, either total tax on profit or a part of it should be exempted. c). In setting up manufacturing units, Governments may allow them premises or land on lease for at least 5-6 years at easy interest rates or returnable clauses. Land can be given by Government, money can be deducted on an EMI basis, Infrastructure support like schools, dorms can be build in a public - private partnership. D) Taxes may also depend on the type of industry a SMEs focus lies in like R&D driven, technology driven or breakthrough / innovation driven. A scheduled list of such broad category of industries may be chalked out for long term benefits of the sector.
Certifications on products sold on E-tailing sites: With Digital India as the larger theme, it is particularly important that for technology startups some clear roles are decided. There must be some sort of certifications made compulsory from gov ernment as a way to check the inventory status i.e. 'as and what is' must be shared with visitors on the site as there is no 'touch and feel' aspect. This will ensure the prospective buyers while browsing through information about when a certain product was manufactured, what is its quality, its condition etc. Something similar to what takes place in a consumer durable industry with BEE Ratings - products marked as A+. B++ etc. Specifications will help boosting sales and also avoid unwarranted litigations companies can avoid due to misleading information coming as complaints. These will put lesser pressure for startups in ecommerce industry to rain discounts and rather progress naturally in an organic way.
Incentivize to operate in low penetration areas: Low penetrated geographies i.e. where penetration level is less than double digit, tax benefits can be granted so that it is reflected in the prices and benefits are passed on to end customers by products becoming cheaper or more affordable.  Privileges attached to an Aadhar card may also be merged into buying schemes of users in these lesser or non-penetrated markets. For brands that are not premium, this can help in their outreach and rural sales.

How an expert like you can help SMEs? Also how easy (costly) it is to get an expert advice?
Dr. Yasho V. Verma: I am helping SMEs and entrepreneurs right from the pre-build up stage as a Mentor or a Guide. I help them strategize vision, mission and business architecture. I also counsel them on how and where they may look for right resources including capital, manpower, operational and logistic aspects. Costs vary from industry to industry and scale to scale. I am reachable at yasho.v.verma@gmail.com