Professional management catches on

Small Business and professionals plan to hand over the reins of their business to professional management, even though passing the business on to children is also still popular. Financing and shortage of staff are two major hurdles for these institutions.

These were some of the findings of a five country survey covering 677 small businesses and professionals (SBP) in India, HongKong, Malaysia, Singapore and South Korea conducted by the Economist Intelligence Unit. The SBP segment for the survey was defined as enterprises with annual turnover of less than $10 mn. There were 175 respondents from India.

In what could be seen as a marked shift from the practice of keeping control of their business in the family over a long term, 44% of those surveyed from India plan to grow their enterprise and then pass it on to professional managers. Rather than money, India’s SBPs are more motivated by the desire for personal accomplishment and entrepunerial skill.

Also half of those surveyed in the country said financing is a formidable hurdle. For working capital a third of India’s SBPs depend on retained earnings, with bank financing at 27%.

Foreign banks like Citi have in recent years started concentrating on these business. According to Rajiv Jamkhedkar, business manager, CitiBusiness, Around 35 to 40% of the total retail business which is over Rs 15,000 crore is contributed by small business. The business has seen a growth of 50% in the last one year.