Small and medium-sized enterprises (SMEs) have played a crucial role in Singapore's development, making substantial contributions to the current local economy. However, the journey to success can be challenging, and many SMEs encounter common obstacles that hinder their growth.
Read on to learn more about the critical business challenges SMEs face in Singapore and how to overcome them.
Definition of SMEs
There are three main requirements business must meet to fulfil to qualify as an SME in Singapore:
1. Possess a minimum of 30% local ownership.
2. Maintain an annual turnover that does not exceed $100 million.
3. Keep the employee count on the payroll below 200.
Rising costs
According to the 2022/2023 Singapore Business Federation (SBF) National Business Survey, 66% of businesses consider rising costs as a major concern (Tan, 2023).
The rising cost of raw materials, utilities, transportation, and distribution costs, coupled with the disruptive impact of theCOVID-19 pandemic on supply chains, has led to a steady increase in operational costs.
Additionally, SMEs must be prepared to offer competitive salaries and benefits in the face of heightened talent competition, making wages a significant proportion of rising costs for SMEs.
Hence, a recommendation is made to conduct an evaluation for all SME’s expenses and financial capabilities. If challenges are encountered in this regard, the development and implementation of a support strategy is critical.
Competing with large companies
It is difficult for SMEs to stand out, especially with competition against multinationals that have stronger brand identities and more resources. SMEs must continuously innovate and offer unique products and services to stay ahead of the fierce competition despite their relatively smaller pool of resources.
Vulnerability to crises
SMEs have limited financial resources and access to investment capabilities compared to larger companies. As a result, they are more vulnerable to shocks and often face greater challenges in recovering from the disruptions.
Manpower availability and retention
The tight labour market in Singapore has made it difficult for SMEs, especially those in niche markets, in attracting workers with the requisite skills and experience.
When attempting to attract new employees, SMEs face tough competition with MNCs that offer a more extensive array of opportunities and benefits, hindering the growth of SMEs. Without an experienced team to facilitate the development process, handling changing business processes and systems becomes a significant challenge for SMEs
What opportunities can SMEs leverage to overcome these challenges?
The Singapore government is comitted to supporting SMEs through various initiatives, schemes, and grants. Businesses facing any of the aforementioned challenges can refer to the guide on government SME-supporting initiatives for more information.
Conclusion
Starting and developing an SME is a challenging task. Many SMEs encounter common challenges, such as rising costs and manpower limitations. To overcome these challenges, it is essential for SMEs to recognise and capitalise on the government support available.
Exploring grant opportunities and reaching out to consultancy firm like LiT Strategy could be beneficial. LiT Strategy offers top-notch strategy consulting services, including expertise in EDG grant consultancy and PSG Job Redesign advisory services. Feel free to explore our services for strategic guidance and consultation.
References
Tan, M. (2023). Businesses identify manpower and increased costs as core challenges for 2023. The Business Times. https://www.businesstimes.com.sg/singapore/businesses-identify-manpower-and-increased-costs-core-challenges-2023