Running a business can be exciting, but the challenges are plenty. Given that Singapore is a regional business hub and it’s unique eco-system, what are the key challenges faced by small business in Singapore today?
In this article, we will identify 5 key challenges faced by small businesses in Singapore, as observed by me as a business broker in Singapore. I will provide actionable insights to address these pain points.
1. Size of Singapore market
Regardless whether you are in the B2C or B2B segment, that’s a high probability your core market for the 1st few year will be in Singapore. Given that our current residential population is 6.04 million, this means that any small business in Singapore can easily max out most of the total addressable market in Singapore within 3 - 5 years.
The next growth option is to focus on other market that offer a bigger pie, whether is it in Southeast Asia or international market. No matter which option you choose, the needs and characteristic of these markets are likely to be different from Singapore based customers.
Suggestion: You need to have a plan in mind for international business expansion right at the onset. Singapore is a small market that is primed for disruption due to myriad factors. Your business run a high risk of being displaced if you simply choose to remain stagnant.
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2. Talent Crunch: Attracting & Keeping Top Performers
Most SMEs face major huddle in attracting and retaining A players. For many SMEs, finding A players can feel like searching for a unicorn. There are a few reasons for this situation. Singapore is a vibrant business hub that attract MNCs (Multi National Companies). These MNCs typically offer attractive compensation, benefits and development opportunities compared to SMEs. As such, most job seekers would prioritize MNCs for career opportunities. No different from how South Koreans would prioritize Chaebols for their employment opportunities.
Finding an A player for a SME can be a major win. They bring with them the latest know-how, their wealth of experience and the network that they have established over the decades, if not years. A rule of thumb, if any small business in Singapore can have more than 30% of their workforce as A players, I consider that they have done well in then human capital department.
Suggestion: Be open to A players who are based overseas or digital nomads. Tap on internal referral for high calibre hiring. Be open to local candidates who may not come from the same industry.
Be ready to offer equity as part of an overall compensation package to retain A players. Implementing flexi work arrangement and empowerment can go a long way. Use MyCareerFuture and LinkedIn proactively to attract potential candidates. It's free, anyway!
3. Profitability: Inflation or Improvement?
For many SMEs especially those in the retail and FB sector, 2024 prove to be an onslaught. After narrowly surviving the COVID years, plenty of retail and F&B small business in Singapore are slayed by the landlords through 20% - 30% rent hike. While the demand for their offerings are damped by the soft economy and the vibrant overseas travelling.
Suggestions: Focus on products that offer higher profit margin, while cutting down on low margin product line. Re-evaluate the existing distribution channels, and collaborate with other businesses that are synergistic. Relook into the existing modus operandi, and simplify whenever it makes sense.
4. Marketing: What is that?
Most SMEs in Singapore have a constrained understanding of marketing, and practice a narrow aspect of marketing – paid advertisement. Their day-to-day focus largely revolve around sales, tackling operational issues and paying bills. As a matter of fact, most SME business owners do not subscribe to marketing and see it as a negative ROI.
Suggestions: Observe the marketing strategies by the top dog in your industry, and learn from them. Talk to marketing agencies and professionals, listen to what they have to share. Watch YouTube videos, books and subscribe to newsletter on marketing. Try it out for yourself and see if it works.
If there are any companies whom you admire, they must have done something right. Investigate on that! Make sure you identify the right audience for your business, and understand their needs and preference well.
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5. Financial: Money Matters!
Running and scaling a business requires money, whether you are looking at hiring someone, launching a new product, implementing certain solution or launching into a new market. For a small business in Singapore especially in the early years, getting the right resources can make or break your business.
Below are some suggestions for you:
Explore government grants and funding programs: Several options exist specifically for small businesses in Singapore. Check out this link to see the available grants from the Singapore government. There are various grants agencies in Singapore, that take the heavy lifting from the owner’s shoulder, during the application process. You can check out the financial support from Enterprise Singapore website too.
Consider crowdfunding platforms: Raise funds by showcasing your business idea or product. Some of the better known crowdfunding platforms include Kickstarter, Funding Societies and Indiegogo.
Build a strong credit history: This increases your chances of obtaining favourable loan terms. The banks will look at your business bank balance to assess your risk too, thus it’s important to keep at least $30k of cash at any time.
Bootstrapping: Invest personal savings or reinvest profits back into the business. It’s crucial to have at least 2 years of business expenses to tide over any unexpected business challenges.
Seek angel investors or venture capitalists: They offer capital and valuable expertise. Be wary of the equity they are asking for, in return.
Conclusion:
Being aware of these challenges and having time to prepare for it can be incredibly helpful. On the other end, if you start to lose interest in running your business, perhaps it’s a good idea to consider putting up your business for sale. As a business broker in Singapore, I help business owners to exit from their business profitably.
Whether you are looking to buy a business in Singapore, sell a business in Singapore or simply explore Singapore businesses for sale, it’s a good idea to talk to a Singapore business broker.
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