written by | September 27, 2022

Problems of Small Scale Industries and Business Ideas in the Sector

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Table of Content


Small-scale industries comprise businesses that are just starting up or offering new goods and services in different sectors. They have little to no capital, are labour intensive, and manufacture goods or products with the help of a small workforce. More than 50% of products overseas are shipped from India by small-scale enterprises, and some of these companies are created because of high demand from international vendors. 

These industries are known for their small size and do not enjoy many government schemes or initiatives by large-scale sectors. The limited capital and unit sizes are also barriers when it comes to their growth and expansion. This post will discuss the biggest problems of small-scale industries below.

Did you know? There is a national small-scale industry day celebrated every year on 30th August!

Problems Faced by Small Scale Industries

Every small-scale industry is different, and the growth trajectory is not the same. However, the challenges of small-scale industries are very common globally. Here are the main problems experienced:

Also read: How to Start Haldirams Franchise Business in India

1. Not Getting Enough Funding

For small-scale industries, finance is a major problem, no organisation can grow without adequate funds. Entrepreneurs have difficulty getting loans from banks and lack creditworthiness since they are building a new business model. Most small-scale business owners do not have any of their own resources and have to borrow money from lenders at exorbitant interest rates.

For this reason, many small-scale businesses choose to apply for loans from non-banking financial corporations (NBFCs) and private lenders instead of commercial banks.

2. Lack of Technology

Small-scale enterprises are not equipped with the latest technology to manage their factories and machinery. There is a lack of automation in doing manual, labour-intensive tasks as well, and they cannot compete with larger-scale players because of obsolete production techniques. Other challenges the service sector faces are lower quality, increased production costs, and outdated hardware and software for their technology solutions (if any).

3. No Marketing 

Small-scale industries do not know how to advertise themselves effectively. There is a lack of marketing strategies, and small-scale enterprises cannot get good market information. There is no strategy for building ideal customer personas, and most business owners do not think about demographics. Building brand awareness is a common problem, and small-scale businesses in India don't have a high marketing budget.

Since small-scale industries cannot ship internationally in most cases or do not have superior quality products, they can't get a wider reach. However, times are changing, and the Government is launching initiatives to extend a helping hand to such businesses, thus improving access to both domestic and international markets. Some business owners aren't good with social media marketing and cannot afford to hire professional help.

Many small-scale industries are based offline and don't have any online presence. This is detrimental in the long term because customers tend to gravitate towards businesses with a strong social media image over those that don't.

4. Unskilled Labor

If a business hasn't built its reputation yet or grown in revenue, it can be difficult to get good hired help. Small-scale units are forced to resort to employing unskilled labour or manpower. Skilled workers do not want to work for small-scale businesses and are not usually happy with the wages. Enterprises cannot also offer the facilities and amenities that these workers demand.

5. Inferior Quality Products

Due to the shortage of funds, raw materials, or labour, small-scale industries cannot produce high-quality products. And in the event business owners can, they're not able to sell it at the market rates they want. Markets are competitive, and sellers face competition constantly from big players, which makes it hard to grow. The top reasons why product quality is not up to the mark are the increased production costs, low capital, lack of research, and non-availability of resources.

Production is tied to performance, and staff may not be motivated to do their best work. If the business is too small, getting a trading license granted by the state can be an issue.

Top Small Scale Business Ideas

There are many to choose from if you are looking for the best small-scale business idea and want to build a successful company. Here is a list of the top ones:

1. Landscape Design

Landscape design is a highly profitable business model, and it is easy to acquire new clients. Many properties look for lawn services and want to renovate their landscapes. A good landscape architect can boost the value of a property which is why their services are in high demand everywhere.

2. Gift Business

India is a nation where customers buy gifts for festive, cultural, and religious occasions. Gifts are normal in our society, especially when inviting loved ones. You can provide unique, hand-made, and customised gifts for your buyers and sell them online. It can be something as simple as making sugar-free desserts, arts and crafts, or wedding carousels.

Also read: Top Small Trading Business Ideas

3. Videogame Design

Kids love playing video games, and if you want to capitalise on their interests, make video games! Videogame designers bring in huge profits by designing the latest consoles and gaming titles. You can explore various genres such as puzzle games, arcades, PlayStation and Xbox, or even design custom consoles!

4. Restaurant Business

If you have amazing cooking skills, you can start a restaurant business from the comfort of your own home. Just start a website and give a pre-order option to your customers. Make meals when you receive orders and send them out for deliveries. You can invest in better equipment, more labour, and scale up as you make nice profits.

5. Freelance Copywriting

If you want to get into a small-scale industry that caters to B2B and B2C brands, freelance copywriting is a good choice. Many small-scale business owners are looking to optimise their copy online and sell services. Copywriters help businesses launch effective marketing campaigns and are in charge of boosting sales. The more customers you can attract and convert with your sales writing, the greater your reputation in the industry will be.

6. Photography Business

All small-scale industries need good photos for their products and services. Launching a photography business is a good idea since you can target these clients. Wedding photographers are in huge demand, and you can earn rewards by taking good pictures. If you have extra time, you can turn your hobby into a profession by taking up numerous photography projects.

7. Visual Artist and Storyteller

Storyboard artists and visual designers are hired everywhere, not just by small-scale businesses. Many small-scale industries in India hire graphic designers. As a creative entrepreneur, you can design posters, mood boards, flyers, banners, and other social media marketing elements for brands. You can create illustrations about the latest products and services. Visuals are more engaging than words which is why artists have always sought after them. However, keep in mind that commission rates vary, and if you are a creative startup, how much money you make will solely depend on your skills.

8. Tours and Travels Agency

You can start a travel agency or become a successful tour operator in your region. Many visitors from international countries and nationals want to travel places. They always search for affordable tickets and want to tour at their own convenience. Tours and travel agents are well known for their knowledge of booking domestic and international flights, train tickets, hotel bookings, and more.

Also read: Best ideas for starting a small business in Pune

Conclusion

So that was all you needed to know about the problems of small-scale industries, top business ideas for entrepreneurs, and how to take care of key challenges small-scale business owners face. As long as you have a good business idea, it is possible to succeed despite these issues. The takeaway is to have a solid business strategy in place, use good inventory management software, and apply the best business tips to your niche.
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FAQs

Q: What are the best low-cost, small-scale industry business ideas?

Ans:

Low-cost, small-scale businesses that are profitable and require zero to minimal investments are - the food and beverage industry, salon and beauty parlours, arts and crafts, photography, and eCommerce.

Q: How do small-scale industries improve?

Ans:

The best way to improve small-scale industries and scale up is by getting adequate funding. Refinement in the methods of production and product development makes a huge difference too. Employee industry education and training play a huge role as well.

Q: Discuss the main problems faced by small-scale industries?

Ans:

The main challenges faced by small-scale industries are - finances, procurement of raw materials, marketing, infrastructure management, and underutilised labour capacity.

Q: What are the top key features of small-scale industries?

Ans:

The top key features of small-scale industries are ownership, management, flexibility, employment, reach, and productivity.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.