For start-up MSMEs, experience counts

 

CRISIL has studied the performance of 969 start-up micro, small, and medium enterprises (MSMEs) rated on the basis of 2013-14 (financial year April to March) financials. To compile the list of start-ups, CRISIL has considered MSMEs which started business operations after 2010.

The study revealed that start-up MSMEs with promoters who have relevant experience of more than four years in the same line of business registered higher profit margins, as compared to those with limited experience. Start-up MSMEs where the promoters had experience of more than four years in the same line of business registered an operating profit before taxes (OPBT) margin of 2.14 per cent in 2013-14, as against 1.17 per cent for those started by promoters with less than four years of relevant experience. Further, the manufacturing and services sector saw a significant variance in their OPBT margins, while trading saw the least variance among the three sectors.

 

Success in the manufacturing and services sectors requires a good understanding of business, including market dynamics, distribution and production/service delivery. Thus, experienced promoters of start-up MSMEs were able to identify both opportunities and challenges, quickly enabling their enterprises to perform better.

Note: CRISIL has rated over 50,000 MSMEs in India. This fortnightly tracker presents to our readers insights on MSMEs, a key element of the Indian economy.