Survey of 6,000 MSMEs, startups reveals 59 percent likely to scale down, shut or sell their business this year

In a survey that received 11,000 responses from 6,000 Micro, Small, and Medium Enterprises (MSMEs) and startups, community platform LocalCircles revealed that 59 percent of the participants are likely to scale down, shut down, or sell their businesses this year on account of the impact of the second COVID-19 outbreak in the country.

The survey, which included responses from registered LocalCircles participants, also found that only 22 percent MSMEs and startups have a runway of over three months, and 41 percent are either out of funds or have less than one month of finances left.

It also revealed that 49 percent of respondents planned to reduce employee compensation and benefit costs by July to sustain themselves.

"The Indian economy had just started to recover from September 2020 from the first wave of COVID-19. However, the second wave and related lockdowns and curfews and their impact on the economy have once again brought along very high levels of uncertainty, struggles and challenges for MSMEs and startups to find growth in the business and gather necessary funds and capital to run their operations," LocalCircles noted in its survey.

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The findings revealed that in the next six months, 37 percent of respondents are looking to scale down operations, 14 percent will likely shut down, and eight percent were planning to sell their business. While 19 percent of respondents did not have an opinion on this, only 22 percent of MSMEs and startups said they see growth in their business during this period.

The survey also noted:

"88 percent of small businesses need the government to let Public Sector Undertakings (PSUs) provide price escalation on all MSME/small business contracts where supply of commodities like steel, copper, etc is involved. Further, 92 percent small businesses want the government to provide a time extension of three to six months on all government/PSU contracts to avoid any liquidated damages to them."