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Our hyper-connected Digital world is opening up to new business model innovations, Although it may be difficult to predict what the exact innovations hold, they can be catalogued into possible business models.
The first premise is, remove anything that does not create value. The second is related to business models which can serve multiple markets simultaneously. The third premise is businesses opening up to international growth.
For Small & Medium Enterprises (SMEs) developing a working business model is key to survival.
State of SMEs
A vast majority of SMEs have experienced a decline in sales owing to the pandemic. The reduction in employment was of course more severe for non-permanent employees.
The crisis has further worsened the already existing challenges which affect the industry.
The top challenges include:
Regulation and approvals
Several loopholes exist in the system which keep businesses from expanding. Due to delay in approvals/ registration, entrepreneurs are demotivated. Enforcing contracts and dealing with construction permits impact the business set up time.
Lack of financial expertise
Entrepreneurs may lack the sound financial knowledge to steer the business in the right direction. In the absence of financial expertise, they may end up making wrong business decisions leading to business failure.
Absence of trust
It can be seen that banks and financial institutions refrain from extending loans as the amount remains small and believe that they lack the repayment capacity. In such a case, they may end up stricter regulations and make it difficult for business owners to meet the eligibility criteria.
Empowering SMEs
As mentioned earlier, choosing the right business model will check whether SMEs survive or die.
A hybrid business model such as a Virtual Captive can deliver higher value-added services while being low on cost.
The benefits include:
*Optional property ownership
*Less on capital investment and more on process flexibility
*Quick implementation speed
*Enlarged business strategy and focus
*Quick adaptation based on business requirements
*Transparent cost structure
*Total operational control
A Virtual captive can be considered advantageous due to smaller financial risk at the initial investment and local presence and experience of the provider can decrease the set up and operational risks.
The model provides an opportunity for SMEs to be flexible and ensure continuity in operations.
This hybrid solution can be ideal for SMEs that lack the required financial and technical knowledge or the maturity or size to establish an own centre.
Another important point of view is that a virtual captive could simplify recruitment and reduce any staff attrition where the company isn’t well known in its geographical area.
Avoiding any cost of infrastructure and operations is also crucial when it comes to working out the cost-benefits.
Let’s map the delivery requirements with the benefits of a Virtual Captive Center.
*Service Delivery
The risks of service providing are treated in a more cooperative way.
*Pricing
Continuous management of several cost elements.
*Image
It is usually under the Image of the Company.
*Human Resource
The Company has a voice in HR management.
*Governance
Lesser governance when compared to a traditional captive but larger than outsourcing
*Operational Risks
The risks and operational loss beyond a certain level are shared.
Concluding thoughts
As a necessity of complex business cycles and economic scenarios, SMEs need to carefully look at their operational model to consider the adoption of a hybrid model.
A hybrid model will help the SMEs continue operations at costs manageable for sustenance.
The local government also needs to offer a helping hand in the form of working capital financing and incubation to support the SME growth.
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