Planning to start a small business in Singapore? You have probably made the best decision of your life. Simply take a look at the World Bank’s Ease of Doing Business Report released in 2017 to know how Singapore continues to favour businesses and entrepreneurs.
Even with a helpful environment, you still need actionable ideas to get your venture off the ground. However, won’t you agree that hatching plans for a business is not the same as actually implementing such plans? It requires a lot of detailing and an action-oriented approach.
Our own experience of starting a business in Singapore has taught us a lot. Ideas that we’re going to share with you in the next few sections, may help you move in the right direction. But first, let us help you identify the common bases that you need to cover before launching your business.
Give Your Entrepreneurial Venture Direction by Doing the Following
The success and stability of a business can depend a lot on how you lay its foundation. Hence, getting things right from the beginning is important. Here is a list of things that you should do first:
Find an Idea That You Can Build on
It goes without saying that a business can’t be started without a basic idea. However, that may not be enough. You have to find an idea that’s practical. The idea should be adaptable and should be able to derive ‘juice’ from the ecosystem available.
Study the Market
An idea will only work if it can solve a specific problem. Sometimes, the market may not even realise the problem until you have pointed it out. Tell the market how your idea can solve the problem better than other options available.
Don’t forget to study the solutions offered by your competitors. To make your product/service unique, you need to know what your competitors are or aren’t offering.
Learn Where to Source Your Business Funds From
Obviously, financing is one of the most important requirements for starting a business. Do you have a corpus big enough to power your business through and through? If not, where else can you find money? Should you depend on crowdsourcing, approach an angel investor, talk to friends, or look for government assistance?
The right answer may lie in your business objectives and model. Understanding the purpose of financing is equally important. Is it for expansion, is it for buying equipment, is it for procuring raw material, or is it for paying off rents and salaries? You may find loans that are specific to your need.
Some loans are designed specifically for startups and small businesses. The collateral-free Business First Loan from OCBC is an ideal example of such a loan. You may even consider a personal loan if you have a good credit profile and limited needs.
Know the Government Bodies and Regulators
Knowing the government regulations inside out is a must. You should also be aware of the various government assistance programmes. Find out more about organisations such as Enterprise Singapore that guide investors and entrepreneurs.
In addition to helping individuals start businesses in Singapore, Enterprise Singapore also helps businesses looking to venture into markets outside Singapore. It will help you connect with the right stakeholders. You’ll also be advised on regulatory compliance issues, market opportunities, tax compliance issues, and even key partnerships.
Government platforms such as Startup SG also act as a launchpad for many small businesses.These organisations can often help you establish the right connections.
Understanding the relevant MAS (the Monetary Authority of Singapore) policies and the country’s tax policies as administered by IRAS (the Inland Revenue Authority of Singapore), is a must.
Know the Registration and Licensing Rules in Detail
Before you can start a business, you’ll have to register it. You may also need licences for specific business operations and functions. You’ll not only need to carefully analyse the costs for each, you’ll also have to know what the eligibility requirements are, to what extent a certain rule applies to you, and how to get them.
Have a Clear Idea About the Probable Costs
Starting a business from scratch without knowing the costs involved and estimations for each can be difficult. Even for purposes of budgeting and accounting, you’ll have to identify various cost components. In addition, you’ll have to think of ways to minimise such costs.
If you can control the operational costs well, it will be easier to manage your cash flow. You may also be able to break even quicker. Once you understand your cost expectations, you can also price your services/products properly. After all, both underpricing and overpricing can spell doom for your venture.
Need an Office Space? Here Are Some Factors You Should Base Your Search on
For certain small businesses, you may not need a commercial space. However, in most cases, you will. Due to high rental/lease prices, cost may become a major determinant of suitability. Doing a cost-versus-expected-return analysis is a must.
For example, if your business is expected to thrive on high footfall, you may have to rent a place that is based in a major business centre. On the contrary, you may not require a piece of property in a prime location if:
- Your business is in the B2B domain OR
- You wish to mainly follow an online-sales model OR
- Your business is low-volume and low-margin, among other things.
Also, start the hunt for an office early. This will give you the time to look at multiple properties and also negotiate a deal better.
Lay a Foundation for Your Marketing and Promotional Policies
Nowadays, a business, even in niche sectors, can’t avoid promotions altogether. Although, you may not yet be in a position to decide on the marketing specifics, you can definitely create a policy direction.
You’ll also have to allocate a separate budget for communication and marketing. This is also an area where a thorough understanding of market dynamics will help you.
Find out more about the media consumption habits of your clientele. Determine the budget accordingly. Allocate money for each channel separately.
If reliable market data is available, use it. By market data, we mean details of marketing plans used by your competitors, approximate budget allocations they make, and returns on investment in the last few years.
Do a Thorough Research on Corporate Savings and Current Accounts
Banking is an integral part of running the day-to-day operations of a business. Almost every bank offers special benefits for business accounts. Spend time on the internet to choose the best savings or current accounts for your business. Compare the offers and features.
With a clear business plan, you’ll be able to identify a business account that can be plugged into it effortlessly. An ideal account will not only help you manage your cash flow better but it will also have levers that help expedite borrowing, when necessary.
Know How to Bring on Board the Best Talent
It goes without saying that a business is as good as its workforce. If you can’t find the right people for the right jobs and if you can’t retain them, your business will lose competitiveness and also the trust of your customers.
You may refer to government platforms such as Workforce Singapore to find the best talent.
Let us now get into the specifics of some of these plans in the next section. You’ll find out how some of these plans can be implemented on the ground.
Here’s How You Can Convert Your Strategic Plan/Vision Into Reality
Once you have a set plan for your business, you can start the gruntwork. Here are some ideas that you may find useful and implementable:
Get Professional Help for Registration
To register your company, you may hire a registration company. Self-registration isn’t available to foreigners. You’ll have to register your company name, names of board of directors, and the structure of your company with ACRA (the Accounting and Corporate Regulatory Authority of Singapore).
To register a business, you’ll also have to do the following:
- The name of your company has to be approved by the government. The process will be overseen by the Company Registrar.
- If your company is incorporated as a private limited, you can register up to 50 shareholders.
- Appoint as many directors as you want. However, at least 1 director has to be based in Singapore. All the directors should be aged 18 years and above. They should also have no prior criminal records or undischarged bankruptcy. Directors need not be shareholders.
- You’ll also have to appoint a qualified company secretary within 6 months of incorporation.
- Your incorporated company should have a minimum paid-up capital of S$1. It can be in preference shares, ordinary shares, or other forms of shares.
- You’ll have to register a local address. It can be commercial or residential in nature.
- Foreign owners will have to fulfil some additional requirements such as work visas. We’ll talk about them in detail, later.
Start Making Arrangements for Necessary Licenses
Depending on the nature of your industry or business type, you may have to procure various government permits. You can visit the government-owned LicenseOne website to find a comprehensive list of permits that your business may require.
You’ll have to answer a few questions, select a permit, fill up a form, and submit it online. You can pay the necessary fees online. The website will also give an estimate for the possible processing time.If you’re not too keen on the legwork, you can seek assistance from legal firms/agencies.
Seek Mentorship and Funding for Your Business
An ideal incubation centre should provide businesses support at different stages of growth. A business should be able to scale up in a hassle-free manner. Singapore has all the qualities that you would want as an entrepreneur.
The easiest way to connect with the right accelerators, incubators, and investors in Singapore is through government platforms such as Startup SG. It can help you find the right resources, guidance, and assistance. Startup SG has six distinct arms that offer specialised assistance:
Startup SG Founder
This platform can connect your business with the right mentors and investors. Provided your business proposition is unique and innovative, this platform can also provide you funds of up to S$30,000.
Startup SG Tech: This platform can help you fund your proprietary technology developments. Funding may also be offered for faster commercialisation of such technology and scaling up of business.
Startup SG Equity: This is a platform through which the government may co-invest in your business along with qualified third-party investors. To qualify for this scheme, however, you’ll have to demonstrate the potential to reach global markets. You’ll also have to exhibit ownership of intellectual property.
Startup SG Accelerator: This platform works with incubators/accelerators to identify high-potential startups in key sectors. It also helps these mentors connect with these startups. If your company qualifies for this opportunity, you can receive training, funds, and guidance from incubators/accelerators.
Startup SG Talent: This platform aims to help businesses attract skilled workers from all over the world. One aspect of it is to make the process of getting work visa for foreigners smooth and glitch-free. With its help, you might be able to find the right talent for your company. The aim will be to use the talent to solve challenges that you face in areas of growth and innovation.
Startup SG Loan: Many small businesses and startups struggle initially due to lack of funds. The government has tied up with participating financial institutions (FIs) to ensure that funds/financing is available to companies that are showing potential and need money. If your business qualifies for such schemes, you’ll be able to borrow at soft rates and enjoy various other benefits.
A seventh pillar — the Startup SG Investor — tries to encourage investors to invest in innovative startups in Singapore. The government offers tax incentives and exemptions to such investors and fund management companies for investing in new startups.
Try to Benefit From Tax Rebates and Incentives
In addition to having a low corporate tax rate of 17%, Singapore offers a number of tax incentives and rebates to startups and small businesses.
Currently, your company will enjoy partial exemptions (until YA 2019) as follows:
|Taxable Income||Percentage of Exemption||Actual Amount of Exemption|
IRAS also offers a tax exemption scheme to new startups. Until 2019, tax exemptions will be as follows:
|Taxable Income||Percentage of Exemption||Actual Amount of Exemption|
For the tax assessment years 2018 and 2019, IRAS will also offer tax rebates of 40% and 20%, respectively to eligible companies. The Corporate Income Tax Rebate has, however, been capped at S$15,000 for 2018 and S$10,000 for 2019.
From the year of assessment 2020 (YA 2020), your company might enjoy partial tax exemptions as follows:
|Taxable Income||Percentage of Exemption||Actual Amount of Exemption|
If the first three years of assessment of tax for your company coincides with YA 2020 or goes beyond, you can save S$125,000 through exemptions on a taxable income of S$200,000. You can find out more about such tax exemptions here.
Small companies can also benefit immensely from Double Tax Avoidance Agreements, Investment Guarantee Agreements, and also free trade agreements that Singapore has with many countries. This is beneficial not only for local companies but also for foreign companies looking to start a business in Singapore.
Seek help from legal and financial experts with thorough knowledge of Singapore’s tax structures and regulations. This might help you reduce your liabilities and enjoy the most lucrative deals.
Find the Best Talent and Train Them Adequately With Government Assistance
Running a business without the right talent is impossible. Training them and keeping them up-to-date with the latest practices is also a necessity, especially for companies working in technology sectors.
The Government of Singapore has a platform for this too. SkillsFuture SG is a government initiative that connects employers with prospective employees. It also helps companies train their workforce and get funded for such activities. It also runs a number of programmes to help companies increase their productivity, and thereby, revenue and impact.
You can also find insights on the labour market on the SME portal managed by the government. Get tips on hiring and information on training as well. You may also receive government assistance and relevant market information.
Secure the Right Visas and Work Permits
This is especially important for foreign companies with a base in Singapore or local companies looking to hire from abroad. For example, directors and top-ranking executives looking to stay in Singapore for a few years can apply for Employment Passes. It is valid for 1-2 years. You can renew it every 3 years.
The S-Pass can pave the way for entry of a foreign specialist or a skilled worker in any domain. The Work Permit is usually reserved for low-skilled or unskilled foreign workers.
If you’re a foreign entrepreneur who is looking to set up business in Singapore, you may apply for an EntrePass. The first pass will have a validity of 1 year. Every subsequent pass will be valid for 2 years. Depending on your total business spend in a year, you may also enjoy the privilege of getting certain family members entry into Singapore.
Special Tips for Foreign Entrepreneurs
Planning to start a business in Singapore? Visit the Ministry of Manpower website for relevant information. You can visit the MAS website to learn more about financial norms, regulations, and policies. Turn to the Legal Services Regulatory Authority website if you need legal assistance or information. For most other business-related assistance, you may visit the Enterprise Singapore website.
You can choose to set up a business without relocation and have at least one resident director. You can also choose to start an offshore company in business. The third alternative could be to relocate to Singapore in person to open a business. Liaising with an agency that specialises in handling visa, company registration, and permits, can make life simple for you.
Expected Cost of Company Incorporation and Related Activities
According to online sources, the cost of incorporating a business could be around S$2,354 for a company with at least 1 resident director. It could be around S$5,759 for an offshore company located in Singapore. A foreign entrepreneur with an employment pass may have to pay an approximate fee of S$7,230 (All charges inclusive of GST). Some of the common cost components could be:
- Incorporation of your company.
- Provision for registration of a local office.
- Allocation for a nominated director.
- Cost of hiring a company secretary.
- Cost of securing an employment pass, where applicable.
- Cost of opening a savings or current account.
- Paying a deposit fee (refundable).
Why Should Singapore be Your Choice for Launching Your Business?
By now, you may have realised the advantages you would enjoy if you start your business in Singapore. Here are some pertinent reasons that make Singapore a hotbed for small businesses:
- Ease of doing business.
- Transparency in government regulations.
- Protection for workers and laws that categorically deny employers the right to mistreat them.
- A developed infrastructure to support growth.
- Easy availability of information in the public domains.
- More than 50 comprehensive Double Tax Avoidance Agreements between Singapore and other countries.
- Easy import/export regulations.
- One of the lowest corporate tax rates in the world. It has stood at 17% since 2010.
- Various tax exemption schemes for new startups.
- Easy transfer of technology and platforms for innovative collaborations.
- Ease of funding and financing for businesses.
- Government and corporate support for startups.
Large organisations such as DBS constantly offer mentorship and financing to small businesses including social enterprises. Recently, it has launched a mentorship programme to nurture 12 social enterprises.
Do you know what else makes Singapore a great option for entrepreneurs? It offers flexible exit options to them. According to this report, Singapore has recorded 40 exits in a decade. The total value of exits was US$530 million.
This means that if you can set up a business that runs on strong fundamentals and transparent policies, you may not have a problem exiting it, if you choose to in the future. Who knows, one day tech giants like Amazon or Facebook can be interested in your proprietary technologies. That way, you can get to exit the company and make a fortune out of it. If everything goes well, you could even be Singapore’s next millionaire!