Despite comprising 99% of businesses in Singapore and providing seven out of ten local jobs, SMEs face tougher times than ever before – local, international and online challenges that cause many small businesses to cease operations before really getting started.
What’s the current sentiment amongst Singapore SMEs?
While 83% of small and medium businesses feel confident about the future, they are also acutely aware of the possibility that they may fail within five years.
We posted recently about the numerous government initiatives available for SMEs, and the uptake of such grants has increased over the past few years to almost 70% of small businesses.
So, if the help is there, and confidence remains high, where do the problems lay?
1. Lack of staff
64% of SMEs say manpower shortages are tough – locals often do not apply for low paying service-based roles and strict employment quotas mean many companies quickly reach their limit on foreign workers.
When staff can be found, companies are finding that wage expectations are high due to the growing demand for workers. Employees in the retail sector particularly have been able to garner wage increases of around 4.5% over the past year.
2. High rental
Overheads are always a big consideration for small businesses and 2014 saw the highest increase in office rental costs in several years – almost 9%. SMEs have to be creative in their use of space during such turbulent times.
3. High competition
Probably the biggest challenge faced by SMEs is the rising competition coming from all angles. Local competition is nothing new and can keep small businesses on their toes, but international and online competition has created newer challenges from a variety of sources.
The digitisation of business combined with fewer geographical restrictions has opened up many opportunities but has also meant that local companies are facing tough competition in these new online and offline spaces. The result has been lower costs and more choice for the consumer so SMEs have to be more creative to reach the same audiences.
4. Increased production costs
Just like the general cost of living is increasing, so too is the cost of doing business. Increased costs of raw materials, imported goods and machinery means the profit margin is being squeezed for many small companies.
5. More empowered customers
Customers are more knowledgeable and confident in what they want than ever before, which means SMEs have to be creative and efficient in the way they work. Fewer customers now need ‘educating’ by a business, they can find out everything they need to know online before even interacting with your company. As they are equipped with more knowledge and insights, SMEs have to think smart to attract customers to their store over their competitor’s.
If traditional SMEs are reluctant to embrace this change, they may be missing out on key customer interaction.
What are the solutions?
Access the help available
There are 12 SME centres across Singapore that offer walk-in services and advice to all SMEs and can help with grant applications.
Streamlining processes wherever possible can help to reduce manpower and create more efficiency across your organisation. Look for innovative ways you can do this at all levels – front of shop as well as back office tasks can often be improved by simple measures.
Assessing your processes is a key step before investing in any technology – get the basics right first.
Explore digital options
If it’s not your area of expertise, get the help you need to put together and execute an effective digital marketing campaign. It’s never too late to join the online competition and the advantage here is that things will always evolve so you can grow with the changes. Cloud-based technology and crowdfunding opportunities also create new avenues for increased local and international business – being open to new technology will become increasingly important for SMEs.
Retain customer focus
However you make changes to your organisation, keeping the customer top of mind is key. More than ever before, customers can make or break your business so keep their journey and their preferences in mind when putting together your growth strategies.