The Basics of Starting a Business within SingaporeDownload Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist
If you’re thinking of starting your own business, congratulations!
Singapore prides itself on being one of the most business-friendly countries in Asia, which means that you’ve picked the perfect place to begin your entrepreneurial journey.
But as exciting as entrepreneurship can be, you probably have countless questions about launching your own business. Where do you start? What documents do you need? How do you analyse your competitors? And, of course, the big question: how do I finance my business so that it doesn’t fail in the first few months?
Don’t worry, we created the following guide to help you get started on your entrepreneurial journey. After reading this, you’ll be ready to start and operate your own business in Singapore!
Before You Start, Build Your Foundation First.
A big mistake that many entrepreneurs make is to start a business without first building a foundation. In fact, half the work of becoming a successful entrepreneur consists of everything you do before you launch your business. Unfortunately, though, most business owners get so excited that they jump straight into the very technical things like starting a website, getting a logo, launching online advertising campaigns, and similar tasks.
The foundation of your business includes things like coming up with a great business idea, understanding your customers, having a strong support system, and more.
So, before we explain the practical aspects of starting a business in Singapore, let’s briefly discuss the most important elements of your foundation.
How Do I Know If I Have a Good Business Idea?
The concept of a good business idea is very simple. If you’re solving your customers’ problems, improving their lives in some manner and they’re able and willing to pay for your solution, your business idea is both good and extremely valuable.
But remember, you can’t be all things to all people. That is, you have to very specifically define the group of people that you want to serve through your business. The group “young adults in Singapore” is far too broad; “men between the ages of 22 and 29 who live in urban areas in Singapore and have a median monthly income of at least $6,000” is a much better and more targeted group. Target market segmentation is vital in ensuring all your efforts are going to be efficiently utilised. Other benefits include, effective market campaigning, higher retention of customers and it allows for customer needs to be better addressed, which can ultimately increase customer satisfaction rates.
How Much Demand Is There for My Product?
There are three things you need to do to accurately determine how much demand there is for your product.
- Define your customer base. It’s impossible to know how many people want your product if you don’t know who to ask. Are you targeting single, working moms between 30 and 40 in Singapore? Self-employed graphic designers who need easier ways to convert their drawings into digital files? Whatever the case, one of the most important steps in calculating how much demand there is for your product is being crystal clear on who you’re selling to.
- Conduct a market survey. A market survey will tell you as many details as possible about the market for your product or service. A market survey can be carried out through online surveys or by utilizing focus groups, though focus groups tend to be a more time consuming and expensive option, as a soon to be start-up business it’s important to understand your target market. Here are a few examples of the information you can receive from a good market survey:
a) The current size of the market, which is an estimate of the number of potential buyers for your product. This is why defining your customer is so important; it tells you what part of the market you want to understand and should be studying.
b) The growth potential of the market. Based on current data, does it seem like the size of the market for your product will grow or contract in the next few years?
c) An estimate of the market share that you expect to acquire with your business. This is where you’ll analyse your competitors (more on that later) to determine the share of the market that they currently own. For example, are there a few big players in the market that own almost all of the market or are there many small players that own only very small parts of it?
d) The buying habits of your market segment. This part will help you answer important questions like “How much money do my target customers spend per month?”, “What do they spend their money on?”, “How much money do they earn?”, “Which features do they prioritise?”, and so on.
e) The various segments of the market. This will help you understand the different preferences of the many groups of people in the market.
f) The average profit margins in your industry. You should always go into entrepreneurship with your eyes wide open and know how much money you can expect to earn in the best- and worst-case scenarios.
Create your minimum viable product (MVP). An MVP is the most bare-bones, cheapest, and minimalistic prototype of your product that you can sell to a small group of customers so that you can get feedback on your idea. The success and feedback of your MVP will give you an idea of how much demand there is for your product, the aspects of it that were successful with customers, and the features that need to be improved.
It’s difficult to determine exactly how much demand there is for your product because of the gap between what people say they want and what they will purchase.
This phenomenon refers to the concepts of stated preferences and revealed preferences. That is, we often say that we want such and such a product, but we reveal our true preferences through what we eventually decide to spend our money on.
What about My Competition?
An effective way to study your competition is to create something called a market positioning map. Here’s an example of how to do that:
- Determine the top two most important features of your customers. For example, if it’s a chocolate bar it could be price and calorie count. You should have discovered this when determining the buying habits of your market segment.
- Find out which of your competitors are the best in each feature. To continue from the prior example, which company has the best price? The best (lowest) calorie count? Which one is good in both?
- Graph the companies’ results on a two-dimensional map, with the price on the y-axis and the calorie count on the x-axis. Make sure that the size of the circle reflects the company’s market share. In other words, the bigger the circle the bigger the company’s market share.
- Find holes in your market positioning map and position your company there. For example, if no company in the market offers a chocolate bar with a low price and low calorie count, there’s a gap in the market that your company can fill.
Which Documents Do I Need When Starting My Business?
You have to register your company with the Accounting & Corporate Regulatory Authority (ACRA), which is Singapore’s official company registrar. ACRA oversees the process of company registration and allows you to register your company as either a private limited company, a sole proprietorship, or a limited liability partnership (LLP). We won’t cover all the advantages and disadvantages of each type of business, so we recommend that you do additional research about that or hire a lawyer to help you decide which business structure would be best for you.
Nevertheless, the process of registering a company in Singapore is relatively simple and free of red tape. The main requirements are:
- The name of your company. The name has to be approved by and registered with ACRA. For more information on this, read our article on reserving your company name.
- At least one local resident director.
- An SSIC code which outlines your company’s business activities.
- At least one but no more than fifty shareholders.
- A local registered address in Singapore for your company office.
- You have to register at least one company secretary within six months of registering your company.
- A minimum of S$1 in Issued Share Capital.
Do I Need a License or Permit for My New Business?
This depends on the sector of business you operate within and the nature of its activities. A few examples of businesses that do require licenses and permits are restaurants, cleaning businesses, educational institutions, travel agencies, financial services, import/export of goods, and many more. If you do need a license, make sure to get it before you start your business activities.
What If I Want to Hire Employees?
You can either hire a recruitment agency to hire employees for you or create an in-house human resources (HR) department to do that. There are also several websites (e.g. LinkedIn) that you can use to recruit employees
Are There Any Grants or Government Assistance That I Can Get?
Although they are very competitive and hard to win, there are opportunities to obtain government grants for your new business. The following are the types of grants available on the Business Grants Portal:
- Market Readiness Assistance (Enterprise Singapore)
- Enterprise Development Grant (Enterprise Singapore)
- Electric Vehicle Common Charger Grant (Land Transport Authority)
- Business Improvement Fund (Singapore Tourism Board)
- Agri-food Cluster Transformation Fund (Singapore Food Agency)
- Aviation Development Fund (Civil Aviation Authority of Singapore)
- Productivity Solutions Grant (PSG)
- Covid-19 Support: Jobs Support Scheme (JSS)
For Foreigners: Should I Do Business Remotely or Move to Singapore?
The answer to this question varies per business and situation because it depends on your specific needs. For example, if you plan to operate a manufacturing company where you make physical products to sell only in Singapore, it might be easier to move to or open your business in Singapore. After developing company operations, you can consider applying for an Employment Pass (EP).On the other hand, if you plan to run a Software as a Service (SaaS) company and sell your services internationally, you might consider doing business remotely.
Sprout with Us!
Sprout offers professional corporate services to guide aspiring entrepreneurs just like you in the right direction! Our team of experts want you to focus on what you do best, while we handle the rest. Check out our budget-friendly incorporation packages to get you started. Any questions? Feel free to contact us with any queries you may have, we’ll respond within 24 hours.