Why Do Small Businesses Struggle Especially In India? | 2021

Why Do Small Businesses Struggle Especially In India? | 2021

If you believe that the world is run by big corporates, you are probably right. But did you know that the small business of any country is its backbone? At the same time, it is sad to know that most small businesses struggle big time while they are running their show and trying to keep up with the competition.

Let’s take a closer a look at why that happens and what makes such businesses struggle quite a lot. Before we look into that, let’s trying and get an understanding of a small business and what they actually do.

What Are Small Businesses?

They are small organizations that cater to a smaller population, usually locally or even if they are online catering to the whole country. This is primarily because of their production capacity and the budget to reach a wide range of audience.

Generally, they tend to offer products or services to a particular niche. For example, a café, bakery, candles, home décor, and other products that fit a similar profile.

If we remove the big corporations like amazon or flipkart from the picture, small businesses tend to cater these wide range of customers.

Considering that these smaller set ups have the potential to offer products and services but still struggle to run businesses in this competitive world.

7 Reasons Why Small Businesses Struggle Especially In India.

There are variety of reasons why it is difficult for smaller organizations to run effectively in any country but especially in India. Let’s take a look.

1. Budget


Most of these small or local businesses do not have huge budgets to deal with their expenses. They tend to start their business with small capital usually saved from their jobs. That sometimes isn’t enough for them to deal with rising costs of raw materials or marketing for that matter.

When I personally started working with small businesses, and start ups in helping them building websites or offer business advice, I soon realized that there are number of costs that come up. Such costs are usually not accounted by these businesses when they initially think about starting the businesses.

Buying raw material is not cheap, marketing campaigns can take up a lot of budget. Requiring other services such as branding and logistics and everything that eat up the budget a lot faster than you think.

2. Inability to bulk buy

Inability to bulk-buy

In a highly competitive market how do you offer low prices and not suffer revenue losses. One of the ways to do it is to buy the raw material in bulk and produce at a higher capacity than usual so that the overhead cost of making one finished product is a lot cheaper than what it would normally cost.

This seems like an ideal thing to do, but is that the case with a small business, unfortunately no. The primary reason for that is the budget to buy materials in bulk and wait for the products to be sold to recover that investment.

Now, considering that they will have to buy smaller quantities of raw material that forces them to raise the cost of the finished product which results in them not being as competitive. Add to that the cost of logistics in acquiring and delivering the finished products to the customers can substantially alter the price.

3. Lack of understanding of target Audience

Lack of understanding of target audience

Not a lot of small businesses or start-ups come with a background of catering to customers directly. Nor do they come with the data that can tell them what’s their actual audience. Of course, they’d typically have an idea whom they need to sell, however, finding that perfect audience can be really challenging in the beginning.

It might seem like a simple to thing to keep in mind, when you drill down, it is quite a complex business affair. That’s because there’s the demographics of potential customer can be huge and knowing where your audience is even more complicated.

In such a situation, most small businesses struggle and end spending an awful amount of time and resources in offering products and services in a not so productive environment.

4. ORM (Online Reputation Management)

Online Reputation Management

A term that is highly regarded in digital marketing and marketing in general, is often not considered by new businesses. The majority of the customers are online. When they come across new business, a most common practice is to go on a search engine. They will look for businesses guarantees, reviews, and social proof.

When someone searches for your business online and they find only your website coming up as a source of information may not be very helpful. Although, if there are no bad reviews online some customers may take a leap of faith and order with you.

Imagine the same situation, when they search for your name and come up with a ton of bad reviews. Would you buy anything from such a business?

Usually, when you are starting up, you should pay attention be present and active on all or relevant to your business media online. Make use of all the social media channels. Find yourself on pages that can help you increase the credibility. Even though they may not bring direct customers to you but can act as a source of trust building factors.

5. Ignoring the power of Social Media

Ignoring the power of social media

Social Media over a period of time has changed a lot. There was a time when only people with personal profiles sharing their pictures were found. However, in recent times a lot of businesses have flooded the social media pages.

Social Commerce is the term recently coined for such practices. Established businesses just post regular content and keep their customers informed. Whereas, new businesses try to build their customer base and audience through that.

Maybe a couple of years, especially, in India, a lot of customers wouldn’t prefer buying off of Facebook or Instagram. That’s changed a lot now.

The conversion rate through social media can be really low, but then it helps a business to make smaller marketing investments and create a brand awareness.

6. Fake Businesses Online

Fake Businesses

I ordered a gaming chair nearly 6 months ago from a website that came up as a sponsored post (Instagram ad). The chair was for my WFH office and came at a fraction of a price. That should have been a sign. They needed an advance payment because it was at a heavily discounted price (Second sign).

It’s been a bit over 6 months, there’s no news, no updates, no website, no insta handle and more importantly no chair.

This didn’t affect my mental idea of a small business much, however, imagine that of a regular customer who have had such experience. They are never going to trust buying off of a small and unknown (new) business.

A bad taste like that can really affect the customer behavior. With more genuine businesses that are coming online, a good ratio of fake businesses are making their place online too.

7. Unhealthy Competition

Unhealthy Competition

One can always gather inspiration from another business, create a similar product but make it unique to stand out and not clash. On the other hand, there are plenty of new social commerce pages just conveniently replicate another business and sell the exact same product. Most likely at a cheaper rate in the beginning to cut the other businesses audience.

That is, to be honest, a very unhealthy business practice. It’s not like these businesses already have a lot to deal with. Someone copying and replicating their product or service can be an added hurdle to their existing problems.


In conclusion, I am not implying that such small businesses haven’t flourished in India, however, there’s a substantial number of businesses that struggle. I also don’t mean to say that it’s a bad idea to start a business. It’s just important to have a strong plan with steps that can be achieved on a regular basis.

That’s important to constantly achieve short term goals and keep working towards the long term ones.

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8 months ago

The idea of starting a business can be both stressful, yet exciting. But, imagine you wish to start up your own business and you face these struggles already knowing that you have put all your strength and finances into it. Let’s face it, this pandemic isn’t making it any easier. A lot of people has started to support small business which I find beautiful but sometimes it is not enough for the businesses to survive. You need a whole plan and be consistent with it.

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