Why Singapore Businesses Don’t Last & What You Can Do About It

There, we said it. The longevity of Singapore businesses is pretty short – usually less than a decade. While many can argue that this can be said of any businesses in every part of the world, the risk-averse culture in the city state is a huge factor in the folding of businesses owned by locals.

Of course, you could argue that there are many successful companies that have sprouted through the decades – Charles & Keith, Razer, Creative Technology, just to name a few. One thing in common about these businesses is that although they have started in Singapore, they have taken steps to diversifying their consumer base beyond the local borders.

Let’s take a deep dive into why Singapore businesses don’t last – these are based on our experience.

1. Limited talent in certain sectors
2. High operating costs
3. Small local market
4. Fast-changing consumer habits & preferences

Problem 1: Limited talent in certain sectors

Let’s face it. Given that Singapore is a small country, the population can’t be compared to say, Malaysia, Vietnam, Indonesia, etc. While the government has put in place different types of visas and attractive packages for foreign talents to work in Singapore, we got to admit that not all companies can afford such foreign talent plus their relocation packages.

The competitiveness of the local employment market is high, but certain sectors like Tech and high level management positions are often non-local hires. It is great to see the government issuing Tech.Pass for the highly skilled tech foreign workers to transfer the knowledge to local counterparts.

This is why expanding overseas such as Malaysia and Vietnam could be crucial for you to hire their professionals within the country to execute your operational work. Singapore can still be the management HQ to power business decisions and growth, whereas your call centre and/or resource hub can be based overseas. This is said to be a twinning strategy where you leverage on the strengths of both countries for a synergetic approach that is powered for growth.

Problem 1: Case Study – Hiring IT locals in Vietnam

Vietnam has established itself for its IT workforce as the government has been putting in resources to grow this sector via tax and labour incentives. With the country now being the 8^th largest provider in IT services globally, it is a good chance for Singapore IT companies to tap on this wave and hire out of its local population by setting up a branch in Vietnam.

The low costs and high-quality labor remain a key attractive proposition for Singapore business owners. Aside from that, foreign investments in IT will be granted corporate income tax exemption for up to 4 years and 50% CIT reduction for the next 9 years – that’s a whopping 13 years of tax incentives and no wonder big players like Samsung are investing so much in Vietnam’s tech market.

Vietnam’s tech parks are also seen to be sprouting in the country. For instance, Da Nang High-tech Park houses many tech companies with additional benefits of import duty exemptions, land rent exemption, and more.

What’s really surprising is that the country is churning a lot (!!) of highly skilled graduates with more than 25,000 technical engineers produced every year, and this number is expected to grow.

Problem 2: High operating costs

Another area of concern when we speak to Singapore business owners is that operating a business in Singapore is expensive. Given the country’s naturally small plot of land and high maintenance costs (i.e. utilities, etc.), the operating cost to maintain a company in an office space is high.

This is unlike other countries in Asia, except probably Hong Kong, where the rent and operational costs are significantly lower than Singapore. That is why most Singapore businesses opt to go regional to hire and set up branches, while having a small management team in the local country.

Problem 3: Small local market

Aside from the high operating costs, Singapore businesses have to deal with a smaller population size. Below is a quick comparison of the population in some of the top countries that most business owners expand into.

With a small population, it’s difficult to achieve economies of scale, especially for manufacturing, retail, and F&B industries. While some may argue that if you were to compare the GDP per capita, Singapore remains a strong market as you can charge at a high price and its population can afford it.

This is totally true, but in the long run, Singapore businesses may struggle to sustain in the market given the dynamic nature of the society.

For retail, and F&B companies in Singapore, entering a new market like Indonesia, Vietnam, Thailand, and Malaysia can be a great way to extend your consumer base beyond local borders. These countries GDP per capita is also steadily growing in spite of the pandemic, which is a good sign for local business owners to take the leap and achieve first mover advantage right now.

Some of the other industries who face a lack of end consumers are those in the professional services, consulting, software development, and education (this list is non-exhaustive).

Problem 4: Fast-changing consumer habits & preferences

Coupled with problem 3, problem 4 on fast-changing consumer habits and preferences can take a toll on Singapore businesses as they need to stay innovative to keep up with the latest trends or applications.

No matter which industry your business is in, innovation is the answer to many problems. However, being innovative requires time, effort, and R&D – all of which some SMEs do not have. That’s why the next best alternative is to expand into markets that have strong purchase intent for your products or services. This way, you can buffer more time for R&D.

The Common Denominator is to Expand Overseas

Solutioning the problem is always easier said than done, and there can never be a 100% correct solution to any business problem.

While Singapore business owners are rooted to the society ingrained risk adverse nature, taking a chance to bring the out of Singapore. Calculated risk is the approach forward for Singapore business owners to extend the life their business.

The best part of this is that the Enterprise Singapore has been supporting local businesses to take the leap beyond Singapore borders by offering great monetary support of up to S$100,000 (max 70% of total costs) per new market. The Market Readiness Assistance (MRA) grant is aimed to give flight to Singapore businesses for business expansion.

Here’s our recommendations for industry-specific expansion plans into Asia.

Before you decide to take on our recommendations, it is good to understand more about each jurisdiction. We compiled a summary of considerations that you should take before deciding your next business destination here, comparing it from a corporate tax perspective.

Reach out to us today for your company expansion – we have a holistic go-to-market packages from market entry, business matching to brand and integrated marketing services.