Starting your business right in Singapore: The 5 key considerations before starting your business.
"The secret of getting ahead, is getting started." - Mark Twain
Starting a business in Singapore?
We have lived in a world where few countries revelled in economic prosperity while the bulk of countries watched with envy, wishing to share similar opportunities. Now, we live in a global economy, where every country is able to engage, contribute and benefit from the trading of goods and services across the globe.
Singapore took the opportunity to rise up the ranks as a nationwide super-hub for businesses to start, grow and prosper. The country provides many advantages for an entrepreneur who wants his business to grow in its prosperous environment. For instance, Singapore is strategically located as a business hub in Southeast Asia amongst prospering countries like China. It is politically and macro economically stable, while its tax systems and modern infrastructure perfectly positions the country as an entrepreneur’s haven. Such great business environment and economic opportunities prove to be attractive for budding business owners, corporations and investors.
Entrepreneurship at its peak
Entrepreneurship and capitalising opportunities go together – The process requires a business person who is ready to take risks with that unique DNA in their persona to take action. Starting a business can be stressful. It often feels like there are a thousand things to work on at the same moment. In such a reality, meticulous planning, creativity and perseverance will make it way easier for the business to thrive.
The 5 key considerations to think about when starting a business
Beyond giving it your all, it’s important to direct your energy to the right areas of focus – especially when you before you are planning for the incorporation of your company. With proper research and assessment of the legal aspects of your industry, you will be able to work on your personal and business finances, the range of risks involved and the adequate timing and help required. The first thing you should think about is your business model!
1. Planning your Business Model
In a traditional business model based on one-time sales, revenue is prone to market-based fluctuations with consumer sentiment a key determinant. The recurring revenue model guarantees the business a certain amount of revenue at scheduled intervals. The key question to ask yourself when starting a business is – Is your revenue based on recurring or one-time events?
In traditional business models, you acquire a customer, sell your product once, and then get a new customer to make another sale. Though acquiring a new customer generates the initial sale, making new sales to existing customers is simpler than finding entirely new ones who have yet to discover your product.
In subscription business models, customers pay a weekly, monthly, or yearly fee in exchange for your products or services and it initiates recurringly. Customers can renew their subscription after a certain period of time. This model allows you to leverage your customer relationships to create a steady stream of income.
A subscription-based business will give your business sustainable cashflows for operations. Subscription business models are beneficial for many organizations because they encourage long-term relationships and improve buyer retention. In current times, subscription models are used in almost every industry. Up-selling and cross-selling are a lot easier with a recurring revenue model, where businesses have continuous contact with customers to build bonds of trust, which makes it easier to sell additional services.
For the right product, brand and industry, choosing the right business model for your company can be a very effective and lucrative approach to running your business.
2. Knowing Your Customers
Next comes your customers. They are your key sources of income. The reason why your business model is up and running is to meet their needs. Are you a B2B or a B2C business? Your go-to-market strategy will differ with either.
Being able to find out and understand your consumer needs is crucial for every successful business. With this, you will be able to persuade existing and potential customers that acquiring your products or services is in their best interests. If you’re selling to other businesses, you’ll need to know which individuals are responsible for the decision to buy your product or service.
Every market strategy requires a great deal of market research of existing reports, business trends, consumer buying habits and needs, and competition in the industry. These will lead to you building greater confidence and foresight in the trends that are going to influence your customers, which in turn help you anticipate what they need.
Your business needs a reason for your customers to buy from you and not their competitors. This is called a Unique Sales Proposition (USP). Your USP can change as your business or your market changes, and you can have different USPs for different types of customer. All USPs are effective to the right audiences as their buying decisions have a direct correlation to the unique core features of your business. It’s also useful to be in the know of the USPs of your competition. The key factor is setting apart your USP from others in other to stand out from the market.
3. Understanding Your Margins
With proper understanding of your target audiences, make sense and interpret your Gross Margins and Net Margins. This is proof of the sustainability of your business. Your margins must make sense. When calculating your business margins, you will gradually have to factor in any affecting factor that has significance to your business – the more you factor in, the more accurate a picture you will get of your true profit margin.
Operating profit margin accounts for operating costs, administrative costs and sales expenses. It includes amortisation rates and asset depreciation, but it does not include taxes, debts, and other non-operational or executive-level costs. It tells you how much of each dollar is left after all the operating costs to run the business are considered.
Net profit margin is the toughest type of profit margin to track, however it gives you the best insight into your bottom line. It takes into account all expenses and income from other sources like your business investments.
Gross profit margin is the easiest profit margin to calculate. It helps you understand how much of your revenue you have left, by using calculations of your operating profit margin and net profit margin.
Your company’s margins reflect the overall profitability of your business, relative to its gross sales. Improving profit margins for your business is an important way to increase profitability. By widening your profit margins, you can make more from every dollar of your gross revenue. How can you improve profit margins? Track your expenses! You should always be in the know of how much money your business is spending.
After allocating time to calculate your business margins, you will have to make full use of your insights to readjust your production costs, prices of your products or services and other monetary influencing areas. You can then determine the margin by calculating what percentage of the total revenue represents gross profit. Business owners and managers can calculate what the overall margin of their business is or calculate the margins for individual products. Margins also help business owners and managers decide on the number of goods or services that they need to sell in order to make a significant profit.
4. Your Business’s Capital Intensiveness
Now you will be able to focus on your business assets. Would you need to own assets like machinery to operate your business, or are you renting them? Owning assets requires large amounts of capital outlay at the beginning
“Capital Intensiveness” refers to business processes or industries that require huge amounts of investments to produce a service or good and therefore have high percentages of fixed assets, like properties, manufacturing plants and equipment. Many businesses in capital-intensive industries are regularly marked by noticeable levels of depreciation.
Capital-intensive industries require a high volume of production to provide an adequate return on investment. Business owners have to note that small changes in sales can lead to big changes in profits and return on invested capital.
High operating leverage of businesses in capital-intensive industries are more prone to economic slowdowns as compared to labour-intensive businesses as they are tied down with fixed cost payments like depreciation on the equipment. Such cost have to be paid even when the industry is in recession.
Some examples of capital-intensive industries include automobile and semi-conductor manufacturing, oil production, telecommunication and transportation sectors such as railways and airlines. Such industries require a great deal of capital expenditure to strive and grow.
Another factor that can help your business gauge its capital intensity is to calculate the amount of assets required to product a dollar of sales, which is the total assets divided by sales. Known as the asset turnover ratio, this indicates the efficiency of your company in its ability to deploy assets to generate revenue.
Capital-intensive businesses are more prone to utilize a great deal of financial leverage, using their equipment and plant as collateral. Nevertheless, it is crucial as a business owner to understand that having both high operating leverage and financial leverage is potentially risky with any unpredicted drop in sales.
5. Shareholding
Building the right ownership structures in your business sets your incorporation for the long term. Is your company structured for incentivising growth? Ultimately, you have to provide the right people with the right incentives.
Being a shareholder involves the investing in a business with the hope of receiving a portion of available profits in relation to one’s shared holdings with the company. If things go south, a shareholder will also be required to contribute to the company’s debts to the capacity of their liability.
In current times, entrepreneurs tend to give more importance to their role as a CEO as compared to being the largest shareholder and chairman of the board. To account for that position, the role of CEO requires endless, tireless work and a great amount of dedication to keep the business growing.
When a founder holds a large percentage of shares, he must align his incentives with all other shareholders and investors. His most crucial role is to do whatever it takes to increase the value of the company and maximize returns. This means that he has to continuously assess the company’s ownership structures, leaderships and decision making reflects the interests of its shareholders.4
The ultimate control of the business lies with the shareholders. All it takes is a majority vote to make big changes when necessary. For instance, changing the course of business strategies or changing board members with reasonable stand.
In usual cases, during the early stages of businesses, the entrepreneur will take the top management role (i.e. CEO), sit on the board and be the majority shareholder. However, do not forget the importance of having strong corporate governance in place from the start in order to outperform companies that fail to do so.
Every business is dependent on its business models, and financing decisions made throughout its lifecycle. If you are the sole shareholder and director of your business, you owe the company itself. If you bring in investors, they will definitely acquire a certain percentage of ownership of the company. Nevertheless, it is important to know the level of control and involvement you want with your company so as to be able to provide the right incentives to the right people involved.
Start small, build a successful business model first before committing large sums of money. You want to minimize as much risk as possible before taking the plunge. Even for fund-raising, you can get a lot more capital once you have a proven, revenue-driven model.
Seth Lui
Starting your business right in Singapore: The 5 key considerations before starting your business.
"The secret of getting ahead, is getting started." - Mark Twain
Starting a business in Singapore?
We have lived in a world where few countries revelled in economic prosperity while the bulk of countries watched with envy, wishing to share similar opportunities. Now, we live in a global economy, where every country is able to engage, contribute and benefit from the trading of goods and services across the globe.
Singapore took the opportunity to rise up the ranks as a nationwide super-hub for businesses to start, grow and prosper. The country provides many advantages for an entrepreneur who wants his business to grow in its prosperous environment. For instance, Singapore is strategically located as a business hub in Southeast Asia amongst prospering countries like China. It is politically and macro economically stable, while its tax systems and modern infrastructure perfectly positions the country as an entrepreneur’s haven. Such great business environment and economic opportunities prove to be attractive for budding business owners, corporations and investors.
Entrepreneurship at its peak
Entrepreneurship and capitalising opportunities go together – The process requires a business person who is ready to take risks with that unique DNA in their persona to take action. Starting a business can be stressful. It often feels like there are a thousand things to work on at the same moment. In such a reality, meticulous planning, creativity and perseverance will make it way easier for the business to thrive.
The 5 key considerations to think about when starting a business
Beyond giving it your all, it’s important to direct your energy to the right areas of focus – especially when you before you are planning for the incorporation of your company. With proper research and assessment of the legal aspects of your industry, you will be able to work on your personal and business finances, the range of risks involved and the adequate timing and help required. The first thing you should think about is your business model!
1. Planning your Business Model
In a traditional business model based on one-time sales, revenue is prone to market-based fluctuations with consumer sentiment a key determinant. The recurring revenue model guarantees the business a certain amount of revenue at scheduled intervals. The key question to ask yourself when starting a business is – Is your revenue based on recurring or one-time events?
In traditional business models, you acquire a customer, sell your product once, and then get a new customer to make another sale. Though acquiring a new customer generates the initial sale, making new sales to existing customers is simpler than finding entirely new ones who have yet to discover your product.
In subscription business models, customers pay a weekly, monthly, or yearly fee in exchange for your products or services and it initiates recurringly. Customers can renew their subscription after a certain period of time. This model allows you to leverage your customer relationships to create a steady stream of income.
A subscription-based business will give your business sustainable cashflows for operations. Subscription business models are beneficial for many organizations because they encourage long-term relationships and improve buyer retention. In current times, subscription models are used in almost every industry. Up-selling and cross-selling are a lot easier with a recurring revenue model, where businesses have continuous contact with customers to build bonds of trust, which makes it easier to sell additional services.
For the right product, brand and industry, choosing the right business model for your company can be a very effective and lucrative approach to running your business.
2. Knowing Your Customers
Next comes your customers. They are your key sources of income. The reason why your business model is up and running is to meet their needs. Are you a B2B or a B2C business? Your go-to-market strategy will differ with either.
Being able to find out and understand your consumer needs is crucial for every successful business. With this, you will be able to persuade existing and potential customers that acquiring your products or services is in their best interests. If you’re selling to other businesses, you’ll need to know which individuals are responsible for the decision to buy your product or service.
Every market strategy requires a great deal of market research of existing reports, business trends, consumer buying habits and needs, and competition in the industry. These will lead to you building greater confidence and foresight in the trends that are going to influence your customers, which in turn help you anticipate what they need.
Your business needs a reason for your customers to buy from you and not their competitors. This is called a Unique Sales Proposition (USP). Your USP can change as your business or your market changes, and you can have different USPs for different types of customer. All USPs are effective to the right audiences as their buying decisions have a direct correlation to the unique core features of your business. It’s also useful to be in the know of the USPs of your competition. The key factor is setting apart your USP from others in other to stand out from the market.
3. Understanding Your Margins
With proper understanding of your target audiences, make sense and interpret your Gross Margins and Net Margins. This is proof of the sustainability of your business. Your margins must make sense. When calculating your business margins, you will gradually have to factor in any affecting factor that has significance to your business – the more you factor in, the more accurate a picture you will get of your true profit margin.
Operating profit margin accounts for operating costs, administrative costs and sales expenses. It includes amortisation rates and asset depreciation, but it does not include taxes, debts, and other non-operational or executive-level costs. It tells you how much of each dollar is left after all the operating costs to run the business are considered.
Net profit margin is the toughest type of profit margin to track, however it gives you the best insight into your bottom line. It takes into account all expenses and income from other sources like your business investments.
Gross profit margin is the easiest profit margin to calculate. It helps you understand how much of your revenue you have left, by using calculations of your operating profit margin and net profit margin.
Your company’s margins reflect the overall profitability of your business, relative to its gross sales. Improving profit margins for your business is an important way to increase profitability. By widening your profit margins, you can make more from every dollar of your gross revenue. How can you improve profit margins? Track your expenses! You should always be in the know of how much money your business is spending.
After allocating time to calculate your business margins, you will have to make full use of your insights to readjust your production costs, prices of your products or services and other monetary influencing areas. You can then determine the margin by calculating what percentage of the total revenue represents gross profit. Business owners and managers can calculate what the overall margin of their business is or calculate the margins for individual products. Margins also help business owners and managers decide on the number of goods or services that they need to sell in order to make a significant profit.
4. Your Business's Capital Intensiveness
Now you will be able to focus on your business assets. Would you need to own assets like machinery to operate your business, or are you renting them? Owning assets requires large amounts of capital outlay at the beginning
“Capital Intensiveness” refers to business processes or industries that require huge amounts of investments to produce a service or good and therefore have high percentages of fixed assets, like properties, manufacturing plants and equipment. Many businesses in capital-intensive industries are regularly marked by noticeable levels of depreciation.
Capital-intensive industries require a high volume of production to provide an adequate return on investment. Business owners have to note that small changes in sales can lead to big changes in profits and return on invested capital.
High operating leverage of businesses in capital-intensive industries are more prone to economic slowdowns as compared to labour-intensive businesses as they are tied down with fixed cost payments like depreciation on the equipment. Such cost have to be paid even when the industry is in recession.
Some examples of capital-intensive industries include automobile and semi-conductor manufacturing, oil production, telecommunication and transportation sectors such as railways and airlines. Such industries require a great deal of capital expenditure to strive and grow.
Another factor that can help your business gauge its capital intensity is to calculate the amount of assets required to product a dollar of sales, which is the total assets divided by sales. Known as the asset turnover ratio, this indicates the efficiency of your company in its ability to deploy assets to generate revenue.
Capital-intensive businesses are more prone to utilize a great deal of financial leverage, using their equipment and plant as collateral. Nevertheless, it is crucial as a business owner to understand that having both high operating leverage and financial leverage is potentially risky with any unpredicted drop in sales.
5. Shareholding
Building the right ownership structures in your business sets your incorporation for the long term. Is your company structured for incentivising growth? Ultimately, you have to provide the right people with the right incentives.
Being a shareholder involves the investing in a business with the hope of receiving a portion of available profits in relation to one’s shared holdings with the company. If things go south, a shareholder will also be required to contribute to the company’s debts to the capacity of their liability.
In current times, entrepreneurs tend to give more importance to their role as a CEO as compared to being the largest shareholder and chairman of the board. To account for that position, the role of CEO requires endless, tireless work and a great amount of dedication to keep the business growing.
When a founder holds a large percentage of shares, he must align his incentives with all other shareholders and investors. His most crucial role is to do whatever it takes to increase the value of the company and maximize returns. This means that he has to continuously assess the company’s ownership structures, leaderships and decision making reflects the interests of its shareholders.4
The ultimate control of the business lies with the shareholders. All it takes is a majority vote to make big changes when necessary. For instance, changing the course of business strategies or changing board members with reasonable stand.
In usual cases, during the early stages of businesses, the entrepreneur will take the top management role (i.e. CEO), sit on the board and be the majority shareholder. However, do not forget the importance of having strong corporate governance in place from the start in order to outperform companies that fail to do so.
Every business is dependent on its business models, and financing decisions made throughout its lifecycle. If you are the sole shareholder and director of your business, you owe the company itself. If you bring in investors, they will definitely acquire a certain percentage of ownership of the company. Nevertheless, it is important to know the level of control and involvement you want with your company so as to be able to provide the right incentives to the right people involved.
Start small, build a successful business model first before committing large sums of money. You want to minimize as much risk as possible before taking the plunge. Even for fund-raising, you can get a lot more capital once you have a proven, revenue-driven model.
Seth Lui
How we helped
At Tisch Global, we are professionals of over 30 combined years in anything Accounting and Finance. Being your modern business advising firm, we bring the best-in-class knowledge and tools to support the startup, growth and maturity of businesses in the many industries throughout Singapore.
We are your growth partners at different business stages:
✅ If you are a Young StartUp, let us materialise your vision.
✅ If you are a Fast-Growing Small Business, let us support your business goals.
✅ If you are a Mature SME, let us give you that competitive edge.
How we helped
At Tisch Global, we are professionals of over 30 combined years in anything Accounting and Finance. Being your modern business advising firm, we bring the best-in-class knowledge and tools to support the startup, growth and maturity of businesses in the many industries throughout Singapore.
We are your growth partners at different business stages:
✅ If you are a Young StartUp, let us materialise your vision.
✅ If you are a Fast-Growing Small Business, let us support your business goals.
✅ If you are a Mature SME, let us give you that competitive edge.
Written by, Sai Prema | Starting Your Business Right | 07 June, 2022 | #TGInsights
