TWO THIRDS OF START-UPS PROFITABLE WITHIN 3 YEARS

Nationwide Survey of Start-Up Enterprises shows entrepreneurship is thriving in Singapore
Roadshow at DP Bureau shares key findings  
 
 
They are young, educated and prize individual freedom and control over their own careers. With less than $50,000 and with just six months of planning they make the bold step of establishing their own company.

And remarkably, within three years most have turned their business idea into a profitable enterprise, generating employment for up to eight of their fellow Singaporeans.

This is the profile of a typical Singaporean entrepreneur according to a new nationwide survey of start-up companies released today by the DP Information Group (DP Info) - Singapore’s leading provider of business and credit information - and strategic partner Action Community for Entrepreneurship (ACE). Sirius Venture Consulting is a sponsor for the survey.

The DP Information - ACE STEPS Survey was conducted among 582 companies that have been in operation for up to three years.

Ms Chen Yew Nah, Managing Director of DP Info said the survey reveals critical information on the challenges of starting a new enterprise.

“For the first time, we have a clear profile of the typical Singaporean entrepreneur. More than 65% of entrepreneurs are under the age of 40. And they are well educated, with 70% having achieved a tertiary level qualification.”

“The most encouraging finding of the survey is that 63% of startup companies manage to make a profit by their third year. A healthy 36% are profitable within the first 12 months of operations, and another 27% achieve profitability by the third year. Only 37% have yet to breakeven,” Ms Chen said.

Mr Inderjit Singh, Deputy Chairman of ACE, said the survey shows more and more Singaporeans are realizing their dream of starting and owning their own business.

“The number of new start-ups hit an all-time high in 2005 with close to 43,000 new companies and businesses established. Based on the preliminary results, 2006 looks set to exceed this number. With entrepreneurship on the rise in Singapore, the purpose of this survey is to give us a clear picture of the new breed of entrepreneurs and understand their challenges to help us better identify the gaps and catalyse relevant changes.”

CAPITAL

The typical Singaporean entrepreneur starts small with 73% of respondents investing less than $100,000 in their new venture, while 42% start with less than $50,000 in initial capital.

The reason for the modest initial startup capital is the limited sources of funds available to the entrepreneur. The primary source of capital is the founder’s own funds, together with resources from family and friends - 77% of new companies use the founder’s own funds, while another 27% use funding from family and friends.

Throughout the first three years of a new company’s life it continues to rely heavily on the financial resources of the founders. According to the survey, 90% of start-ups rely on owner’s equity to fund operations while only 12% use term loans and 11% have an overdraft facility.

FOUNDER’S EXPERIENCE

The trend is towards younger entrepreneurs, with two-third (65%) of the founders aged 40 and below. Only 8% of the founders are aged above 50.

The founders of start-up companies tend to stick to what they know with 92% possessing working experience in the industries in which their new venture will operate. Many are extremely well qualified with 50% having 10 or more years of relevant experience.

Today’s entrepreneur is also well educated with 42% having obtained at least a Bachelor Degree, and 70% possessing a tertiary level qualification.

START-UPS LOOK TO OVERSEAS MARKETS FOR GROWTH

The survey findings show a high proportion of start-up companies look to overseas markets to drive their growth. Within the first three years of their operation, 43 percent of new businesses successfully establish an overseas presence.

The majority of these companies spend their initial 12 months stabilizing their business. However, 41% of new businesses enter the international marketplace in their second year, while another 32% do so in their third year of operation.

Of the companies that do venture overseas, 67% do so through exporting goods, while 12% choose to establish a physical presence through an overseas subsidiary, branch or office. Another 11% prefer to establish an overseas alliance when entering a new market.

RESEARCH AND PLANNING

Entrepreneurs do not spend a lot of time on research and planning before starting up a company. Nearly two thirds (63%) of the founders spend less than 6 months in planning and preparation before commencing with their new venture.

GETTING CUSTOMERS

No business can survive without customers, so getting and keeping new business is essential if any new venture is to succeed. And when it comes to getting new business, there is nothing more powerful than ‘word of mouth’ recommendations. According to the survey, 64% of companies win new customers through the recommendation of existing customers while 36% rely on referrals from business partners.

OUTSOURCING POPULAR AMONG START-UPS

Start-up companies see the benefits of outsourcing specialized functions such as accounting (45%), corporate secretarial (30%) and web hosting (22.0%). Since most start-ups have a smaller workforce and cost restraints, it makes sense for a new business to outsource these functions, allowing the business to focus on its core activities.

CONCLUSION

While it is encouraging that a high percentage of start-ups achieve profitability within three years, there are several findings in the survey which highlight the enormous challenges an entrepreneur faces when starting a business. The survey has identified the following areas where start-ups would welcome assistance in::

1. Start-ups are largely reliant on referrals - 64% depend on referrals from existing customers and 36% on their business partners. Almost half (48%) are asking for assistance in networking to meet potential customers.

2. Start-ups need additional planning and management skills - 88% are seeking assistance with operating and managing a business, business planning, financial management and marketing research/planning.

3. Start-ups rely heavily on internal funding - 77% rely on owners’ equity and 27% on friends/relatives to provide start-up capital. 97% of start-ups are requesting assistance from the government to push for greater access to other funding options.

INFORMATION SHARING AT DP BUREAU ROADSHOW (OPEN TO THE PUBLIC)

In support of the Start-Up community and aspiring entrepreneurs, DP Bureau, a subsidiary of DP Information Group, has organised a four-day roadshow starting on 9 January (Tuesday) till 12 January (Friday). This roadshow will be held at DP Bureau’s International Plaza branch, located on the fifth level. The roadshow is open to the public and DP Information strongly encourages start-up business owners and aspiring entrepreneurs to attend the roadshow to gain a better insight into the start-up community. Highlights of the survey will be shared at this roadshow for fellow start-up owners/entrepreneurs and aspiring entrepreneurs who are keen to learn more.

Ms Chen Yew Nah said “The nationwide Start-Up Enterprise of Singapore Survey is a major step forward for companies that have been incorporated for up to three years and are looking for avenues to express their views. At the same time, it provides a platform to address the challenges that they face as a start-up company.”