Starting a business in Singapore is quick and easy. Data from the World Bank suggests that an individual in 2018 needed 1.5 days to start a business in Singapore. It is lower than what is required to start a business in some of the most influential nations of the world, including United States of America (5.6 days), China (8.6 days), and Germany (8 days). While starting a business in Singapore receives full support from the government, but there are several challenges that the business owners are expected to solve on their own. That said, the government of Singapore, with its reliable and stable policies, ensures that a business owner is never left stranded on a deserted plane and gets supported towards success in all possible ways. Let’s take a deeper dive into the subject of the importance of growing a new business in Singapore and the challenges faced.
Why is it Important to Grow a New Business in Singapore?
Singapore has emerged as the home of start-ups and small scale enterprises of the world. The country’s economy is single-handedly dominated by the SME sector, which forms a fantastic 99% of the total enterprise count and employs 72% of Singapore’s working population.
World Bank has ranked Singapore as the best country in the world for Doing business from 2006 to 2016 continuously. The Economist Intelligence Unit (EIU) ranked Singapore as the most efficient economy in the world for seven years consecutively. The rest of the world is struggling with creating a haven for children. Singapore has emerged as the best country in the world to have family and children.
Was it all done in a day? Absolutely not.
Singapore has been on the continuous path of development and upliftment of its people since becoming a separate state in 1965. Since then, the country is working on creating a homely environment for everyone that can contribute to the growth of the nation.
Singapore enjoys the benefit of being close to the two growing superpowers of the world – China and India. While these two superpowers have a very volatile environment for business, but it does not stop companies from establishing their headquarters in Singapore and reaping profits from the neighboring states. Singapore ranked 7th worldwide and 2nd in Asia on the best logistics performance index in 2018.
Being headquartered in Singapore gives the companies a chance to benefit from 21 free trade agreements (FTAs) and 76 comprehensive avoidance of double tax agreements (DTAs) signed by Singapore with more than 25 economies of the world. Here is a list of DTAs and FTAs signed by Singapore for a quick reference.
Singapore has a very progressive tax framework. It means that people who earn more money pay higher taxes than people who make comparatively less money. It eases out the burden on the economy as a whole and lets everyone enjoy good social standing. As of now, the highest slab of tax capped at 17% (2019) for businesses settled in Singapore. IRAS website presents a clear picture of the nature and rate of taxes on its website.
Singapore loves entrepreneurship, and the government has created a comprehensive framework to support small businesses. It not only incorporates the official government agencies responsible for creating a business-friendly ecosystem but also contains enablement services like banking products for start-ups to support new businesses in establishing their presence in the market. The government of Singapore has formulated several schemes and grants that help the businesses in starting their operations, expanding overseas, retaining talent, and upgrade their production infrastructure. Everything about the Government grants can be found here.
Challenges Faced in Growing New Businesses
In spite of a very favorable, stable, and robust economy, Singapore presents its shares of troubles and problems for the new businesses. However, most of these challenges can be dealt with internally, and rarely would you require an expert’s help. Thus, bringing down the cost to maintain a business setup in the country. Here are some challenges:
Hiring & Retaining Talent : With so many start-ups coming up, the opportunity to land a rewarding job for the workforce has grown dramatically (leading to excessive competition among employers to maintain their talent pool). The new businesses, who are yet to receive millions in funding, find it difficult to scout, hire, and retain the best people in the market. Also, the government’s push to limit the workforce strength of foreign workers to 35% in any company forces the companies to hire.
Sectors like F&B, Retails, Construction are highly labor-intensive industries and therefore find it challenging to retain and hire the right people. Employers need to strengthen the skill set of the workforce by work enrichment and smoothen the process through digital transformation.
Our ultimate goal is to enable our people to continue to have good jobs and opportunities, and to be at their best.
-said by Finance Minister Mr Heng Swee Keat.
Finding New Customers: Finding new customers in an ever changing and highly competitive environment is a critical concern for most SMEs. Identifying the right prospects and the strategy to tackle them is their main focus, as the underlying demographics of the customer base is continuously shifting. On top of that the rising cost of doing business, makes it all the more challenging.
In order to overcome this hurdle, it’s imperative the executives first develop a research plan to understand the mindset, requirements, and purchase behavior of the target customers. Next, a clear, concise and implementable strategy must be developed to attract these prospective customers. It is important that it not only engages their interest but also meets their needs so as to convert them into lifelong customers. Using online marketing platform will help to target the right customer, to educate, receive feedback for product & services provided by the organisation.
Money, Money and Money: Most of the problems faced by Start-ups stem from the unavailability of an adequate amount of capital. Since several start-ups have bootstrap funding, the money required to expand the production and operations is hard to allocate. Thus, the start-ups are always on a hunt to find investors or receive loans on competitive rates from the banks. So if someone is starting new, look to invest ones own hard earned money, in order to avoid any interest on loans. However relying on government grants and supports for Micro Loans, Working capital loans, Capital Development Grants etc, is definitely an option. SME’s can also benefit by deploying technologies like automation and productivity tools like Microsoft’s Small Business Software and Tools for SMBs that improve the quality and ROI of the overall operations of the business.
Tangible & Intangible Resource Management: The material here refers to all the resources, tangible or intangible, that are required to produce, market, sell, and provide service to the customer. There is a long list of items that are needed by businesses to operate efficiently. Unfortunately, all of these items are either very generic or expensive or require a lot of research and development effort. In the absence of the right material (or solution), the loss can incur either in the form of excess inventory or a missed opportunity. For example, Nike, the world’s leading sports shoe brand, has been unable to find a software solution that would help them forecast and manage inventory. As a result, Nike ends up with excessive stock leading to millions in losses year after year. As an SME, you cannot afford to jeopardize your inventory situation.
Singapore has a very favorable ecosystem for the development of a start-up. It allows for 100% foreign ownership; thus, giving the freedom to establish any capital and ownership structure that one needs. The government does not impose many restrictions on the movement of money in and out of the country. If the right fund source is available, the businesses and investors have much flexibility in terms of money management.
Setting and growing a business in Singapore requires a compact strategy. While the companies can face a crunch in the man and money spheres, but the overall outlook of the government and the policies is very supportive. A strong business strategy will be the key to growing a successful business in the country.