SMEs have it rough in Singapore. This ST report from 2017 shows more businesses closing down every year. Closure rate for retail in particular almost DOUBLES!
People often cite the high rental costs in Singapore as the main problem. I disagree.
If high rentals kill all businesses, then you won’t see any offices and shops occupied anymore. But there are plenty of people paying sky-high rentals PSF and their business are doing VERY well. High rental is a problem, but it affects profitability more than scaling up.
Building a profitable business is easy. Every business can make profits. You can start a home bakery and just sell to friends alone. Word-of-mouth alone is PROFITABLE. Then you earn maybe $200-$300/mth. You can give private tuition and make $1,000/mth. But can you grow these? Profits are STUCK.
In my experience, the real hurdles to business growth are:
Small businesses rely on manpower to scale. Without people to help you, you can’t ever grow.
If you’ve ever tried hiring, you will realise it’s impossible to get good talent at a reasonable rate. SMEs cannot offer the same status or salaries as MNCs (banks can offer up to $5,000+ for an admin role). And if you decide to hire foreigners, you’d soon be asking “Why is there is a quota on lower-cost foreign workers, but MNCs can hire as many foreign managers as they like!?”
Some of you might say you’ve never considered hiring before. After all, how can you afford to hire if you’re only making $2k to $4k? Times were much better in the 90s and early 2000s. Business was easier to do.
There are so many competitors nowadays. Rents are high. People are hard to hire. Customers go online or the product you’re selling is no longer in trend. Multiple reasons.
*infographic from SingStat showing how MNCs dominate Singapore
MNCs makeup only 1% of registered companies but hire 35% of the workforce. Large local/regional companies and chains are taking over retail (try naming 5 restaurants in shopping malls not owned by groups or major chains).
These guys have money; can pay high wages, access to the best people, big budgets. You feel like you’re slowly being squeezed out.
Solution: The key to many businesses is creating more efficient SOPs. Traditionally run businesses rely on experienced heads to run things. You cannot clone your old generals. But by creating clearer and more structured systems and steps, you can hire young warriors to help fight the battle. AI, computerised systems and automation help streamline the rest.
Think back to the earlier example. Word-of-mouth alone is enough for you to run a profitable business. The problem is always about scaling up. So when you have manpower and operations all worked out, how do you get the next 100 customers?
The usual advice on the street is paying for a good SEO agency Singapore, do Facebook ads, hire a social media agency etc. Other more traditional B2B businesses rely on radio ads, door-to-door salesmen and events/seminars. They’re all correct. Different industries need different tactics.
Marketing can work to the point where it outpaces your operations capability. Ever seen business owners ask you to stop giving them more customers? I have. Plenty of times.
The problem with young businesses is they know they NEED marketing, but they can’t AFFORD it.
Talking about just digital marketing, REAL SEO costs at least $1,500/mth. Google AdWords will be another $2,000/mth (including agency fees). Social media plus content production easily takes up another $1,000 to $3,000. And that’s just marketing. We haven’t even gone into sales SOPs, inquiry follows ups etc. Effective marketing costs around $5,000/mth. Small businesses cannot afford that.
No $$$? You can’t do proper marketing. Everything you try will likely be half-baked and end up losing more $$$.
Solution: None exist on the market today. I’m not smart enough to figure something out too. Maybe if a reader has a way to help small businesses with this cost, you can drop me an email. I’d be happy to try it. Thousands of businesses in Singapore will thank you.
Or less. Or more. Depending on your business.
Since my last blog post (more than a year ago!!!), I’ve been busy taking a stake in businesses and helping them grow. It was this old post of mine that got me thinking hard about my digital marketing role.
My experience is in business management and marketing. I’ve helped a number of small businesses go from struggling to prospering.
So, if you’re a small business owner:
Maybe we can work something out. Cheers.