Accel, Kalaari-backed Firm to Steer Indian SMEs to Higher ProfitabilityThe best way to increase profitability for SMEs is to go after their biggest spend and see if we can save some money there!

Small and Medium Enterprises (SME) have for long struggled with constraints such as lack of technology implementation, lack of resources and access to capital. However, with the implementation of new government policies, the SME sector is now seeing a spike in interests from both, the startups and government organizations.

In a bid to empower this undertapped section of the Indian economy, Power2sme is helping SMEs in procuring raw materials in bulk and simplifying procedures of getting financial loans. The company currently caters to Rs. 1 crore sales through SME Shops after just three months of its launch.

The Accel, Kalaari Capital backed company enables SMEs to obtain the most optimal pricing for their procurement needs. The company pools the demand of multiple SMEs for raw materials for their business needs, thus allowing it to not only obtain the most optimal pricing, but also have an access to a larger pool of quality suppliers. It buys directly from the manufacturer and sells to the SME, thus eliminating out the middle link of distributors and wholesalers.

In an interview with Entrepreneur Media,Founder and CEO R.Narayanspoke about some of the biggest challenges of the SME ecosystem and how he aims to empower them to double up on profitability numbers.

Major concerns for SMEs in India – procurement costs!

The first largest problem they have is their own profitability. Their profitability is mostly in low single digits which further gives them a roadblock to invest in other categories like marketing, R&D and more, Narayan said.

Narayan claims that the first instinct to make a difference for SMEs was to make them more profitable! SMEs spend most of their money in procuring raw materials like paints, tools, lubricants, steel and on technology. The best way to increase profitability is to go after their biggest spend and see if we can save some money by lower procurement costs. Once that is done, an SME will then start looking at R&D, improvising technology and other details, he adds.

Power2SME has also managed to engage a number of financial institutions and help SMEs take loans easily, thus solving the issue of capital availibility.

The impact of government policies

Narayan lauded government initiatives like GST bill and Swacch Bharath Abhiyan, which are aimed at empowering the SME ecosystem in India. Narayan said that because of GST, a lot of the SMEs will now have to embrace the digital platform. Once they get on to the digital platform, they will have to learn and adopt the technology.

The company has earned good faith from the best industry folks like Kalaari Capital, Accel Partners, Inventus Capital and has received its fourth round of funding from Nandan Nilekani, Power2SME has turned into a profitable venture in just 4 years of its operations.