Fail fast, fail often. This is a mantra commonly heard among the entrepreneurship community. However, the reality of failing is consequential, resulting in loss of money, lack of confidence in the leadership, decrease in market share and business closure, in extreme cases.
While many foreign entrepreneurs are drawn to setting up a business in Singapore given the country’s various business benefits, here are five common mistakes that they should avoid.
Forgetting to keep tabs on costs
Ranking among the top places in the world to do business, Singapore also features as one of the most expensive places to live, work and play. In terms of office rental, Cushman & Wakefield – a commercial real estate services company – reported in July that premium office rents in Singapore have risen for the first time in nine quarters. For instance, grade A central business district rents were at S$8.51 per square foot per month.
In terms of cost of living, Singapore has been consistently ranked as being the world’s most expensive city for expatriates according to the Economist Intelligence Unit’s Worldwide Cost of Living Survey. So, if you are a foreign entrepreneur looking to start a business in Singapore, make sure to include a detailed budget plan in your business strategy, taking into consideration startup costs and living expenses. It is always better to slightly overestimate potential costs to avoid the financial stress caused by unforeseen expenses.
Not knowing the market
Eight out of 10 entrepreneurs who start businesses fail within the first 18 months, notes Bloomberg. This can in part be attributed to the fact that entrepreneurs do not know their customers and deliver a product or service which customers do not really need. It is therefore important to test the market and estimate the demand for your potential product.
Even if the product or service is viable, it is key for the entrepreneur to know and define what the Unique Selling Point is. This will definitely save on the time and money spent on marketing the good or service. Foreign entrepreneurs in Singapore can get to know the local market by a number of ways, including in-country market reports, bespoke market research and networking events with potential partners and clients.
Engaging with the wrong partners or distributors
After the analysis and evaluation of the market, foreign entrepreneurs in Singapore might decide on working with a local partner or distributor. Working with a local contact offers a variety of advantages such as country knowledge, customer referrals, cross-pollination of ideas and profit-sharing. However, before embarking on working with another party, it is crucial to conduct due diligence. This can range from verification from the Accounting and Corporate Regulatory Authority’s (ACRA) website to background checks and business valuations on the potential partner or distributor. The aim is to know if their businesses are active, have good credit ratings and hold positive compliance with local tax laws.
Not understanding the Singapore tax regime
Understanding the Singapore tax regime and how to benefit from tax incentives may first seem overwhelming to a foreign entrepreneur. Since 2004, there has been a strong commitment to boost entrepreneurship in Singapore. To this end, startups, which satisfy qualifying requirements, can claim tax relief on the first S$100,000 of normal chargeable income for the first three consecutive years of assessment. (Read more here on the corporate tax regime in Singapore).
On the individual level, a foreign entrepreneur can benefit from the Not Ordinarily Resident (NOR) Scheme especially if he is always on the go and travelling for work. Under this scheme, the NOR taxpayer pays income tax only on that part of his employment income which correlates with the number of days he is in Singapore.
Hiring the wrong talent
According to the 2016 Willis Towers Watson Global Talent Management and Rewards Survey, more than 65% of Singapore employers struggle to attract talent. This is even more so for talents who are either top performers or high potential employees.
Singapore employers also found retaining talent to be an issue. In light of this, it is especially crucial for a new company to hire and keep new employees who have the right skill sets and right attitudes for doing business in Singapore.
It might also be worthwhile to create a core team to look after the various functions of the company. These team members could be sent from the head office to train the Singapore team and also align them to the company’s vision and mission.
Hiring the wrong talent can prove to be a strain to the company’s resources such as time, money, and effort by the company recruiter.
Starting a new business is both exciting and daunting. Contact AM Corporate Services today to discuss how we can be of assistance for some of the processes such as incorporation, taxation, business valuation, business consultancy or secretarial services.