KUALA LUMPUR, May 27 — More than half of Malaysian and Singaporean small businesses are optimistic about growth despite the signs of a challenging business environment, according to the inaugural Small Business Sentiment and Friendliness Survey conducted by on-demand services startup ServisHero.

The survey of more than 2,000 small businesses — albeit those only on ServisHero’s platform — saw 63 per cent of respondents saying that their businesses were performing better than in 2015, and 65 per cent reported an increase in client base over the past six months.

Arguing that business sentiment is mostly concentrated on large companies because it’s difficult to reach out to thousands of small and medium businesses, ServisHero founder and chief executive officer Karl Loo (pic above) said it is important to find out what these companies think as their contribution to the economy is substantial.

“We receive thousands of data points every day, and we wanted to accurately use this to support the observations in the index.

“Our aim is to provide meaningful and actionable data to businesses and governments to support SMEs (small and medium enterprises) — the backbone of our economy and of ServisHero,” he told Digital News Asia (DNA) in Kuala Lumpur recently.

The survey also revealed that business owners in Kuala Lumpur were more optimistic than those in Johor Baru and Penang. Similarly, businesses with two or more employees, plus those which have been in business for over a year, expect more growth in the next six months, ServisHero said in a statement.

The company said its Small Business Sentiment and Friendliness Survey provides a ground level view of the economy from the perspective of small business owners in different parts of Malaysia and Singapore.

The survey, conducted in April, also looks into what factors affect small business owners and measures the optimism that respondents feel about the prospects of their companies relative to the state of the economy.

The results from the sentiment questions are aggregated into an overall Sentiment Index, which will be used to track the outlook for this sector and correlated to economic activity on a quarterly basis, ServisHero said.

The Index ranges from 1 to 100, with a value above 50 indicating that respondents are more optimistic than pessimistic, the company added. Malaysia recorded a Sentiment Index of 64.5.

Small business challenges

According to the survey, while the overall sentiment and outlook was positive, access to labour was a top concern for small businesses, followed closely by access to finance and ease of obtaining appropriate licensing.

“Although word-of-mouth still reigns strong as the most popular way of gaining new leads, 27 per cent of businesses have employed some form of digital marketing in the past six months,” ServisHero said.

In terms of access to financing, Singapore was way ahead of Malaysia: 75 per cent of Malaysian respondents said finance was not easily accessible, whereas only 57 per cent in Singapore expressed the same sentiment.

Overall, 72 per cent of owners reported that their financing needs were not met by their regional government or financial authorities. 17 per cent of the respondents in Malaysia, along with 13 per cent of those in Singapore listed ‘limited access to funding or high cost of credit’ as the biggest challenge faced by their businesses.

Interest rates are low, but prospects for putting borrowed money profitably to work are not common practice for small business owners. Ironically, even with more than half of all owners expecting business conditions to improve, prospects for an improvement in financing are not looking particularly good, ServisHero said.

Finding and securing talent is a major pain point for small businesses, whether or not skilled labour is required, according to the report.

32 per cent of respondents reported hiring or trying to hire in the last six months, often with few suitable applicants for the positions they were trying to fill. Over three-quarters of Malaysian businesses found it difficult to find and hire new employees.

“It appears that this may be a continuing theme as 56 per cent of respondents expressed an intent to hire in the next six months,” ServisHero said.

In addition, 17 per cent of overall respondents indicated high cost or poor quality of labour as their single biggest challenge.

More on methodology

ServisHero said its Small Business Sentiment and Friendliness Survey analyses two major metrics, where respondents have to rate various statements relating to their business and their environment on a scale ranging from ‘Strongly Disagree’ to ‘Strongly Agree.’

The questions were grouped into two major categories:

1) Business performance and outlook (Sentiment)

This section focused mainly on questions related to business performance in the past six months and plans for the next six months. ServisHero said it analysed growth based on plans and track record for additional hires, boosted customer base, and geographic expansion.

2) Ease of doing business (Friendliness)

Certain external factors and government regulations affect small businesses more than others, the company said. This section explored what the most critical factors that contribute to the ease of doing business are in various cities across Malaysia and Singapore.

The survey was conducted in April 2016 and meant to review small business owners registered at ServisHero, and which are actively using the platform.

For purposes of this survey, small businesses are defined as employing 10 or fewer people on either a full-time or part-time basis.

The full report is available on request. — Digital News Asia

* This story was first published here.