Strategies for 3x–5x for SMEs

Introduction

Unlocking 3x - 5x growth

In today’s competitive business landscape, small and medium-sized enterprises (SMEs) face mounting challenges—from rising input costs and global tariff barriers to increased competition and the urgent need to adapt to rapid technological changes. Many SMEs remain uncertain about the future direction of their business.A recent report revealed a staggering 48% of MSMEs are at risk of shutting down within the next eight years.Despite these obstacles, SMEs have immense potential to achieve 3x–5x growth. By adopting a focused approach and leveraging digital strategies, they can build resilience and unlock new avenues of growth.

Understanding the Value Proposition

A value proposition is the unique benefit an SME offers to its customers—what differentiates it from competitors. In today’s digital age, a compelling and clearly articulated value proposition is essential.

SMEs can enhance their value proposition through three core strategies:

• Improve: Enhance existing products or services. For example, upgrade product quality or improve customer service experience.

• Expand: Introduce new offerings. This could include entering new markets or launching complementary products and services.

• Innovate: Develop entirely new business models or technologies to create distinct market value.

Margin Improvement vs. Growth Strategies

To scale effectively, SMEs must understand when and how to leverage two core strategies:

1. Margin ImprovementFocuses on internal efficiency—reducing costs, improving operations, and boosting productivity.

Examples:

• Negotiate better supplier terms

• Adopt automation

• Optimize production

2. Growth StrategiesFocuses on market expansion and revenue generation.Examples:• Launch new product lines• Enter new markets• Pursue acquisitions

According to McKinsey, MSMEs in emerging economies operate at just 29% of the productivity of larger firms. In India, this figure is even lower—just 26, compared to 54 in Brazil and 84 in the UK.

This stark gap highlights an urgent need for productivity transformation in India’s SME sector.

According to McKinsey, MSMEs in emerging economies operate at just 29% of the productivity of larger firms. In India, this figure is even lower—just 26, compared to 54 in Brazil and 84 in the UK.

Challenges Faced by Indian MSMEs

Indian MSMEs are under pressure from multiple fronts:• High cost structures due to productivity inefficiencies• Limited digital capabilities• Competitive disadvantage from outdated technology• Low scalability and quality complianceWithout strategic intervention, these factors can erode profitability and long-term viability.

Prioritizing for Maximum Impact

While both margin improvement and growth are important, prioritization is key. Starting with margin improvement can help establish a strong financial foundation, which can then fund sustainable growth initiatives.

Why Start with Margin Improvement?• Builds financial resilience• Focused execution• Minimizes risk• Prepares for scalable growth

Assessing Readiness

To grow in today’s market, SMEs must adopt a structured approach. Begin by evaluating readiness across key drivers of efficiency and scalability

Benefits of a Phased Approach

Benefit	Description
Focused Execution	Allows SMEs to concentrate efforts on one area for quicker impact
Optimized Resources	Prevents overextension and ensures efficient allocation of funds and manpower
Reduced Risk	Minimizes exposure to strategic or financial missteps
Sustainable Growth	Builds maturity in stages, leading to long-term, balanced performance

Case Study: Lenskart

Lenskart, a leading Indian eyewear brand, exemplifies how a phased, strategic approach can deliver sustainable growth.

Strategy	Lenskart’s Actions	Impact
Improving Existing Offerings	Automated lens manufacturing; online ordering platform	Delivered high-quality, cost-effective eyewear at scale
Expanding the Value Proposition	Opened new stores across India and overseas; added sunglasses and eye care	Catered to broader consumer segments
Creating New Propositions	Launched virtual try-on technology; introduced subscription lens service	Boosted customer convenience and loyalty

Conclusion

While both margin improvement and growth strategies are vital, a phased approach is often more effective for SMEs seeking transformative growth. By first strengthening internal efficiency and financial stability, SMEs can lay the groundwork for bold, market-facing initiatives.

Call to Action

Ready to accelerate your growth journey?Begin by assessing your current capabilities. Then create a phased plan—starting with margin improvement or growth—based on your strengths and business maturity.Stay tuned for the next article in this series, where we’ll dive deeper into the key drivers of margin improvement and scalable growth, along with a step-by-step roadmap for SMEs.

About the Author

Dr. T. Nagesh, CMC® is a seasoned consultant and Chair of the Bangalore Chapter of the Institute of Management Consultants of India (IMCI). He specializes in strategic planning, operational excellence, and smart factory transformation, helping organizations unlock revenue growth and drive cost efficiencies.

Dr. Nagesh holds a Ph.D. in Management and a master’s degree in industrial engineering. He is also certified in Lean Six Sigma, Industry 4.0, and Supply Chain Digitization. With deep expertise built over time through associations with some of the most reputed organizations—as both an executive and a consultant—he delivers tailored consulting services to mid-market enterprises and large manufacturing organizations navigating digital transformation.

You may visit the website: www.mgmtsolns.com