Research shows that 97% of all Malaysian businesses are small and medium enterprises or SMEs, and they account for almost 36% of the country’s GDP. They also employ 65% of the labour force and produce about 18% of total exports. Given these numbers, it would be safe to say that SMEs are the key to Malaysia’s economy.
While that is true, however, many SMEs still face challenges in keeping their business afloat. Unfortunately, about 60% of them fail in their first five years. The question is ‘Why?’
The first challenge to Malaysian SMEs is the high cost of starting a new business. This is why SME finance and support are necessary to provide some relief, so these budding entrepreneurs could develop their operations into more stable businesses. Lowering registration and licensing costs for new businesses could be the key to let them thrive, as well.
The government, for example, provides assistance through the SME Association of Malaysia. One of these is the SME Masterplan, a programme that aims to help SMEs. Some businesses may also be eligible for financing programmes, such as Soft Loans for SMEs.
Developing an idea
Big tech companies, such as Google and Facebook, have inspired many entrepreneurs to come out with daring new ideas. This goes to show that great ideas can come from the grassroots level.
It is not easy to build and develop a business model, however. You need talent, technology, and time on your side. The trick is to convince investors to give you all of that by showing them how your radical idea could change the market. Fortunately, there are companies in Malaysia that specialise in helping startups commercialise their ideas and help turn them into profit.
Many SMEs fail because they do not know how to manage their money properly. Some of them, for instance, do not have a long-term business projection. This could lead to problems with cash flow, inventory control, and access to credit, which can keep their business from growing. Business owners should learn financial management skills to make their operations sustainable.
SMEs are important to the Malaysian economy. They face many challenges, most of which have something to do with financing. With a little help from the government and private companies, fewer SMEs will fail and have a chance to grow.