Small and Medium enterprises play a unique and significant role in economies and are certainly undaunted pillars of prosperity. Singapore is buzzing with it where SMEs account for 99% of the country’s enterprises and contribute nearly half the GDP in Singapore’s economy. The unique part of these enterprises is their contribution towards the creation of jobs for Singaporeans. Strategic flexibility for making transitions and the ability to adapt changes along with support from the Government of Singapore make SMEs thrive in the marketplace. The definition of SME may vary from country to country.
In SIn Singapore, the Government has mapped out strategies and measurements for SMEs to prosper. However, there are a few standard DO’s and DONT’s that SME must follow to ensure their survival in an increasingly competitive space. With globalization, the world is coming closer, and many economies have been opening its doors and welcoming foreign countries to participate in their growth story. For a Singaporean SME to bloom in this competitive market, it’s a must to adopt some of the best practices to stand out and prosper at International level.
Right from financing, to managing business, implementing business tactics, governance, taxation, the SMEs wades through an ocean of challenges. However, they should be able to build capabilities in areas such as digitalization, internalization, innovation, smart technology use plus the development of efficient human capital, and many more. Let’s run through some of the best practices SMEs in Singapore can adopt for their business to have positive growth.
Five Best Practices for SMEs in Singapore to expand their horizon
Managing Working Capital
For any SMEs, the major challenge could be the management of Working capital to run day to day business smoothly. There are many obligations in the short term like need for financing for small expansion of business or piling up inventory to avail discounts or giving credit for boosting trade, which needs easy and quick loan options. The government agencies recognize this fact and help SMEs through their vehicles for SME growth.
For making this requirement feasible and approachable, The Singaporean Government has developed 12 SME Centres for free business diagnosis and basic advisory on budgeting and financial statement analysis. Any business which needs financing for working capital can avail Enterprise Singapore’s SME Working Capital Loan and Capability Development Grant.
There are agencies like IE Singapore, Hong Leong finance, and Crest Capital Asia provide funding solutions which are modified to fit each SME situation. It helps dilute the SME’s equity and exiting when the cash flow issues resolve.
Example: West-Street Carrier, an SME in Singapore in the logistics business, availed the SME Working Capital Loan to meet its short term working capital requirement. The loan was used to upgrade their equipment which resulted in a 15 % increase in monthly sales and a 12 % reduction in labor costs. (Source: Smeportal.SG)
Focusing on Internationalisation
Ms.Leung Wai Ling, Assistant Chief Executive of Enterprise Singapore, Corporate Development and SPRING Investment, mentioned that given the increase in domestic competition, internationalization would help local SMEs in Singapore to cater to World Markets to grow their business. Notably, the proportion of revenue generated from overseas has increased for companies with foreign engagements.
Singapore based local food company SMC Food 21 can teach an essential lesson of globalization. SMC Food 21 having its operations in many regions like India, Japan, Indonesia, Korea, decided to expand its business into China. For SMC Food 21, the major roadblock to enter China was strict quality standard and to overcome the same the company adopted the China HACCP (Hazard Analysis and Critical Control Points) standard. It not only wisely expanded its market for the largest economy but also became the first company in the world outside China to certify to a China HACCP.
SME’s may need financing for such overseas ventures. However, it’s not easy for financial institutions to provide lending to smaller enterprises as it may involve a higher risk of failure. For such risk-taking ability SMEs need government assistance for taking share of guarantee and increase lending easiness.
Internationalization Finance Scheme (IFS) of IES Singapore provides financing assistance to Singapore based companies to venture globally. For terms and qualifying criteria for the scheme, SMEs can refer to Enterprise Singapore website.
For Globalisation, SMEs in Singapore have to familiarise with business conditions of different markets. Getting acquainted with the economies they want to venture into it is necessary for them to have effectiveness in operations that can help in increasing productivity. Singaporean Government assists SMEs by sharing costs for training allowance, airfare, and training cost. IE Singapore hosts the Manpower and International Business Fellowship (IBF) program, through which such grants are easily made available to empower the SME with an international set of skill and development.
Training and Development
Training and development will always be the key to advancement for any business. The Singaporean Government recognizes this as an essential aspect of SME’s growth. The Government agencies have a lot of such trainings, workshops, conferences, and seminars organized for SMEs to enhance the support. It’s no hidden fact that a healthy relationship between business and HR can help to build strong SME not just locally but globally as well.
For example, at Charles & Keith (Singaporean fast-fashion footwear and accessories retailer) more than 5000 employees go through constant learning and development; successfully lowering attrition rates. Wai Jyy, Group Head of Talent Management in Charles & Keith says in her interview with Ministry of Communication mentioned,
People are our most important assets, the breakthrough for the business to grow beyond what is normally achievable. As HR professionals, we are here to help employees build meaningful careers so they excel professionally but also in their personal development. In turn they can steer the group towards sustainable growth.
Lastly, for any organizational development, a standard operating procedure and a firm HR policy can enhance their ability to keep all the employees on the same page across the board and hence reducing any effort of country-specific challenges for employee management.
Innovation and Transformation
With the increase in Globalisation and Digitalisation, it has helped the world march ahead of its times in multiple folds. The Government of Singapore has conceptualized a doted entity called ITM’s (Industry Transformation Maps) to build strong local SMEs. ITM’s will focus its strategies towards four key areas – productivity, innovation, jobs and skills, and internationalization. The ITMs promotes growth and competitiveness for 26 industries. Currently, it focuses on six major industries like Built environment, Essential and domestic services, lifestyle, manufacturing, modern services, and trade and connectivity.
The classic example of innovation and transformation can derive from Singaporean company, 800 Super which beliefs in recycling all the waste that it collects. With passing time, this Waste Management Company has evolved itself through adopting the practice of innovation, transformation, and digitalization. Today it is no longer just a Waste Management Company but is known as “Environmental Solution Provider” company. It has undertaken a lot of innovative measures and adopted digitalization which has ensured a significant transformation and now is providing 99% solutions with accuracy.
There are many such success stories mapped out in ITMs that truly brings out of the box ideas and make the growth a cakewalk for an SME.
Often innovation, transformation, and digitalization go hand in hand. In today’s ever-competitive world, you ‘shape up or ship out’ and that’s the only way. With technological advancement in the areas of education, food & beverages, manufacturing, financial services, investing in digitalization has become one of the vital ingredients to enhance productivity, grow globally and scale up quickly and efficiently. In words of Enterprise Singapore Assistant Chief Executive Officer Chew Mok Lee –
For many companies, the road to digitalisation can be daunting. But it doesn’t always have to be this way – the key is to start small, set clear goals and keep faith in the long-term payoffs.
Investing in digitalization is a tedious and costly affair, but many SME which has adopted to digitalization and have reaped benefits enormously. Some of the most famous ones in Singapore being the online restaurant booking website CHOPE which through added value to its application through advanced use of technology is leading its way to international markets in big way. Another successful story is of ROTIMATIC, who designed the automatic roti maker and created crazy buzz across the world. After tasting success in Singapore, they expanded their reach to international markets, and they continuously upgrade their technology and send updates to its customers online. It keeps advancing its technology to produce different breeds and make available lot more choices for its customers across the world.
However, digital advancements and innovations can be very challenging due to the nature of becoming obsolete, requiring appropriate digital talent and increasing cyber risks. AI has been a major breakthrough in the area of data analytics, but for SMEs, it is a big challenge to keep up with the latest technologies as it involves huge cost. With appropriate guidance and taking help from government support system like Enterprise Singapore can be of profound use for SMEs to overcome such challenges.
On a concluding note, a lot can be said and done for an SME in Singapore to bloom amidst many challenges and adversities. It remains an unchallenged fact that an SME is the backbone of the Singaporean economy and continue to remain so. Enterprise Singapore provides SMEs with a platform to seek knowledge, guidance, financial assistance, trainings, conferences, global readiness which are the critical ingredients for success. There is no sure-shot formula or standard procedures for achieving success. But by adopting the best practices as mentioned above, SMEs can overcome challenges and make a difference.