© Copyright 2008. DP Information Group. All Rights Reserved. RESTRICTED MEDIA CONFERENCE 6 October...

© Copyright 2008. DP Information Group. All Rights Reserved. RESTRICTED

MEDIA CONFERENCE6 October 2008

SME DEVELOPMENT SURVEY 2008- Conducted by DP Information Group

Enhancing Business Competitiveness Among Singapore’s SMEs


Understand & highlight following issues relating to SMEs:

Business strategies & challenges faced locally & overseas

Extent of internationalization & contribution to Singapore economy

New financing requirements in next 1 year

Rate & benefits of technology adoption & innovation

IT spending in next 1-2 years

Staff development & succession planning

SME Development Survey 2008 - Survey Objectives


5% increase in participation from SME Community

1,656 companies responded to this year’s survey (last year: 1,206 respondents)

23% repeat respondents from last year’s survey

SME Development Survey 2008 - Characteristics of Respondents

Respondents by Business Sector

Commerce (Retail & Wholesale)

43%

Manufacturing 15%

Services 15%

Transport / Storage

8%

Construction 10%

Hospitality/ F&B1%

Finance 1%

Property 2%

Information & Communications

5%


7% increase in participation from SMEs with smaller capital

7% increase in smaller SMEs with paid-up capital of no more than S$0.5m

Percentage of SMEs with >S$1m in paid-up capital reduced from 39% to 33%

Respondents by Paid-Up Capital


Paid Up Capital 2008 2007 2006

S$2 - S$50,000 8% 7% 18%

S$50,001 - S$0.5m 40% 34% 53%

> S$0.5m - S$1m 19% 20% 6%

> S$1m - S$2m 14% 14% 13%

> S$2m - S$5m 10% 12% 5%

> S$5m 9% 13% 5%

Total 100% 100% 100%


More experienced SMEs responding to survey:

- 76% in business for >10 yrs (4% increase) - Continued decline in Start-up participation from 6% to 2%

No. of companies experiencing accelerating turnover growth increasing but at slower pace

Mature & Decline companies on the rise


2%

6%

11%

29%27%

20%

32%

37%35%

30%

24%25%

7% 6%

9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Start-up Acceleratinggrowth

Moderategrowth

Mature Decline

Stage of Development

2008

2007

2006

Stages of Development • Start-up: First 3 years of operation• Accelerating Growth: turnover growth of > 10% p.a.• Moderate Growth: turnover growth of up to 10% p.a.• Mature: Zero turnover growth • Decline: Negative turnover growth


SMEs registered stronger profitability

Further drop in no. of loss-making companies from 21% to 13%

Almost a quarter (24%) generated profit >S$1m

Upward trend in respondents generating >S$0.1m in after-tax profit


13%

21%

23% 23%

26%

30% 29%

26%

22%

11%

8% 8%

12%10%10%

5%3%3%

7%6%

4%

0%

5%

10%

15%

20%

25%

30%

Losses(<S$0)

S$0 toS$0.1m

>S$0.1mto S$0.5m

>S$0.5mto S$1m

>S$1m toS$3m

>S$3m toS$5m

>S$5m

Respondents by Net Profit After Tax

2008 2007 2006


SMEs looking more to expansionary plans to grow sales in locally & overseas

Improve Cost Efficiency / Productivity remain top strategy but accorded less emphasis

Increasing emphasis on expansion: - New overseas market - New products/ services - Expand local distribution channels

Growing importance : - Improve Customer Service (key strategy for those in Retail) - Branding

SME Development Survey 2008 - Business Strategies

26%

43%

22%24%

21%19%

15%

9%

14%

10%

17%

9%6%

10%8%

3% 2% 2%

14%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Improve costefficiency /productiv ity

Expand newmarket

overseas

Improvecustomerservice

Offer newproducts/services

Expand localdistributionchannels

Branding Scaling down/consolidation

Key Business Strategy in next 1-2 years

2008 2007 2006


Increasing operating costs foremost in minds of SMEs

Increasing operating costs (58%) overtook Increasing competition (49%) as top obstacle

Manpower remains one of top 3 concerns; more so for SMEs in Start-up (42%) & Accelerating Growth (50%) stages

Concerns regarding Cash flow & New Financing have fallen; Cash flow more of a concern for those in Start-up (37%) & Decline (28%) stages

Downward trend continue for Difficulty in accessing biz opportunities & Market size constraint

SME Development Survey 2008 - Challenges to Growth

58%

53%

34%

49%

58%

45%

39%

45%

37%

20%

30%30%

19%24%

12%

20%

25%

9%9%

19%

6%10%

19%

0%

10%

20%

30%

40%

50%

60%

Increasing

operating

costs

Increasing

competition

Manpow er

issues

Cash flow Market size

constraint

Difficulty in

assessing

business

opportunities

Uncertain

economic

env ironment

New

financing

Hindrances to Growth

2008 2007 2006


Increasing Labour cost key cost component affecting SMEs’ profitability in next 1-2 yrs

Most affected are those in Information & Communications (73%), Construction (68%) & Services (63%)

Increasing Cost of sales ie. raw materials will continue to have major impact on SMEs’ profitability;

SMEs in Construction (82%), Manufacturing (81%) & Wholesale (59%) greatly affected

Rental costs remain a challenge for most SMEs

More SMEs reducing their expenditures on optional cost factors

Advertising & Promotion less regarded as key cost component

SME Development Survey 2008 - Challenges to Growth

58%61%

57%55%

42%37%

20%20%

20%17%

14%18%

5%13%

0% 10% 20% 30% 40% 50% 60% 70%

Labour costs

Cost of sales

Rental of premises

Currency fluctuation

Transportation costs

Utility costs

Advertising & Promotion

Cost components affecting profitability

2007

2008


Export growth to Asian region reached an unprecedented level – All Top 10 overseas countries from Asia

Upward trend in SMEs serving China & India markets

China overtook Indonesia & catching up with Malaysia as most favoured destination

Japan & Korea did not get into the top 10 last yr, but overtook Australia & USA to emerge among the top 10 this yr

At least three-fifths of SMEs that ventured to Middle East are serving Saudi Arabia & UAE

Cambodia, Myanmar & Taiwan increasing in popularity

SME Development Survey 2008 - Overseas Expansion

69%

81%

64%67%

65%

41%

60%

71%

51%48%

56%

39%39%45%

26%

38%34%

22%

37%41%

25%25%20%

15%

25%19%

13%

20%23%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Top 10 overseas countries

2008 2007 2006


Local Enterprise Finance Scheme (LEFS) remains the most popular scheme but SMEs accessing down 10%

More SMEs accessing :

- Microloan (up 3%) - Loan Insurance Scheme (up 1%) - Internationalisation Finance Scheme (up 2%)

Start-up Enterprise Development Scheme (SEEDs) assisted 5% of respondents in Start-up stage

Low take-up rate (1%) for Internationalisation Finance Scheme (IFS) among those in Accelerating Growth stage

SME Development Survey 2008 - Financing/ Funding

53%

63%

53%

28%25%

28%

11% 10%

4%7%

5%2% 4% 3%

0%0%

10%

20%

30%

40%

50%

60%

70%

LEFS Microloan LIS IFS SEEDS

Government Funding Schemes

2008 2007 2006

External financing 2008 2007 2006 2005

Govt Funding Schemes 7% 10% 8% 6%


Majority of SMEs are sufficiently funded

70% do not see the need to seek new financing in the next 1 yr

Among those who seek new financing, majority (60%) looking at >S$0.5m in new financing

SME Development Survey 2008 - Financing/ Funding

70%

2% 3% 4% 4%

18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

None <$50k $50k -$150k

$150k -$300k

$300k -$500k

>$500k

Amount of new financing required in next 1 year


2 most prominent benefits reaped from technology innovation:

- Increased Productivity - Improved Cost Efficiency

Good opportunity to share with SME community especially since Improving Cost Efficiency will be adopted by 26% as top business strategy in the next 1 year

SME Development Survey 2008 - Information Technology & Innovation

Benefits of adopting technology innovation

%

Increase productivity 76%

Improve cost efficiency 59%

Widen range of products / services available

20%

Shorten turnaround 14%

Enhanced image/ reputation 13%

Widen market coverage 11%

Facilitate customization 7%

Majority reported an improvement in actual turnover or profit through technology innovation. No

20%Yes80%

Material impact of technology innovation adoption


More than half of respondents plan to adopt technology innovation in the next 1-2 yrs

Among those who have already adopted technology innovation, a high majority (88%) plan to further embrace technology innovation in the next 1-2 yrs

Half of those who have not adopted technology innovation are considering making their first attempt in the next 1-2 yrs


Technology Innovation

Planning to adopt in next 1-2 yrs

Yes No

Already adopted

88% 12%

Have not adopted

48% 52%

Overall 59% 41%


SMEs have very little budget for technology innovation

51% who intend to adopt technology innovation in next 1-2 yrs do not wish to incur any costs on such adoption

Only 12% willing to spend beyond S$100,000 on technology innovation


51%

26%

11%

6%

3%

3%

0% 10% 20% 30% 40% 50% 60%

None

S$1 - S$50k

> S$50k - S$100k

> S$100k - S$300k

> S$300k - S$500k

> S$500k

Amount willing to spend on technology innovation


SMEs are willing to invest in training

79% find it useful to send their staff for training

Majority looking for training to upgrade Technical / Job Related Skills

With more SMEs identifying Improve Customer Service as their key business strategy in next 1-2 yrs, Customer Service is the 2nd most cited area where training is needed

Note: Technical / Job Related Skills and Customer Service were not provided as options on last year’s survey

SME Development Survey 2008 - Training & Management Development

64%

35%25%

29%22%

27%

20%19%19%

20%14%

21%

8%

4%

3%7%

0% 10% 20% 30% 40% 50% 60% 70%

Technical / Job-Related Skills

Customer Service

Leadership & Mgt Development

Marketing & Advertising

Strategic Planning

Information Technology

Accounting & Finance

Human Resources

Corporate Governance

Policies, Law s & Regulations

Areas of training required

2007

2008


Available training options may be limited for those who budget <S$100 per employee for training

Only 55% set aside training budget of >S$300 per employee

Respondents from Manufacturing have set a lower budget for staff training compared to other business sectors 34% not willing to spend >S$100 per staff

SME Development Survey 2008 - Training & Management Development

20%

25%

15%

25%

10%

3%

2%

0% 5% 10% 15% 20% 25% 30%

< S$100

S$100 - S$300

> S$300 - S$1000

> S$1000 - S$2000

> S$2000 - S$5000

> S$5000 - S$8000

> S$8000

Dollar per headcount spent on training

46%

27%

14%

4%

9%

0% 10% 20% 30% 40% 50%

< 1%

1% - 3%

> 3% - 6%

> 6% - 10%

> 10%

Training budget as percentage of staff cost

Though SMEs are supportive of staff training, close to half (46%) set aside <1% of staff budget for training


SMEs have demonstrated an improved credit risk profile

Increase in Investment Grade (DP1 – DP4) companies (Up 3%)

Increase in High Yield (DP5 – DP6) companies (Up 3%)

Drop in High Risk (DP7 – DP8) companies (Down 6%)

Distribution of Respondents by DP Credit Rating

SME Development Survey 2008 - DP Credit Ratings

DP Credit Rating

2008 2007 2006 2005

Investment Grade (DP1 – DP4)

17% 14% 20% 21%

High Yield (DP5 - DP6)

58% 55% 49% 47%

High Risk (DP7 - DP8)

25% 31% 31% 32%


Recommendations


• Strategizing for International Growth • Encouraging SMEs to collaborate and pool together their resources in bidding for

overseas projects.

• SMEs to Collaborate in Overseas Ventures • Assisting SMEs who are keen on internationalising to develop and implement a

sustainable overseas growth strategy.

• SMEs to Change Mindset on Technology as Investment & to Embrace Technology to Improve Cost Efficiency

• Encouraging SMEs to have a mindset change on technology (cost vs investment) & to embrace technology through greater use of managed or hosted services to improve cost efficiency.

• Banks to Review Evaluation of Innovative & Deserving SMEs • Reviewing existing lending criteria for innovative SMEs using DP Credit Rating.

• Groom present & future leaders among SMEs• Facilitating SMEs’ bosses and key managers in training and capabilities

development through greater funding support, customised curriculum and at flexible timing.

SME Development Survey 2008 - Recommendations


Thank You


SME DEVELOPMENT SURVEY CONFERENCE 2008

Wednesday, 15 October 20088.45am – 1pm NTUC AuditoriumNTUC Centre, One Marina Boulevard

Special presentations 1. Mr Sareth Menon, US State Representative from Pennsylvania

– “An Insight into American SMEs”2. Mr Terence Swee, Founder and CEO of muvee technologies

- “moving muvee” – home-grown technology company

Supported by SPRING Singapore, IE Singapore & EDC@SICCISponsored by HSBC


Q&A

© Copyright 2008. DP Information Group. All Rights Reserved. RESTRICTED MEDIA CONFERENCE 6 October...

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