Just four months down the road, the ‘resilient’ and ‘adaptor’ groups will need to find new footing amid new geopolitical challenges.
In online survey involving 13,118 decision makers of small- and medium-sized enterprises with fewer than 250 employees (SMEs) between 25 November and 2 December 2021 across 11 countries including South-east Asia (Malaysia and Singapore) to gauge the business impact of the pandemic, respondents were showing “green shoots of optimism” at the time.
At the international level, the data showed that a new generation of respondents has emerged during the pandemic who are more confident about the growth they can achieve in the upcoming year. In general, four main groups of respondents were identified:
- 14% of respondents belonged to the “COVID Generation” that saw an opportunity to launch during the pandemic. Typically, they were more optimistic than average, with big growth plans even though they reported larger-than-average success barriers, including recruitment and productivity issues.
- 27% were termed “Adaptors”—businesses that had faced a wide range of barriers during the pandemic but were the most optimistic group, confident about their staffing levels and their workforce’s digital skills. Adaptors responded to the challenges of the pandemic by increasing investment in technology, focusing on training and developing employees, recruitment, and service innovation. These businesses were usually mid-sized and the most likely (31%) to have received government funding.
- 18% were “Resilient” respondents that were cautious about the year ahead, having faced significant challenges related to the pandemic without making the required changes to adapt in the long term. They were focused on overcoming challenges rather than gaining growth, with most expecting no changes in their staffing levels, tech investment and revenue in the near future. Some 41% of these business decision makers were in the 18-34 age bracket and were less likely than average to have received government funding (19%).
- The remaining 9% of respondents were “Left Behind”: pessimistic about the viability of their businesses and seeking support to continue their operations. These businesses largely expected barriers such as cash flow and liquidity problems and reduced customer demand in the year and beyond. They were likely to be the smallest businesses globally, with 24% operating as sole traders and being less likely than average to have received government funding (19%).
- 64% of businesses in the survey had been founded during the pandemic by young people (aged 18–34).
- ‘COVID Generation’ businesses were much more adaptable to pandemic restrictions, with less 29% stating that the pandemic had negatively impacted their operations in the past 12 months. These SMEs were more confident they can generate revenue growth in the next six months (57%) vs those founded before the pandemic (48%). However, these businesses still feel there are significant barriers to success, with relatively low levels of satisfaction in various areas of their business, including staffing levels (56%), ability to recruit talent (51%) and productivity (58%)
- Over 33% of SMEs in the survey were still not operating normally due to pandemic challenges.
The top five challenges cited as negative impacts included:
- 34%: being unable to operate our business as normal due to the pandemic
- 31%: increases in costs (inflation, wage increases, rent increases)
- 23%: reduced demand from customers
- 20%: supply chain disruptions
- 19%: cash flow / liquidity problems
- 69% of global respondents indicated confidence about the success of their businesses within 12 months, including 65% that were optimistic at the time of the survey (which omits 2022 circumstances)
- 81% of respondents expected to be at least somewhat back to pre-pandemic levels of profitability 12 months from the survey period.
Singapore and Malaysia findings
In Malaysia, the 1,070 SMEs in the survey were more likely than the global average to name a range of barriers that were impacting their business—most notably:
- being unable to operate as normal due to COVID (50% vs 34% globally)
- increases in costs (42% vs 31% globally)
The respondents named a wide range of strategies that had helped them to overcome these two key barriers, including cutting costs (44% vs 31% globally) and adopting technology to operate better (39% vs 24% globally).
For Singapore’s survey sample size of 528, SMEs polled were much less likely to feel confident at the time of the survey (53%) compared to the global average of 65%. Decreased cash flow was the most common reason (55%) for this lack of confidence and significantly affecting SMEs in the country in comparison to the global average of 32%.
According to Steve Hare, CEO, Sage Group, which commissioned the survey: “SMEs have demonstrated incredible resilience throughout the pandemic. But their confidence cannot be mistaken for invincibility. Governments must do more to safeguard their prosperity against a backdrop of continued uncertainty and rising costs—or we risk forcing them to choose between protecting people or protecting profits. Overlooking smaller businesses endangers the recovery and thousands of jobs; we all have a role to play in futureproofing their success.”