Introduction
Micro, Small, and Medium Enterprises (MSMEs) form the backbone of India’s economy, contributing approximately 30% to the national GDP and employing over 11 crore individuals across the country. They are critical drivers of entrepreneurship, employment, and regional development. Yet, MSMEs in Tier-2 cities often face unique challenges that go underrepresented in mainstream industry discussions.
To address this gap, SkillLabs undertook a study involving 300 MSMEs across the Tier-2 regions of Zirakpur, Mohali, and Chandigarh. These enterprises spanned a wide range of sectors including retail trade, logistics, financial services, and apparel distribution. Some had been operating for over 15 years, while others were relatively new—but together, the 300 MSMEs offered a holistic view of how small businesses function, survive, and grow in semi-urban India.
The data collection approach combined in-person field surveys with online responses gathered through simple tools like Google Forms, ensuring both reach and depth in the insights obtained. The objective was to move beyond theoretical perspectives and capture real, day-to-day experiences of MSME owners—their priorities, operational hurdles, financial behaviors, and level of digital awareness.
This blog presents the key insights drawn from these 300 MSMEs, providing a grounded understanding of what it truly takes to run a business in Tier-2 India today.
Who We Met: The MSME Landscape
The 300 MSMEs covered in this study reflect the diverse and dynamic nature of India’s small business ecosystem. Spread across Zirakpur, Mohali, and Chandigarh, these enterprises spanned a variety of sectors, each with its own role in the local economy.
A significant number of businesses operated in retail trade, selling everything from groceries to garments. Others were engaged in logistics and transport services, playing a key role in regional supply chains. The sample also included chartered accountancy firms, apparel distributors, warehouses, chemists, and local service providers—capturing a cross-section of both goods- and service-based industries.
In terms of longevity, many of the MSMEs surveyed had been operating for over 5 to 10 years, with some exceeding 15 years of continuous functioning. A large portion were family-run enterprises, passed down through generations or managed jointly by relatives—demonstrating a strong local legacy and personal investment in the business.
Most of these enterprises operated with lean teams, typically employing between 1 to 10 people. This included not just shop floor or delivery staff, but also informal family help and part-time workers. The size of the workforce reflected both the modest scale of operations and the cost-conscious strategies adopted by small businesses in Tier-2 regions.
These observations offer an indicative view of the types of enterprises that continue to drive daily commerce and services across Tier-2 urban centres.
Core Findings: What the Data Revealed
Findings from the study of 300 MSMEs across Zirakpur, Mohali, and Chandigarh surfaced several patterns in how businesses think, operate, and grow. These insights can be grouped into four broad themes:
- Access to Finance
Many MSMEs surveyed continued to face significant operational disruptions due to liquidity constraints. Notably, 81% reported experiencing stockouts on fast-moving goods, indicating a mismatch between available working capital and demand cycles. While credit remains essential, business owners often placed disproportionate emphasis on interest rates, ranking it above factors like loan amount, approval time, or ease of access. This pointed to a widespread perception that affordability matters more than availability—despite access being the more immediate challenge. In several cases, businesses reported relying on informal sources of finance or bank overdrafts to manage short-term needs, especially in emergencies.
- Digital Awareness & Adoption
Digital adoption across the 300 MSMEs was largely partial and fragmented. While tools like UPI and WhatsApp Business were widely used for payments and customer communication, the adoption of deeper operational tools remained limited. When it came to finance and inventory management, only around 50% of the businesses used digital tools such as Tally, while the other 50% relied on manual or informal methods—including paper records or verbal updates.
Very few enterprises had basic business websites, limiting their visibility in digital marketplaces and reducing credibility with new customers. This suggested that while basic digital familiarity is rising, broader digital maturity remains low, especially in areas related to internal efficiency and formal record-keeping.
- Customer Knowledge & Engagement
The study revealed that 76% of MSMEs did not use any formal CRM tools to manage customer relationships. Instead, they relied on manual or verbal communication to understand customer needs, preferences, and feedback. Business owners often managed customer interactions personally or through informal follow-ups, without structured tracking systems. While this relationship-driven approach supported loyalty in some cases, it lacked the scalability and precision offered by formal engagement tools.
Customer acquisition was largely dependent on word-of-mouth, repeat walk-ins, and local visibility. Few businesses maintained customer databases or used insights from past purchases to tailor future offerings, indicating an underutilization of data in decision-making.
- Policy Awareness vs. Usage
There was moderate awareness of government schemes, with many MSMEs able to name two or three common initiatives such as MUDRA loans, Udyam registration, or GST support schemes. However, when it came to actual application or usage, none of the surveyed businesses reported currently availing benefits from any government scheme. This marked a 0% usage rate among respondents at the time of the study.
Commonly cited reasons for this gap included perceived complexity of procedures, the belief that schemes are not suited for their immediate business needs or won’t offer significant benefit, a lack of awareness about eligibility criteria, uncertainty around whether they qualify, absence of collateral, and a perceived notion that loans cannot be sanctioned without collateral.
Behind the Numbers: Stories from the Field
Beyond statistics and survey sheets, we met entrepreneurs whose stories added depth and meaning to our findings. Each conversation revealed the resilience, creativity, and lived challenges behind the MSME sector:
- The Shopkeeper Who Couldn’t Speak—but Managed It All
In one of Mohali’s local markets, we met a shopkeeper who was speech-impaired. Despite his inability to speak, he actively managed his store, handling customer payments from the counter with remarkable efficiency. He had one or two workers assisting him in day-to-day tasks, and it was through them that we eventually connected with his son to complete the survey. His commitment and quiet leadership left a lasting impression—proof that determination can overcome many barriers.
- From Scratch to Scale—A Self-Taught Entrepreneur
One respondent stood out not just for his enthusiasm but for his journey. He had started with a small retail outlet and, over time, learned everything from scratch—how to deal with customers, manage inventory, handle finances, and grow his operations. Without formal training, he taught himself through trial and observation. He later adopted tools like WhatsApp Business to stay connected with his customers, which helped him scale up. Today, he owns two more shops and has expanded his team, continuing to grow with the same hands-on, self-driven approach.
- Finance Questions That Stopped the Conversation
At a distribution unit, the survey was moving steadily until we reached questions on turnover and profit. The owner paused and said softly, “Yeh thoda personal hai.” It was a subtle reminder that financial matters, while crucial to business, are deeply personal.
Many MSMEs hesitated or skipped such questions, showing how finances are often treated with discretion—and why trust is critical in grassroots research.
What Tier-2 MSMEs Want (But Don’t Always Say)
Though most Tier-2 MSMEs openly discuss challenges like high loan interest or rising costs, our field interactions revealed a set of underlying, often unspoken needs that go far beyond these surface concerns. These insights reflect not only what they lack, but what they aspire to—if given the right kind of support.
- Simpler, More Transparent Financing Processes
Many business owners said they find formal financing complicated, slow, and filled with confusing paperwork. Some had applied in the past but stopped midway due to document rejections, unclear eligibility criteria, or simply long wait times. They don’t necessarily distrust banks—but the process feels too out of reach compared to walking into a known shop or calling a moneylender. What they want is not just cheaper finance, but faster, more accessible credit with clarity at each step.
- Handholding in Digital Transformation
Adopting digital tools is not the problem—learning how to use them effectively is. MSMEs were found using UPI, WhatsApp Business, and in some cases even Tally—but most lacked integration between these tools. For example, their payment system was digital, but inventory was still tracked in notebooks. They expressed a desire for someone to walk them through the basics—how to maintain customer records, how to automate inventory, or how to track payments and receivables. One-time training doesn’t help; what they need is sustained guidance, perhaps in their local language, and tailored to their sector.
- Access to Working Capital—On Time, Not Just Cheap
While interest rates were often quoted as the biggest concern, the actual problem was delayed access. As our survey showed, 81% of MSMEs faced stockouts on fast-moving goods. These disruptions didn’t just cost them sales—they weakened customer trust. The need for a well-timed working capital solution, such as invoice discounting or short-term credit lines, was more urgent than long-term affordable loans. This is an area where real-time approvals and flexible repayment plans can make a tangible difference.
- Localized Training, Awareness—and Guidance on Government Schemes
MSMEs want to grow—but many don’t know where to begin. A large number had never received any formal skilling or awareness session. Others had attended generic trainings that didn’t relate to their line of work. More importantly, there was widespread confusion about government schemes. While some MSMEs had heard about MUDRA, CGTMSE, or PMEGP, nearly none were using them. The biggest reasons?
- Lack of clarity on which schemes they are eligible for
- A belief that collateral is mandatory
- A perceived notion that such schemes exist more on paper than in ground reality
- And the assumption that “these benefits are not meant for businesses like mine”
What MSMEs are looking for is guided navigation—someone who can sit down with them, look at their business, and suggest exactly which schemes apply and how to apply. They don’t want brochures. They want conversations.
Conclusion
Tier-2 MSMEs are remarkably resilient. Despite daily challenges—limited access to finance, digital gaps, or lack of awareness about schemes—they continue to adapt, hustle, and serve their communities. What’s evident from this research is not a lack of ambition, but a gap in support structures that can translate their intent into impact.
Ground-level surveys like this play a vital role in bridging that gap. By directly engaging with business owners, we uncover realities that don’t always show up in national reports or policy documents. These findings aren’t just numbers—they are reflections of lived experiences, aspirations, and silent roadblocks that need attention.
Most importantly, this research reminds us that policy interventions must be built not just around what businesses say in theory, but around what they do in practice—their choices, trade-offs, and workarounds. That’s where the real insight lies, and that’s where the next set of meaningful solutions should begin.
-Harshada & Kritika
