By Linette Lai

MANY home-grown smaller firms recognise the need for innovation to help build their businesses - but admit they need help in coming up with fresh ideas.

This was one of the key findings of a detailed study of 500 micro, small- and medium-sized enterprises (MSMEs) - those with less than $1 million in annual turnover and fewer than 10 staff members.

It also found that these firms tend to be over-reliant on a small number of customers or products.

The study was commissioned by the Singapore Malay Chamber of Commerce and Industry (SMCCI). It aimed to measure these firms' ability to withstand economic stress and assess business competency.

Focal points of the study included marketing, business networking, product development and cash grants. Three out of five firms surveyed are from the retail sector. The rest provide commercial services.

A total of 93 per cent of those polled said that they intend to focus on marketing and branding.

'Nine out of 10 focus on nothing but marketing and sales,' said Mr Muhammad Nazri, director of the Enterprise Development Centre at SMCCI, who presented the findings of the study.

'That comes at the expense of other areas, so the trade-off will be...the lack of innovation in terms of packaging because they are so busy selling their existing products to existing customers that innovation takes a back seat - or rather, resources become a limiting factor.'

Other trade-offs include corporate governance and client retention.

The study also found that many of the firms are eager to innovate, with 72 per cent saying they intend to explore new ways of doing business in the next two months.

However, almost 80 per cent said they needed ideas and advice on how to develop new products, while 65 per cent said they needed help to find the best product mix for their businesses.

The study also turned up a pressing need for basic financial and information technology support services, with 84 per cent saying they require basic, effective financial management systems. The same percentage felt that IT could help improve their business operations.

Another area of concern was funding, as many find it difficult to become eligible to obtain cash grants.

'A lot of the grants here basically (are) disbursed based on needs and potential. That means they want to see scalable businesses...The challenge is for the early stage start-ups to show...the potential they have to scale up,' Mr Nazri said.

He added that MSMEs were no longer motivated to get additional funding after being turned down repeatedly, with only 27 per cent looking to get external funding. Mr Nazri stressed that this implies that special micro-funding needs to be made available to MSMEs.

'MSMEs need professional financial services, IT and marketing as well as branding,' he concluded.

'This doesn't mean they need an expensive one (strategy). They need a very practical, pragmatic approach, something that is very effective, affordable, and basically efficient to run.'

This article was first published in The Straits Times.