SMALL Business? BIG problems!
99% of all businesses in Singapore are Small-Medium Enterprises (SMEs). The majority of them face unnerving challenges in this tough business environment and even fight for their survival in the first year of operations.
Though it’s all really exciting – the thought of having your own business and waking up every day to do what you want and love to do. Actually running and managing a business successfully comes with a lot of difficulty that many people do not always foresee. Below are the top 5 challenges we see in our clients, client’s clients and vendors who are SMEs here in Singapore:
1. Cash flow uncertainties
For B2B SMEs, delays in receiving payments from customers is the top financing challenge faced by a quarter of SMEs in Singapore, according to a survey conducted by SPRING Singapore. These delays in collecting money from customers, coupled with suppliers chasing for payments often pose a major headache to business owners who are struggling to process all these financials. Planning to be paid slowly and planning your outgoings faster combined with using accounting software can help you be realistic and avoid nasty surprises.
2. Motivating and retaining employees
Finding, training and motivating good people is a time-consuming and tedious task whilst you’re still trying to keep your business running, but it really pays off in the long term. Employees who are aligned to your goals and vision will see you having an easier time as they will likely be motivated to go above and beyond to meet client needs and represent your business as you would. Here is a great "Everybody Sells" clip from Nick Fawbert on the importance of staff behavior.
3. Finding and retaining customers
No matter the size or type of your business, the only way to survive and to generate consistent profits is to have customers. Focusing on repeat, loyal customers also ensures a certain sense of security for your business. Though initially customers will have to be marketed to, at phase 2 the best way to find and retain your customers is through word of mouth – it’s free and it’s effective, because it’s coming from people that they trust. Use social media to engage with these loyal customers to validate their decisions and communicate your development.
4. Limited resources
Human, Technical and Cash Resources are usually limited for small business owners to get all the things that they need to run their business. Dealing with issues like capital constraints and cash flow often leads to having weak technical knowledge and expertise in the business and it delays the decision to invest in IT automation, legal and financial advice as well as business expansion tools. Having a mentor or seeking the advice of experts and others with know-how and experience will help you to overcome this constraint. No one will be an expert in every single aspect of the business, and it is always smart to ask for help or advice for areas in which you’re unsure of before you commit the time of yourself and your team in the wrong direction.
Every business will always face competition, and this shouldn’t come as a surprise. But with the international and online competition increasing alongside local competition, it’s becoming harder for SMEs to compete. According to Blue Ocean Systems, a business solutions company, 60% of SMEs say that local competition is too high. Lower price points and more variety of choices for consumers, thus SMEs have to be more creative with their offerings to reach the same audiences BUT go back to point (3) building loyal customers through communication and urgent service while taking their advice to you on your business can significantly mitigate this.
At the launch of the Enterprise 50 Awards 2017 here in Singapore the panel of Rachel Lim, co-founder of Love Bonito, and Mark Lee, chief executive officer of Sing Lun Holdings said that attracting the right talent is key, but agreed that SMEs faced a bigger challenge due to resource constraints and limitations.
SMEs need to firstly establish good processes that your business will be built upon, then ensure that you hire for the long term. A great way to deal with resource constraint is to decide on the most important activities for your business and only do those. I strong advise watching this 2 mins piece on the 80:20 rule of working by Todd Dewett.
Ms Lim said that one of the key lessons she learnt when opening Love Bonito was that she needed to bring in people who were smarter than her. “As compared to bigger organizations, we cannot pay our people the way bigger organizations can. So for me, the main challenge is to speak into their hearts and sell them a dream and vision to get them onboard with us.”
She adds that millennials not necessarily are just looking for jobs for the money, but they also seek intangibles like being able to grow personally, making a difference in the world, and working towards a goal bigger than them. This is an important point that we should also apply to our customers – if the workforce needs are changing, then, so are consumers. We need to directly engage with our customers and learn from them about what they want and what they like. Again, don’t be afraid to use new world tools to help you focus only on the urgent and interesting things that make sense.
There are many tools and “rules” that can help you. Try taking the advice from this comparative reader Lisa Bu (Ted ED) by learning from the different advice that's in the public domain and be flexible and open minded to the advice you get and the information about your business that you are presented with.