On 6 January 2023, Cheng & Co. Group held its iSGV2025 Sustainable Growth Programme to coach its staff members on sustainable business growth. Invited to the programme was Tan Sri Muhammad Bin Ibrahim, former Governor of Bank Negara Malaysia, who shared a little bit about the economic outlook of Malaysia in 2023.
During his session, we asked Tan Sri Muhammad about some of the factors that made SME companies successful in neighbouring countries. In his reply, some of the factors mentioned were the following:
Based on the points mentioned, we at Cheng & Co Group held discussions among our top people on the matter. Here we share our thoughts.
Result of Our Internal Discussions
Family Businesses
Academicians in many countries have studied and are studying the effects of family ownership of businesses on business performance. Some have found that there is a positive correlation between family ownership and business performance.
There are many different theories. However, many research found that family businesses perform better because family members work well together because of family bonds. Furthermore, for any problem caused by a family member, one may refer the matter to another family member for resolution.
Still, it isn’t all good. Family bond improves working relationships, just as family feud could impair them. Hence, the very thing that turns family members into a great business team could very well undo it.
It’s most common to find family conflict revolving around business succession. The rivalry between siblings or cousins has led to the break-ups of companies after bitter legal battles. What would be the solution to this?
A good option could be to set up a family office in order to: manage and grow your family’s wealth in investments other than your business; facilitate reconciliation between disputing family members, as opposed to resorting only to settling it in Court; and help you in business succession planning to ensure that successions are done properly without hurting the business.
CC Advisory specialises on financial planning, insurance, and family office. They provide a multi-family office, where one entity handles the wealth of different families. Families with wealth and businesses could enlist the help of CC Advisory to manage and grow their wealth, while family members could concentrate on developing the business. Business succession planning service is also provided by CC Advisory.
High Tech Talents
It’s hard to get high tech talents on your own. You often have to recruit them among experienced professionals. Where do they start out? In Asia, it isn’t unusual for local companies to breed talents through joint-ventures, strategic alliances, and mergers and acquisitions with high tech multinational companies.
You could try recruiting from among them. On the other hand, you could try for joint ventures, strategic alliances, or mergers and acquisitions with a high tech company yourself. Joint ventures usually require the setting up of a third entity, owned by your company and your partner.
The formation of such an entity is a specialty of licensed company secretaries. Cheng & Co. Secretarial Services provides excellent company formation services. In addition to companies, we could also help you out with setting up a limited liability partnership for the joint venture.
As for mergers and acquisitions, the process entails a lot of doing including business valuations and due diligence. Cheng & Co Group also provides excellent mergers & acquisition services, including valuations and due diligence.
Sources of Financing
Banks are risk managers as they carefully lend to companies after analysing the risk and return of the projects that they are asked to lend for, not to mention requiring borrowers to have collateral assets as part of the loan condition. Thus, it’s hard to grow, relying only on bank loans.
Malaysia does provide alternative financing such as IPO in the securities market under Bursa Malaysia. However, there are many requirements to meet in order to be eligible for IPOs. Even so, there is an option. You could go for an IPO in Taiwan. Cheng & Co Group provides assistance with IPO in Taiwan, citing the case of Techcential International Ltd as an example.
If you’re a start-up, you could plan your journey toward an IPO from the start. Cheng & Co Group also provides pre-IPO advisory services, providing you with an pre-IPO journey map (i.e., taking into account all relevant regulations), and helping you to stick to that map through checking and alerting you to any issue that could derail your effort towards becoming ready for IPO in the future.
Recap
SMEs succeed for various reasons. Yet, there are some common factors. Asian giants began as family businesses. Family businesses could succeed or fail, and with failure commonly happening because of family problems. To counter that, you could enlist the help of a firm such as CC Advisory to resolve the issue for you. For equity financing in Malaysia, Cheng & Co Group has expert consultants to help you with IPO in Taiwan and pre-IPO advisory services. For joint-ventures and mergers and acquisitions, Cheng & Co Group has secretarial and consulting teams to assist you on the matters of entity formation and M&A services respectively.
This blog post is an excerpt from The Connection E-Magazine: SMEs Sustainability in Malaysia 2023.
