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Singapore’s small and medium enterprises (SMEs) are the backbone of its economy, providing almost 50% of the country’s GDP and employing around 70% of its local workforce.
In the past two decades, Singapore has successfully established itself as a thriving hub for SMEs among the ten robust member nations of ASEAN.
The number of enterprises in Singapore jumped from 273,100 in 2019 to 291,600 in 2021, of which 99% comprised SMEs. An overwhelming majority of 80% of these SMEs are locally owned, with the remaining foreign-owned.
They have had a pivotal role in Singapore’s economic advancement, helping to support our resilience and improve innovation through their characteristic agility, deftness, and ingenuity.
However, SMEs in Singapore have had to manage difficult challenges in their path. We look at what some of them are, and why it’s still a path worth venturing.
What Qualifies as an SME in Singapore?
According to Singapore’s Ministry of Trade and Industry, an SME is defined as a corporation with a yearly sales turnover of less than S$100 million. It must also employ fewer than 200 workers.
What Are the Main Challenges for SMEs in Singapore, and How Can They Overcome Them?
Some of the main business challenges include concerns about attracting and retaining top talent, the competitive business landscape, and rising operation costs.
These business challenges are particularly relevant for companies in the food and beverage, retail, and construction industries.
Mid-size companies may also find it challenging to compete with larger businesses in Singapore due to their limited resources for growth. As such, they need to be aware of these challenges and have strategies to overcome them.
Related Read: Incorporating Private Limited Companies
Growing Competition From Large Companies
SMEs need to continuously innovate and offer unique products or services to stay ahead of the competition.
With so many large multinationals operating in Singapore, and more to come, it can be challenging to stand out from the crowd. SMEs need to offer a unique product or service that meets the needs of their target market.
They should also focus on building a strong brand identity to help them stand out from larger competitors. Mid-size companies can focus on niche markets to compete more effectively against larger businesses.
Limited Resources and Workforce for Growth
Another business challenge is finding qualified staff, retention, and managing growth.
With the tight labour market in Singapore, it can be challenging to find workers with the skills and experience you need. This is especially true for niche positions, digitalisation, or highly technical roles.
As your SME grows, you will need to adapt your business processes and systems to accommodate the increased workload. This can be a daunting task, particularly if you do not have an experienced team to help you manage the growth.
Outsourcing some accounting and finance operations, payroll, and Professional Employer Organisation (PEO) human resources could be better for SMEs.
Managing Rising Costs
SMEs need to manage rising costs exacerbated by the pandemic. A recent study published in Aug 2022 revealed that over half of SMEs in Singapore had insufficient cash to last beyond 6 months.
The findings are not surprising, considering record inflation and the possibility of a recession, together with rising costs of materials, utilities, and more. Singapore also typically has higher business operating costs as compared to the other countries in Southeast Asia.
It is particularly worrying for cash-intensive industries like the F&B sector. Staying competitive may SMEs alleviate their cash flow troubles, as well as cutting expenses where possible.
Vulnerability to Crises
A survey found that during the pandemic, nearly 90% of SMEs’ business operations were affected to a certain degree. 3 in 5 saw revenue declines, which reflects the vulnerability faced by these smaller businesses during large crises.
Compared to bigger MNCs, SMEs are relatively more vulnerable and find it more difficult to weather storms. This is due to limited financial reserves and access to investment capabilities.
These companies need to initiate self-driven strategies and rely on government support to navigate through difficult times. They must also focus on long-term growth strategies like business expansion, manpower upskilling, and innovation.
Difficulty Accessing Funding
One of the business challenges for mid-size companies in Singapore is difficulty accessing funding. This can be due to several factors, such as the company’s small size or its industry sector.
One way to overcome the challenge of accessing funding is to work with a professional financial advisor who can help identify potential funding sources.
Companies that plan to carry out substantial business activities in Singapore can potentially tap into many government incentives to optimise investment costs, improve long-term return on investment and drive sustained growth.
Related Read: 16 Singapore Start-Up Grants and Schemes »
What Are the Opportunities for SMEs in Singapore?
Despite these challenges, mid-size companies have many opportunities to thrive in Singapore. Some of these promising opportunities include:
Going Digital
Although the pandemic has brought about challenges, it has also opened up opportunities. For example, it accelerated digitalisation by driving both consumers and businesses online.
SMEs may turn to e-commerce as a way to help improve their cash reserves as well. They can obtain payments immediately and need not incur as much costs as a physical store.
Green Transition
The world is moving towards a greener place, and SMEs are driving this green transition in Singapore. Both consumers and investors are growing increasingly conscious of the environment, while companies and governments strive to keep up for long-term growth and success.
SMEs in Singapore can tap into Singapore’s green initiatives, like the resources allocated to R&D for urban solutions and sustainability. They can also partner with the Centres of Innovation in local polytechnics for access to facilities and services.
Companies can also take advantage of a growing talent pool to get the right people to help them in their green transition. Schemes like the National Environment Agency’s (NEA) Energy Efficiency Fund and Green and Sustainability-linked Loan Grant Scheme will also aid these firms financially.
Professional Assistance Can Help You Manage Your Problems
While many resources and business consultants are available to help overcome these obstacles, seeking professional assistance can be the best decision a company makes.
By understanding the business challenges and developing strategies to address and overcome them, mid-size companies like yours can position themselves for success in the Singapore market!
Contact us today for a free consultation and let our team of experienced professionals guide your business to success.
FAQs
- Small and medium-sized enterprises (SMEs) in Singapore are defined as businesses with annual sales turnover of less than S$100 million and employing fewer than 200 employees.
- Some main challenges are:
- Having to deal with rising costs
- Being vulnerable to crises
- Fending off larger and more resilient competitors
- Here are some possible solutions:
- Staying competitive
- Reducing expenses
- Leveraging on government incentives and initiatives
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Rikvin’s content team includes in-house and freelance writers across the globe who contribute informative and trending articles to guide aspiring entrepreneurs in taking their business to the next level in Asia.
