Why we assist SMEs to transform to unlock their full potential

The importance of SMEs as an engine of growth

Small-medium enterprises (SMEs) are the backbone of the Malaysian economy, accounting for 38.9% of Malaysia’s total GDP in 2019. Furthermore, share of SMEs exports to total exports in 2019 was 17.9% and SMEs employment comprised of 48.4% from Malaysia’s employment (i.e. 7.3 million persons in 2019)[1].

When the COVID-19 pandemic hit in 2020 and Malaysia went into lockdown (Movement Control Order, MCO), the government introduced various stimulus packages in March 2020, where RM100 billion was initially allocated for SMEs under the PRIHATIN Rakyat Economic Stimulus Package, following which an additional RM10 billion was allocated in April 2020 to reduce the financial burden of SMEs and to ensure job retention in the SME sector (accounting for 2/3 employees in this country)[2].

Throughout 2020, Malaysia saw variations of MCOs where only businesses under ‘essential services’ were only allowed to operate, and even so, with only up to 30%-50% of the total workforce. More than 50% of SMEs saw a 50% drop in business within the first week of MCO[3].

While the government has proactively rolled out financial support, in particular to ease SMEs’ burden on cashflow, businesses still needed to find long-term viable solutions/turnarounds and potentially make pivotal business decisions to weather through the pandemic and survive. Therefore, timely crisis management support was crucial to ensure SMEs can survive given their vulnerability compared with large corporations that (usually) have a financial buffer to fall back on.

For SMEs that were already leveraging e-Commerce/digital platforms, it was crucial to quickly adapt to current circumstances where e-Commerce online shopping platforms were immediately promoted as the main medium for SMEs to promote and sell their products. During the pandemic, new (online) micro-entrepreneurs emerged; 82,555 new businesses had been registered from April to July 2020[4].

PEMANDU Associates’ approach for transformation, be it crisis management or to strive for higher profits, is not just for large corporations. The approach has been adapted, made accessible to SMEs in helping them with their current goals.

Our four-step approach is designed to achieve:

  1. Identified areas of focus and prioritisation across the business / value chain through a Diagnostics Assessment
  2. Identified financial improvements through Segmented P&L Analyses 
  3. Transformative initiatives/programmes through PEMANDU Associates’ Big Fast Results (BFR) Lab methodology
  4. Timely communications to key stakeholders with rigorous implementation and monitoring of transformation initiatives to garner buy-in and commitment throughout the company, guided with measurable Key Performance Indicators (KPIs) 

Case Study 1: SME Transformation in a Local Fashion Retailer

Case for change:

With physical outlets across four states accounting to over 80% of revenue and its e-Commerce platform growing incrementally, the COVID-19 pandemic and imposed MCOs drastically impacted revenues negatively. Pivoting the business quickly was key to ensure the survivability of the business under the current economic and business climate.

Our approach:

Outcome Summary:

  • Transformative initiatives to end 2020 with a healthy cash surplus position, focusing on revenue and customers, controlled spending and cashflows, and recalibration of the company’s staff remuneration package 
  • Leadership’s proactive role in business decision making, with a clear communications plan to their staff on how the company plans to weather through the crisis through a closed-door townhall session, to address staff’s concerns on job stability 
  • KPIs and detailed implementation plans to monitor and ensure the company is on track to achieving its financial target of a healthy cash surplus position by the end of the year 

Case Study 2: SME Transformation in a Local Wellness & Healthcare Provider

Case for change:

With physical spa and wellness outlets across two states, an established wellness & beauty training academy and successful (organic) body & skin-care products sales via physical outlets, word of mouth marketing and an e-Commerce platform, the company has set aspirations of becoming a listed company within the next 5 years.

In order to qualify, requirements such as the holistic nature of business under a group of companies, 12 months of working capital, and at least RM 5-6 million in Profit After Tax (PAT) for the year prior to listing, would need to be fulfilled.

Our approach:

Outcome Summary:

  • Anchored on the RM5-6 million PAT target within the next 5 years, 100+ segmented profit and loss analyses were studied on all offerings to identify top-line strategies and to prioritise transformation initiatives that would contribute the highest impact in terms of profitability
  • Townhall session with staff to align leadership’s aspirations and to communicate how the company plans to get there, in order to garner commitment and alignment throughout the company
  • 3-month programme management with PEMANDU Associates to handhold and capacity build the company on the implementation of these initiatives through rigorous problem-solving and monitoring of KPIs and implementation plans

Why we believe in unlocking SMEs’ full potential

The pandemic has pushed many businesses to transform; some businesses have diversified, fast-tracked its e-Commerce and digitalisation plans, while others have completely changed its business offerings that are more profitable and in demand.

With SMEs as key drivers for economic activity, it is crucial to unlock SMEs’ full potential. They create jobs, where majority comprising of micro enterprises have seen local communities’ livelihoods advance and thrive further. SMEs should thus adapt to new norms, capitalise on government support towards digitalisation and continue to evolve themselves further to remain competitive.

To find out more on how PEMANDU Associates can assist your organisation, please complete a 2-minute enquiry form for us to revert personally within 2 business days.

References

[1] DOSM

[2] Stimulus Packages for SMEs:
SME Corp, 2020
Crowe, 2020

[3] Malaymail, Mar 2020

[4] Malaymail, Nov 2020

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