14 Dec 2016
Vibrant Malaysian SME Sector in Need of Professional Services Input
With keen government backing and a large domestic consumer base, Malaysia's SME sector is soaring, although its sustainability is being hampered by a lack of business acumen among many of the country's fledgling entrepreneurs.
Starting a business has never been easier in Malaysia, at least that was the message from attendees and exhibitors at this year's SME Solutions Expo in Kuala Lumpur. The ease of starting a business in the country, however, is also encouraging more competition, with only those businesses that capture a niche market with a clearly differentiated product range seen as likely to survive.
Brian Lee is the Managing Director of Elephant Mountain Coffee, the exclusive Malaysian franchisee of Thailand's Doi Chaang Caffe. Reflecting on the country's conducive environment for start-ups, he said: "If you want to start a business in Malaysia, it is easy and fast. There are even a number of different options that banks in Malaysia are willing to offer to those who want to set-up on their own.
"As the start-up phase is quite so easy, competition is very fierce. We have been operating in Malaysia since 2013 and have had to compete with many of the bigger coffee shop chains, notably Starbucks and Coffee Bean. We have survived because we have stuck to our proposition of offering good quality coffee at a reasonable price. That is what gives us our edge – quality and price."
Another exhibitor that clearly believed it has differentiated itself in a crowded market was VVV Suites, a Malaysian business that provides serviced offices, virtual offices and meeting rooms to SMEs and start-up firms. Explaining its own approach, Nora Ariff, a Sales Executive with the company, said: "We are up against international companies that offer the same kind of services that we do. So we have to do something quite different to our competitors.
"One way that we do that is by providing flexible payment schemes for start-ups and SMEs. Other companies that offer serviced offices typically have a strict initial payment requirement of 2+1 – meaning start-ups need to pay up to three months in advance. By contrast, we only require a two-month initial payment. We understand that start-ups and small businesses do not have a huge budget for office space."
At present, the company is planning its expansion into other markets, including Dubai, Australia and Singapore. Ariff said: "We believe the market for serviced offices and meeting rooms in those countries is particularly vibrant. We are currently in the process of securing operating licences in each of them."
Another exhibitor, Syspex Technologies, the company behind the YellowBox.com website, was banking on its own niche market position to maintain its competitiveness within Malaysia. Outlining its USP, Jasmine Lim, a Sales Manager with the company, said: "We know that there are a lot of other online stores in the country, so we focus solely on offering packaging, warehousing, safety and industrial products. This makes us unique in Malaysia."
One company intent on targetting what it sees as an underserved market is Interlight Technology, a small Malaysian business specialising in digital signage, multimedia advertising players and LED displays. Assessing its particular niche, Kenneth Leong, the company's Sales Director, said: "Competition is soft right now for us as there are not so many players in this sector. At the same time, nearly every business in the country is looking at technology-led solutions as a way of gaining more clients, which has provided a huge boost for us.
"We offer a wide range of LCD and display products, and this technology is set to make the printing industry obsolete within a few years. We help SMEs by cutting their printing costs and ensuring they can engage their customers through interactive displays."
A further example of the wisdom of securing a niche market came courtesy of Red Wheels Marketing, a family-owned Malaysian business that supplies customised safety vests and apparel. Having come to dominate the domestic market, the company now also exports to Hong Kong, Germany and Thailand. At present, its range includes customised raincoats, safety vests, work coveralls, customised clothing, safety wear, insulated delivery bags and even backpack beverage dispensers.
Tracing its route to success, Haji Kamaruzaman, the company's General Manager, said: "We started out by producing eight T-shirts for a local client. Now we are that market leader in Malaysia in the safety apparel market, while also supplying a number of international clients keen to buy our in-house designed products.
"Overall, there are a lot of opportunities for SMEs in Malaysia. We have good infrastructure, we have a big market and the government is very supportive. My advice to those starting up here is to never give up, have patience, start small first and minimise your risks."
Amy Seok, the Founder and Chief Executive of the SMEs Venture Group, a business consultancy, meanwhile is very blunt about the route companies need to take, saying: "In Malaysia, you have to find a niche and specialise if you want to survive. There is a very vibrant SME scene here, one backed by a number of government incentives and support schemes.
"For our part, we provide SMEs with business coaching and marketing strategies. Basically, we teach them what they need to know in order to ensure their businesses can be successful."
Seok may have found herself a particularly lucrative niche, with Safwan Zahari, Assistant Vice-president for Projects at the New Entrepreneurs Foundation, believing that the majority of Malaysian small-business owners need all the support they can get. He said: "While Malaysia's SME sector may be booming, the majority of small-business owners lack the skills needed to market their products or services properly, while also not having an understanding as to how to approach potential investors for financing.
"Many of them do not even know how to brand or package their products. SMEs need to seek professional help in these areas if they are going to be successful."
It is this skill and knowledge shortfall that the New Entrepreneurs Foundation was established to remedy. A non-profit organisation with a remit to nurture sustainable entrepreneurship, it has already helped more than 80 SMEs meet their funding and marketing requirements. Explaining the Foundation's role, Zahari said: "We can pretty much do it all for SMEs. We can even test out the market and pitch directly to investors."
Overall, it is the lack of sound financial knowledge that is seen as the biggest problem among many of Malaysia's entrepreneurs. Highlighting this, Emmy Choo, a Senior Associate at the Capspring Temasek Financial Group, an independent financial advisory company, said: "As company owners are busy making money, someone must take care of their business finances in the event of unexpected disasters. SMEs need insurance against such risks as an employer running off with the company's money or one of their key machines failing.
"Many SMEs are also keen to capitalise on the opportunities offered by the internet, often not realising that this means exposing themselves to a whole series of new risks, including cyber-attacks and online fraud. We can help them minimise all of these risks."
SME Solutions Expo 2016 was held at the Kuala Lumpur Convention Centre in Malaysia from 29-30 September.
Geoff de Freitas, Special Correspondent, Kuala Lumpur