1 / 48

SME DEVELOPMENT SURVEY 2007 - Conducted by DP Information Group

SME DEVELOPMENT SURVEY 2007 - Conducted by DP Information Group “SME Challenges & Changes for Continued Growth”. Strategic Partners. Supporting Organisation. Sponsors. SURVEY OBJECTIVES. SME Development Survey 2007 - Survey Objectives. Impact of domestic cost competitiveness on SMEs

lei
Download Presentation

SME DEVELOPMENT SURVEY 2007 - Conducted by DP Information Group

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. SME DEVELOPMENT SURVEY 2007 - Conducted by DP Information Group “SME Challenges & Changes for Continued Growth”

  2. Strategic Partners Supporting Organisation Sponsors

  3. SURVEY OBJECTIVES

  4. SME Development Survey 2007 - Survey Objectives Impact of domestic cost competitiveness on SMEs Strategies adopted by SMEs for overseas expansion & growth SMEs’ competitiveness & opportunities with MNCs & GLCs Adoption rate of process automation & impact on productivity & cost efficiency on SMEs SMEs’ needs & readiness to tap on alternative equityfinancing SMEs’ recruitment issues & staff training needs

  5. CHARACTERISTICS OF RESPONDENTS

  6. SME Development Survey 2007 - Characteristics of Respondents Respondents by Paid-Up Capital • This yr: 1,206 coys responded (2006: 1,068 respondents) • Significantly higher no. of larger companies responded - 59% with paid-up capital >S$0.5m - 13% with >100 employees vs 8% last year

  7. SURVEY FINDINGS

  8. SME Development Survey 2007 - Characteristics of Respondents • Improved turnover & Strong profitability • 26% posted turnover > S$20m; as compared with 20% over last yr • Drop in no. of loss-making companies • Increase in no. of SMEs generating profit >S$5m; from 4% to 6%

  9. SME Development Survey 2007 - Characteristics of Respondents • Increasing no. of companies experiencing accelerating turnover growth of >10% p.a. • Downward trend in no. of companies with turnover on the decline • Stages of Development • Start-up: First 3 years of operation • Accelerating Growth: turnover • growth of > 10% per annum • Moderate Growth: turnover • growth of up to 10% per annum • Mature: Zero turnover growth • Decline: Negative turnover • growth

  10. SME Development Survey 2007 - Challenges to Growth • Competition remains the most cited challenge (58%) • Operating Costovertook Manpower as 2nd topmost selected growth hindrance (53%) • Market size constraint is a new hindrance cited by 24% • Downward trend observed for Difficulty in accessing biz opportunity, New Financing & Uncertain economic environment

  11. SME Development Survey 2007 - Challenges to Growth • Increasing Labour cost top concern across most business sectors especially Construction, Services and Food & Beverage; will significantly affect profitability in the next 1-2 yrs • 2 other cost components that will have major impact on SMEs’ profitability are Cost of raw materials/ intermediate or final products & Rental of premises • Increasing Cost of raw materials/ intermediate or final productsof greater concern for Construction (78%) & Manufacturing (77%) sectors • Increasing Rental is the third most cited cost concern amongst Food & Beverage, Retail, Finance & Services

  12. SME Strategies for Growth

  13. SME Development Survey 2007 - Business Strategies • Significant jump on cost-related issues (11% up) : - Improving Cost Efficiency - Productivity • Less emphasis on New Products / Services (7% drop) • Decline in Scaling Down / Consolidation; 80% of them are making losses or have low profit margin • Growing importance on 2 new business strategies : - Improve Customer Service (9%) - Branding (3%)

  14. Financing & Funding

  15. SME Development Survey 2007 - Financing/ Funding • Continued increase in SMEs having access to Term Loan • Downward trend continues for Overdraft • Government Funding Schemes still low; though upward trend continues

  16. SME Development Survey 2007 - Financing/ Funding • Local Enterprise Finance Scheme still the most widely used govt funding scheme • More SMEs accessing : - SME Access Loan (up 3%) - Loan Insurance Scheme (up 6%) - Regionalisation Finance Scheme (up 3%) • Downward trend continues for Microloan • Low take-up for Variable Interest Loan Scheme & Start-up Enterprise Development Scheme

  17. SME Development Survey 2007 - Financing/ Funding • 3 new concerns : - High Interest Rates - Extensive documentation required by banks - Short loan repayment period • Only half of those without financing facilities express need for external funding (9.5%) • High Interest Rates charged by banks replace Lack of Access to Bank Financing as top concern

  18. SME Development Survey 2007 - Profitability Distribution of Respondents by Profit Margin • SMEs fared better than previous year with 10% drop in those reporting losses • Nevertheless, SMEs continue to register low profit margin

  19. SME Development Survey 2007 - Financing/ Funding • Despite Govt & Fund Investors efforts, majority of SMEs not looking to IPO, OTC or Private • Equity Investment to provide • alternate sources of financing • More informative sessions/ programmes needed to help SMEs to better understand these alternate financing options • Of those who have expressed . some interest in such alternate financing : - Majority (70%) looking for >S$1m - 28% looking for >S$5m of additional capital injection

  20. Overseas Expansion

  21. SME Development Survey 2007 - Overseas Expansion • SMEs have expanded their overseas biz activities • 70% have overseas interests • Almost 60% of respondents have biz activities in overseas markets for more than 3 years • Among those with no overseas biz (30%), one-fifth of them intend to venture overseas in the next 12 months

  22. SME Development Survey 2007 - Overseas Expansion • 70% of respondents have revenue generated from overseas; increase of 11% from previous year • 7% jump in those who derive >70% to 100% of their revenue from overseas markets

  23. SME Development Survey 2007 - Overseas Expansion • High initial investment/cost on engaging overseas biz activities, especially within the first 3 years • Long-term sustainability of SMEs venturing into overseas markets remains a concern as profits remain relatively similar to that when they were about to venture overseas

  24. SME Development Survey 2007 - Overseas Expansion • Malaysia, Indonesia & China remain the Top 3 favourite destinations • Middle East overtook USA as 9th most popular destination • Overall reported increase in all of the top 10 countries for overseas expansion

  25. SME Development Survey 2007 - Overseas Expansion • Vietnam overtook India as the most popular new market for SMEs to venture into in the next 12 months • China has also emerged as one of the Top 3 preferred destination in the next 12 months • Noticeable absence of Middle East amongst the Top 3 preferred destinations for overseas expansion in the next 12 months

  26. Top 3 critical success factor for overseas operations % Finding the right overseas partners 61% Overseas market knowledge 57% Adaptive to local business practices / customs 56% Sufficient funding / financing 34% Product differentiation 31% Manpower 25% Branding 21% SME Development Survey 2007 - Overseas Expansion

  27. Human Resource

  28. SME Development Survey 2007 - Human Resource • 68% claim to pay the market average • 16% pay higher than average

  29. Business Sector Average monthly earning per employee SME respondents 2007 MOM Release 2006[1] % Difference Commerce - Wholesale S$3,504 S$3,017[2] 16% Commerce – Retail S$2,854 -1% Communications/ Transport/ Storage S$3,154 S$3,507 -10% Finance S$4,252 S$5,949 -29% Manufacturing S$2,935 S$3,495 -16% Property S$2,956 S$2,732 8% Construction S$2,217 S$2,513 -12% Services S$3,520 S$3,498 1% Food & Beverages S$1,243 S$1,360 -9% SME Development Survey 2007 - Human Resource [1]Source: Report on Wages in Singapore 2006, Ministry of Manpower [2]As released by MOM, the Commerce sector includes both Wholesale and Retail. No breakdown was provided

  30. SME Development Survey 2007 - Human Resource • 87% have expressed the need for staff to be trained • 3 areas that most SMEs identified for training are : - Leadership & Team-building - Marketing & Promotion - Business Planning

  31. Process Automation & Infocomm Technology

  32. SME Development Survey 2007 - Process Automation & Infocomm Technology • Top challenge faced in adoption of technology is High Cost involved; this is of great concern especially for Start-ups & lack of funding support exacerbates the problem • 2nd most cited challenge is the lack of staff capabilities; reinforces the need for training to be provided • 20% of SMEs have no difficulty

  33. SME Development Survey 2007 - Process Automation & Infocomm Technology • Low level of automation among more than two-fifths of SMEs (43%) • On positive note, slightly more than a quarter have automated more than half of their functions/ process • Level of automation increases with staff strength

  34. SME Development Survey 2007 - Process Automation & Infocomm Technology • Spending on R&D still low among SMEs • 50% spend <1% of turnover in R&D • SMEs in Accelerating Growth stage investing more in R&D, followed by the Start-ups • More than half in Moderate Growth, Mature & Decline stage not spending on R&D

  35. DP INFO’S RECOMMENDATIONS

  36. SME Development Survey 2007 - 5 Recommendations • #1 : Managing Overseas Competitiveness • #2 : More Training Assistance Schemes & Funding • #3 : Adoption of technology as an Investment rather than a cost • #4 : Enhance partnerships between SMEs and the GLCs/MNCs • #5 : Adoption of risk-based financing

  37. SME Development Survey 2007 Recommendation #1 - Managing Overseas competitiveness • Top barrier identified by our SMEs • Intense competition overseas for 2 consecutive yrs; • 2007(58%) & 2006(45%) • 13% SMEs have difficulties in obtaining financing for overseas expansion • Likely reasons • SMEs appear to be going through a learning process when they engage in international activities • Successful venture overseas hinges on finding right overseas partners, overseas market knowledge, limited funding and manpower shortages

  38. SME Development Survey 2007 Recommendation #1 - Managing Overseas competitiveness What our government can do - with IE Singapore taking the lead? • Increase awareness of overseas financing schemes – IFS, LIS • More in-depth, timely & relevant overseas market knowledge • More substantial business networking & engagement opportunities in the right markets overseas • Raise National awareness via regional print & media • SME sharing development and use of ICT platforms (e-clustering or networked communities) for marketing at global level • Render shared services overseas : • technology (secure platform, back-office), • info collective and dissemination, business intelligence, capacity-building and • collective services (marketing, payment, branding) • Focus on overseas-based activities for SMEs operating overseas

  39. SME Development Survey 2007 Recommendation #2 – More Training Assistance Schemes • Manpower & training needs identified by SMEs • 87% identify more training to be required • Hiring difficulties of Supervisory (35%) & Operational staff (45%) with technical skills • Identified “Leadership/Mgt” & “Marketing/Promotion” as 2 main training needs Likely reasons • SMEs are unlikely to have readily available resources, both time and funding • SMEs are a diverse group • Ensuring initiatives such as the Management Development Programme reaches out to wider SME community

  40. SME Development Survey 2007 Recommendation #2 – More Training Assistance Schemes What is needed – How WDA can help? • Develop management training programmes to address specific soft skill needs • Encourage & incentivise short duration & off-site training programs • Accelerate industry-focused training (such as the Retail Scholarship Programme & sharing of training resources • Rating system on local training providers; assurance of quality • Allocate more training funding from Government especially for soft skills development; Such expenditure should be deem as investment for our next generation workforce ( $7-$16 per trainee-hour is low! )

  41. SME Development Survey 2007 Recommendation #3 -Technology Adoption as an Investment • Key challenge • ICT & Process automation adoption rate low amongst SMEs with 43% automating <25% of their processes & business functions • 73% do not spend on R&D with 50% spending just <1% of turnover on F&D • Likely reasons • Cost is one of the top challenges faced by 52% in adopting technology; next being staff capabilities & competence • Many SMEs do not understand nor appreciate the benefits that ICT can bring

  42. SME Development Survey 2007 Recommendation #3 -Technology Adoption as an Investment • How can our government help thru IDA? • Overall Funding support for SMEs – to be included in Infocomm@SME • Funding ICT trainings of owners & staff – to be included in Infocomm@SME(Usage) • Incentivise SMEs to extract advantages from the existing technologies – to be included in Infocomm@SME(Growth) • Active profiling of SMEs that have successfully adopted innovation in process technology • Ensure Technology Innovation Programme reaches/appeals to majority of SMEs

  43. SME Development Survey 2007 Recommendation #4 - Partnerships with MNCs & GLCs • Concern • Low level of business engagement with MNCs & GLCs; only 7% of SMEs have • business dealings with GLCs & 15% with MNCs • Likely Reason • GLCs & MNCs do not proactively engage SMEs as their business partners • Little acknowledgement for those who had done so • Suggestions which SPRING can help? • Promote effective networking between MNCs and potential SME value chain via MNC sponsored event inviting SMEs to participate • Government to officially recognize & award exemplary GLCs & MNCs • Regular industry networking sessions involving GLCs, MNCs & SMEs • Selected government tenders to stipulate requirement for consortia approach for GLC/MNC to partner with SME • Elect some GLCs to ‘lead by example’

  44. SME Development Survey 2007 Recommendation #5 - Risk Based Financing • Top concern for financing High interest loan rate top concern of 52% of SMEs Short loan repayment period highlighted as a challenge by 24% • Likely reason • Are financial institutions charging higher interest rate to compensate for greater perceived risks? • Encourage “lean” SME loans by introducing • Credit process automation and emphasizing high predictive power of rating • A risk-based, individualized and fair pricing for SME’s • Rejected applicants understand better how to improve to qualify • Proactive approach by SMEs to understand rationale of high interest rates & how loan repayment periods may be extended In the SME sector, fast loans and cost-effective processes are at least as important as risk sensitive obligor selection … ... but often highly discriminative rating systems are one major precondition to simplify and accelerate loan processes

  45. Conclusion

  46. SME Development Survey 2007 Recommendation for SMEs • SMEs should take charge • Examine the findings • Find the applications to your business • Stay relevant • Reexamine/reflect on your business • Actively source for assistance • Reflect your needs and challenges through appropriate channels • Never give up

  47. THANK YOU

  48. SME Development Survey 2007 Forum 10 October 2007 8:30am – 2pm NTUC Auditorium (Level 7) One Marina Boulevard The forum that brings together the SME community to discuss the findings of the survey and reflect their views on the challenges to their growth.

More Related