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SME Development Survey 2006 Conducted by DP Information Group
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Transcript of SME Development Survey 2006 Conducted by DP Information Group
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SME Development Survey 2006 Conducted by DP Information Group
“Managing Challenges for Sustainable Growth”
Media Conference SPRING Singapore, 21 August 2006
Sponsors
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Panelists
Ms Chen Yew Nah, Managing Director, DP Information Group
Mr Png Cheong Boon, Deputy Chief Executive, SPRING Singapore
Mr Ted Tan, Deputy CEO, IE Singapore
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SME Development Survey 2006 Conducted by DP Information Group
“Managing Challenges for Sustainable Growth”
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SURVEY OBJECTIVES
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SME Development Survey 2006
Survey Objectives
SMEs’ growth strategies & issues faced at different development stages
SMEs’ financial performance, risk appetite & credit
SMEs’ business risk in going overseas
SMEs’ strategies to achieve cost efficiency & productivity
SMEs’ familiarity & use of E-banking/on-line facilities
SMEs’ level of adoption of technology, automation & innovation
Gain better understanding of ownership profile of SMEs
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SURVEY METHODOLOGY
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SME Development Survey 2006
Survey Methodology
Sampling Base
Random sampling of 10,000 companies; Previous years’ respondents included
Proportion of SMEs selected from each industry based on 2005 GDP contribution
Companies must have :
at least 30% local equity ownership not more than S$80m in annual sales/ turnover not more than 200 employees (if it is a non-manufacturing SME)
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SME Development Survey 2006
Survey Methodology
Survey Method
Primary Data Collection :
• Questionnaire to capture opinions & general characteristics of SMEs
-- Mail-out of questionnaire -- Posting of questionnaire on website at http://smesurvey.dpgroup.sg
• Submission of financial statements to provide insight into SMEs’ financial performance
Participation encouraged through :
• Follow-up calls after mail-out of invitations to participate in survey• Reference to survey made on Enterprise One, IE Singapore, Infocomm Development Authority & Spring Singapore websites
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CHARACTERISTICS OF RESPONDENTS
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SME Development Survey 2006
Profile of Respondents
1,068 companies responded vs last year’s 1004 respondents
21% of respondents participated in last year’s survey
Significantly higher no. of smaller companies responded
41% with less than 10 employees
55% are family owned businesses; only 9% have foreign investors as owners
Respondents Breakdown by Paid-Up Capital
Paid-Up Capital 2006 2005 2004
$2 - $50,000 18% 6% 9%
$50,001 to $0.5mil 53% 27% 41%
>$0.5mil to $1mil 6% 26% 20%
>$1mil to $2mil 13% 16% 14%
>$2mil to $5mil 5% 12% 9%
>$5mil 5% 13% 7%
Total 100% 100% 100%
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SME Development Survey 2006
Profile of Respondents
Significant increase in Start-up participation in survey
Survey has become an important platform for voicing their issues and concerns
23% with less than 10 years in operation; 11% being within 3 years of operation
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
11%
2%
20%19%
35% 36%
25%
29%
9%
14%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Start-Up Acceleratinggrow th
Moderategrow th
Mature Decline
Respondents Breakdown by Development Stages
2006 2005
* 1 in 10 SMEs are Start-Ups
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SURVEY FINDINGS
Challenges to Growth
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SME Development Survey 2006
Survey Findings - Challenges to Growth
Competition remains the most cited challenge (45%)
Manpower overtook Operating Cost as 2nd top 3 selected growth hindrance (37%)
45%
52%
37%
28%
34%
42%
28%
22%25%
32%
19%
34%
19%15%
8% 10%
0%
10%
20%
30%
40%
50%
60%
Top 3 Most Selected Hindrance to Growth
2006 2005
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SME Development Survey 2006
Survey Findings - Challenges to Growth
Cashflow & Accessing Business Opportunity are the top concerns of Start-ups
Manpower is one of the top concerns of SMEs in Accelerating & Moderate Growth stages -Inability of SMEs to hire, develop & retain people will limit their potential to grow
Competition remain the top concern of SMEs in the Moderate, Mature & Decline stages
Development Stage
Top 1 Concern
Top 2 Concern
Start-up Cash Flow (57%)
Business Opportunity
(57%)
Accelerating Growth
Manpower (56%)
Competition (50%)
Moderate Growth
Competition (49%)
Manpower (45%)
Mature Competition (53%)
Operating Cost (34%)
Decline Competition (47%)
Operating Cost (45%)
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SME Development Survey 2006
Survey Findings - Business Competition
Domestic Market is small; Intense Competition
Larger Overseas Market; More Growth Potential but need to be prepared to compete with global players
Top competition faced in Singapore %
Local Competition 69%
Foreign Competition 37%
Do Not Face Any Competition 9%
Top competition faced in Overseas %
With Local Competitors 17%
With Foreign Competitors from other Countries 48%
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SURVEY FINDINGS
Business Strategies
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SME Development Survey 2006
Survey Findings - Business Strategies
Top 2 strategies: Improving Cost Efficiency / Productivity (22%) & New Overseas Market (19%)
2 next commonly cited strategies : New Products/ Services (17%) & Scaling Down/ Distribution (14%)
17% have indicated no specific business strategy to adopt, at the moment
22%
30%
19%
32%
17%18%
14%
7%10%
6%
1%3%
17%
4%
0%
5%
10%
15%
20%
25%
30%
35%
Key Business Strategy for Next 1 - 2 years
2006 2005
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SURVEY FINDINGS
Overseas Challenges
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SME Development Survey 2006
Survey Findings - Overseas Challenges
Top favourites are Malaysia & Indonesia; due to warming ties & increased stability
China took over Thailand as the 3rd most popular country to venture overseas
India unchanged at 22%
64%
49%
40%
51%
43%
31%
41%
32%
24%
39%
32%
24%27%24%
19%26%23%
15%
25%23%
17%22% 22%
15%18%17%
12%
17%14%
0%
10%
20%
30%
40%
50%
60%
70%
Top 10 Overseas Countries
2006 2005 2004
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SME Development Survey 2006
Survey Findings - Overseas Challenges
Most Popular Countries Currently : Malaysia , Indonesia & China
Most Popular Countries SMEs expanded in the last 2 years : Malaysia, Indonesia & China
New Destinations that SMEs likely to venture into : India, Middle East, Vietnam
Top 1 Top 2 Top 3
Countries Currently Presence in
Malaysia (64%)
Indonesia (51%)
China (41%)
New Countries Ventured in last 2 years
Malaysia (9%)
Indonesia (6%)
China (6%)
New overseas markets in the next 12 months
India (32%)
Middle East (27%)
Vietnam (25%)
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SME Development Survey 2006
Survey Findings - Overseas Challenges
Past year of heightened FTA awareness promotion to SMEs as result of last year’s findings
87% of SMEs are aware or have heard of FTAs
FTA usages have gone up from 7% to 11%
Number of SMEs showing no interest in FTA has decreased to 5%
11%7%
43%
27% 28%
34%
13%16%
5%
16%
0%
5%
10%
15%
20%25%
30%
35%
40%
45%
Aware &utilizing them
Aware butnot utilizing
them
Heard ofsuch tariffbenefits &would beinterested
Never heardof such tariffbenefits &would beinterested
Notinterested
Awareness of FTA
2006 2005
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SME Development Survey 2006
Survey Findings - Overseas Challenges
Key Reasons for Not Utilising
•Difficulty in Understanding FTA•Not under Tariff Concessions
More in-depth knowledge sharing necessary for more SMEs to benefit from FTAs
35%
29%
19%
16%
7%
3%
16%
0% 5% 10% 15% 20% 25% 30% 35%
Difficulty InUnderstanding FTA
Products Not TariffConcessions
Products Doesn't MeetRule Of Origin
Customer Didn't AskFor Proof Of Origin
Marginal TariffReduction
Too Costly To Adapt
Not Exporting
Reasons for Not Using FTAs
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SURVEY FINDINGS
Access to Government Projects
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SME Development Survey 2006
Survey Findings - Access to Government Projects
3 in 4 SMEs who tendered for govt projects had been successful
Interest to secure government projects very high (63%)
74% of them are with low profits (<$0.5m) or making losses; Hunger for a bigger pie of public sector jobs out of survival needs
SMEs need help to gain better access and bid successfully for public sector projects
Local Government Procurement
No, but keen to explore the opportunities
63%
No, we are not interested
at all13%
Yes, we have secured at least one tender/
quotation18%
Yes, but have not been
successful so far6%
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SURVEY FINDINGS
Innovation & Technology
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SME Development Survey 2006
Survey Findings - Innovation & Technology
53% see improvement in productivity; 37% also find improvement in cost efficiency
92% who have adopted new technology and enjoyed its benefits, plan to invest further in the next 2 years
16% cite lack of funding as critical factor for new technology adoption
53%
37%
23%
22%
17%
11%
32%
0% 10% 20% 30% 40% 50% 60%
Increased Productivity
Increased Cost Efficiency
Helped Meet Customer Expectation
Widened Market Coverage
Enhanced Image/Reputation
Afforded Greater Product Line ServiceRange
No Impact
Impact of New Tech on Business Growth
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SME Development Survey 2006
Survey Findings - Innovation & Technology
32% considers new technology having no impact for their business growth
62% of SMEs open but unsure of how to strengthen their technological capabilities
85% are with <25 employees; More help needed to reach out to the smaller sized SMEs
Most Critical Factor in strengthening SMEs' technological capabilities
Not sure62%
Funding support for adoption of
new technology16%
Availability of in-house
technological capabilities
6%
Awareness of technological capabilities &
resources7%Desirability &
ability of customers to accept new technology
4%
Availability of external
technology experts/providers/
infrastructure3%
Adoption of common industry standard for new
technology2%
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SURVEY FINDINGS
Financing & Funding
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SME Development Survey 2006 Survey Findings - Financing / Funding
Still strong reliance on Overdraft (40%); though downward trend continues
Next 2 most favoured options are Long-term loans (34%) & Trade Financing (32%)
Continued increase in SMEs going for short & long term loans
Better financing options for SMEs
Banking/Financing Facilities Used 2006 2005 2004
Short Term Facilities
Overdraft 40% 44% 47%
Trade Financing 32% 39% 29%
Term Loans 27% 25% 21%
Factoring 7% 6% 6%
Long Term Facilities
Term Loans 34% 29% 26%
Hire Purchase/ Leasing 31% 33% 35%
Equity Financing
Venture Capital 15% 5% NA
Business Angels 3% 2% NA
Funds From Friends Or Relatives 17% NA NA
Government Funding Schemes
Local Enterprise Finance Scheme 8% 4% NA
Microloan 4% 2% NA
SME Access Loan 2% 0% NA
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SME Development Survey 2006
Survey Findings - Financing / Funding
Increase of SMEs with no banking/financing facilities – from 19% to 38%
Attributable to higher % of Start-Ups in this year’s respondents
52% are with turnover < $1m; 68% are Start-Ups
37% face difficulties in meeting bank’s requirements of pledging collaterals
Banks will only lend as according to SMEs’ ability to pay
2006 2005
No Banking/Funding Facilities 38% 19%
- No need for Funds 65% 64%
- Difficulties in Obtaining Funds 35% 36%
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SME Survey Development 2006
Survey Findings - Financing / Funding
SMEs’ suggestions for better access to external sources of funds
51% would like to see more shift towards Non Collateral based financing eg. Microloan
48% hope to see more industry specific financing schemes
37% see the use of SME Credit Rating; likely expressed by the better rates ones
SMEs’ Suggestions for better access to external sources of funds %
Non Collateral Based Financing Instruments 51%
Industry Specific Financing Schemes 48%
SME Credit Rating 37%
SME Centric Financial Institution 25%
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FINANCIAL PERSPECTIVES
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SME Development Survey 2006
Financial Perspectives - DP SME Credit Rating
DP Credit Rating 2006 2005 2004 2003
DP1 - DP4 20% 21% 19% 9%DP5 - DP6 49% 47% 53% 65%DP7 - DP8 31% 32% 28% 26%Total 100% 100% 100% 100%
Over past few years, general profile of credit worthiness of SMEs remain quite consistent with :
20% in Investment Grade (DP1 – DP4)
About half in High Yield Grade (DP5 – DP6)
Around 30% in the High Risk Grade (DP7 – DP8)
Distribution of Respondents by DP SME Credit Ratings
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SME Development Survey 2006
Financial Perspectives - Profitability
Majority (70%) of Investment Grade companies reported >5% in profit margin
Majority (61%) of High Risk companies experiencing net losses
Distribution of Respondents by Profit Margin & DP Credit Rating
Negative Margin
0% - <5% 5% - <10%10% or more
Total
Investment Grade (DP1 - DP4)
2% 28% 29% 41% 100%
High Yield (DP5 - DP6)
11% 65% 15% 9% 100%
High Risk (DP7 - DP8)
61% 36% 1% 2% 100%
TOTAL 26% 47% 14% 13% 100%
DP Credit RatingProfit Margin Range
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Singapore’s First SME Credit Rating
INITIATIVE
www.smecreditrating.sg
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Singapore SME Credit Rating Initiative
www.smecreditratings.sg
In support of growing SME community for credit ratings
Launch of Singapore SME Credit Ratings website with listing of over 10,000 SMEs previously rated by DP Info
FREE credit rating access for SMEs that are prelisted from now till 30 September 2006
Non-listed SMEs can also approach DP Info for a FREE credit rating access
SMEs may opt to have their credit rating grade displayed for FREE to the public for 12 months
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DP INFO’S RECOMMENDATIONS
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SME Development Survey 2006
DP Info’s Recommendation #1- SME as A Rewarding Place to Work In
Results : Lack of Adequate & Qualified Manpower for SMEs- 37% stated as Top 3 Concerns- 7% to 14% jump as Top Hindrance to Growth- 36% stated as Obstacle for Overseas Expansion
Likely Reasons : a) Unable to compete with MNCs in attracting talents
b) SMEs view as ‘second choice’ employersc) Perceptions relating to differing benefits
Suggestions : Promote the advantages of working for SMEs- Profile the positive aspects of working for SMEs - Incentivise SMEs to structure employee profit sharing schemes through tax breaks
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SME Development Survey 2006
DP Info’s Recommendation #2- Help SMEs with more Government Procurement Opportunities
Results : 3 in 4 SMEs who tried, had been successful63% not tried and are keen to explore these govt procurement opportunities
Likely Reasons : a) Survival needs; 74% are with low profits or making losses
b) Lack of experience in tender documentation c) Inhibiting with huge contracts requirementsd) Short turnaround time to revert
tender/quotation
Suggestions : Create a different level playing field for SMEs to compete- Training on tender proposal writing & how to bid successfully - More communication about the award decision process
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SME Development Survey 2006
DP Info’s Recommendation #3- SMEs to Leverage more on FTAs
Results : 11% (up from 5%) utilize FTAs and 43% (up from 27%) are aware of FTAs35% find difficulties in understanding the FTAs
Likely Reasons : a) FTAs Documentation Compliance can be complicated
b) Tariff Concessions; Non-compliance or Marginal
c) Slow Adopters; Due to Resource Constraints
Suggestions : Specifically engage SMEs to overcome inertia to Adopt - Leverage on IE’s Train-the-trainers programme - Walk-through with the SMEs for the first few applications- Qualified Consultants with grants approval
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SME Development Survey 2006
DP Info’s Recommendation #4- Enhance Technology Management Skills for SMEs
Results : 62% unsure how to strengthen technological capabilities; 42% with plans need funding support
Likely Reasons : a) Resource constraint - time & finance b) Unwilling to experiment due to
risk of failurec) Supply of qualified external
consultants
Suggestions : Communicate & deliver benefits to SME bosses- Train business managers/owners to deploy new technology for business advantage- Incentivise through tax breaks
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SME Development Survey 2006
DP Info’s Recommendation #5- Innovative Financing for Better Credit Rated SMEs
Results : Funding for SMEs have improved over the years- Over 4 years: 20%Investment Grade; 50% High Yield; 30% High Risk
Likely Reasons : a) Banks lend according to firms’ ability to payb) More understanding of SME Credit Risk
required Suggestions : Promote industry adoption of SME Credit Rating
- Differentiate those with high risk from the low risk- Benchmarks for better financial performance- Promote corporate governance, discipline and financial/cashflow management
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SME Development Survey 2006
DP Info’s Recommendation #6- Start-Ups Beyond Capital
Results : 1 in 10 SMEs are Start-Ups; Key concerns are cashflow and biz opportunities
Likely Reasons : a) Lack of track recordb) No economy of scalec) Higher risk of failure
Suggestions : To develop a strong cluster of SMEs has to commence with the Start-Ups- Mentoring the Start-Ups with Business Opportunities- Equip Start-Ups for Regional exposure via IE programmes- Financing Bureau to match SME needs and other Financing options
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Thank You
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Speech
Mr Png Cheong Boon, Deputy Chief Executive, SPRING Singapore
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Speech
Mr Ted Tan, Deputy CEO, IE Singapore
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Q&A