Starting a business with no prior experience and funding can be stressful, especially when you are still testing out the market for your minimum viable product (MVP). The stakes are high, so it makes sense to keep the cost of starting out as low as possible until you are confident that there is a demand for your product and you are ready to go all out for the business. Here are 7 ways you can save the cost of starting a business in Malaysia.
Register a sole proprietorship / partnership instead of a Sdn Bhd
It is illegal to carry out any business without registering with the Companies Commission of Malaysia (SSM). There is a total of 8 business entities in Malaysia that you can register with the SSM. If you are starting small with little concern over personal liabilities and taxes, it is recommended to register a sole proprietorship alone or a partnership with other business partners. Unlike Sdn Bhd which is stricter in terms of compliance, sole proprietorships or partnerships are cheap to register and are sufficiently compliant with the regulations of the SSM. You can always make a transition from a Sole Proprietorship or Partnership to a Sdn Bhd later on.
Comparison of costs between sole proprietorship / partnership and Sdn Bhd
Sole proprietorship and partnership fall under Registration of Business (ROB) while Sdn Bhd falls under Registration of Company (ROC) which is governed by different laws. Here's a table for the comparison of costs between sole proprietorship / partnership and Sdn Bhd.
|Business Entities||Registration Fee||Yearly/Monthly Fee|
|Sole proprietorship/partnership||- RM60 for registration using a trade name|
- RM30 for registration using your personal name as stated on the IC
|It is required to renew your business annually.|
- RM60 / year for businesses using a trade name
- RM30 / year for businesses using personal names
|Sdn Bhd||RM1,000 for company incorporation||It is required to appoint a company secretary for your company which requires a monthly retainer fee. The cost of a company secretary varies from firm to firm. It can range between RM60 - RM200 / month. Besides, other mandatory compliance, such as annual returns lodgement, financial report auditing, and share transfer, may induce additional costs on top of the company secretary's monthly retainer fee.|
Use a self-managed accounting software instead of outsourcing accounting services
Having proper bookkeeping and accounting records is essential in keeping track of your business's cash flow and makes tax filling easy to manage later on. Accounting services can be expensive in Malaysia; hence, doing it yourself when you've just started might be the better choice. It might seem intimidating to do bookkeeping and accounting on your own if you have no experience, but with accounting software, you can easily record your income by issuing invoices through the software and recording your expenses by taking a snapshot of the receipts.
Comparison of costs between self-managed accounting software and accounting services
Accounting software is designed to reduce the workload of accounting and bookkeeping work. Most accountants who provide you with accounting services use the software as well. Here's a table for the comparison of costs between self-managed accounting software and accounting services.
|Self-managed accounting software||Around RM100 / month for unlimited transactions.|
|Accounting services||Starting from RM300 / month and increases based on the number of transactions each month.|
*Special thanks to Jye Eng from Bukku for providing insights on this subject matter. Bukku provides online accounting software & cloud-based accounting services for small businesses in Malaysia.
Work from a coworking space instead of renting an office
While many people choose to work from a home office when they have just started, your home might not be the best place to work from, especially if you have a family. Getting a desk or designated area to work at a coworking space which is designed specifically for productivity might be a good idea compared to renting an entire office. There are no worries on the maintenance of the office, receiving mails, paying utility bills, and most importantly, you don't have to pay an initial huge amount of money in setting up the office which usually comes with a minimum of 3-year lease term.
Illustration of how cash flow can be saved by working from a coworking space instead of renting an office
Up to 40% of your cash flow can be saved and to be utilised for other crucial business operations by working from a coworking space instead of renting an office. Here's how.
*Special thanks to Camilla from WORQ for providing insights on this subject matter. WORQ is a productivity community that believes in improving the productivity of entrepreneurs, freelancers and businesses can have a significant impact on the economy.
Hire freelancers instead of employing full-time staffs
When you are at the stage of testing out the market, you might need to get several things that are out of your expertise done, or you are just too busy to handle these tasks on your own. Whether it's designing a promotional banner, setting up a Facebook advertisement, or handling online enquiries regarding your business, it is cheaper to engage with freelancers who are paid on per-project or per-hour basis. Not only things are done as needed, but you also don't have to add on a recurring cost by hiring full-time staff, at least not in the early stages of your business.
Comparison of time taken and costs between hiring a full-time and freelance web developer
Hiring a freelancer through a specialised platform allows you to get a suitable candidate within 48 hours and to save up to 55% in manpower cost. This efficiency allows startups to make it through the first stages as soon as possible. Here's an example of hiring a full-time or freelance web developer.
|Time taken for the hiring process||Cost|
|Full-time web developer||Around 2 - 3 months||Average salary of RM5,500|
|Freelance web developer||Within 1 week|
Starting cost of RM 2,500 per project
Focus on marketing efforts that lead to organic growth
While it seems more straightforward to spend money on paid marketing, such as Google Ads, Facebook ads, and influencer marketing, to gain attention for your business, the visibility of your business drops as soon as you stop spending. Hence, it is better to place more emphasis in creating valuable content that can benefit your customers and to improve your products based on customers' feedback so that your business is developed based on a strong foundation of trust and loyalty from your customers.
Examples of organic growth strategies
Gaining traction based on organic growth strategies is a marathon that takes time but it is sustainable in the long run. Here are some examples of organic growth strategies:
- Content marketing
Create informative articles and infographics that are useful for your potential customers and customers.
- Search engine optimisation (SEO)
Make sure your website and blog articles follow the best practice of SEO to rank better so that potential customers discover your business on Google search.
- Social media marketing
Maintain a social media presence and provide insights based on the latest trends on the internet to stay on top of followers' mind.
- Customer experience
Assist your customers the best you can to leave a good impression because word-of-mouth is a very powerful organic growth strategy.
Develop a commission-based sales / referral programme
At the early stage of your business, sales volume would be the most important criteria that determine whether your business is worth pursuing. Setting up a commission-based sales programme where eager salespersons get paid based on actual conversions reduces the risk of selling at a loss and motivates the salespersons to close as many sales as possible. On the other hand, a referral programme allows bloggers or other businesses to promote your business and get a cut based on each successful conversion.
Examples of sales commission structures
At the early stage of your business, you might need to experiment on various sales commission structures before deciding on a suitable one.
|Sales commission structures||How it works|
|Basic salary + commission||A fixed salary with commission at a ratio of 60:40.|
|Straight commission||No basic salary. Only commission.|
|Basic salary + relative commission||A fixed salary with a commission where a percentage from the total fixed commission is earned based on the percentage of sales target hit.|
|Basic salary + absolute commission||A fixed salary with a commission where a fixed amount of commission is paid for each conversion instead of a percentage.|
|Basic salary + straight-line commission||A fixed salary with commission where a percentage from the total fixed commission is earned. However, if the sales target is exceeded, the commission increases.|
|Basic salary + tiered commission||A fixed salary with commission which increases as sales milestones are hit.|
|Basic salary + territory volume commission||A fixed salary with commission which is paid to the team of salespersons in clearly defined regions.|
*Information taken from Hubspot's article on sales commission.
Potential referrers who can refer customers to your business
Besides monetary referral fee for each new customers referred to your business, you can offer other incentives such as discounts, free gifts, a free month of subscription, etc. to your referrers. Your potential referrers can consist of:
- Existing customers
- Bloggers who write about topics in your industry
- Affiliate marketers
Utilise free versions of software to better manage your business
From staying on track with your daily to-dos to managing paperwork of your business, spreadsheets might not be the most efficient way to make sure everything is in order due to its various limitations. There are many software in the market that comes with a free tier for you to try out before upgrading to a higher tier once your business grows. You have limited time and resources on your hands. Utilising the right tools can reduce your workload so that you don't have to hire an assistant to sort things out on your behalf.
The software suggestions listed below are for reference only, there are lots of software available in the market. Do check out their features to decide the ones that suit your business needs the most.
Project management software
To keep track of the progress of each important department of your business such as product development, marketing, and governance.
Customer relationship management software
To manage leads that come in so that you can understand where they come from and reach out to them accordingly.
Electronic signature software
To sign legally binding documents so that you do not have to do it in-person or dispatch physical documents. It is recommended to adopt electronic signature for your business.
Marketing analytics software
To understand your website traffics quantitatively and qualitatively so that you can identify your target audience and make adjustments to your website for better conversion.
The practise of good financial management begins with streamlining costs and making sustainable changes tailored to your business' needs. Regardless of the stage your business is currently at, it is always wise to plan ahead with the purpose of reducing business expenses in the long run. Get started by implementing these ideas today!