How Much Do You Really Need to Start a Small Business in Malaysia?

This article is by CompareHero.

Life is getting harder with the inflation rate outperforming our wage growth, which is expected to be gloomy in 2017 according to a projection by 2016 MEF Salary surveys for executives and non-executives. This is one of the reasons millennials are opting to start their own business today: to fight for a larger income source.

There are a few questions you need to think about before taking the first step to actually start your own business. One of the most significant questions is: how much do you actually need to start a business?

Based on CompareHero.my’s research, here are several types of common businesses in Malaysia and the estimated costs to start one.

Business type	Estimated Initial Capital (RM)
Pasar Malam Stall (night market)	RM300 – RM1500
E-commerce	RM500 – RM2000 (depending on product)
Hawker Stall	RM2000- RM5000
Local restaurant	RM60,000 – RM100,000
Café	RM500,000 – RM600,000

Take note that these figures are the estimated cost to start your business and excludes the first six months of operating costs such as the electrical bill, rental, material costs and more. If you intend to keep your business afloat before it starts registering positive cash flow (depending on your strategy), you must prepare additional funds of at least six months operating cash flow. For example, you want to start a hawker stall with an initial startup cost of RM4,500 and roughly RM400 monthly operating costs, you will need to prepare RM6,900 in advance before you actually start your business.

This will help you to have enough cash flow to handle your business financial needs before your operational income starts generating enough cash flow to support itself, or breakeven. Thus, it is important to monitor and adjust all your expenses for your business.

With adequate preparation, you can avoid unnecessary wastage and achieve better returns for your business investment. Over time, you must optimise your capital carefully so that every ringgit is spent on business decisions with high returns.   

If you have already figured out a number of funds for your business, the next question is where to get the funds?

Most people will opt to borrow money from their friends and family or personal savings. However, some may not have these options. Don’t be discouraged as you can still get a personal loan from local banks to fund your business!

By comparing the best personal loan in the city, you can get the loan you need for your business with the lowest interest rates and preferred banks.

Another question entrepreneurs may encounter is: “Should I choose a credit card or a personal loan to fund my business?” We like to think both products offer different features and are applicable to both situations. So, why not use both?

Using a credit card to deal with some of the light to medium sized operating expenses is actually ideal, where you can get the best value from the corporate finance activities such as procurement and automated utility payments.

You can enjoy savings through cash back rates offered by respective banks or get rewarded with gifts by accumulating rewards points on your credit cards. That being said, you also get to enjoy features and benefits with a credit card which cash and cheque are unlikely to provide!

Just remember not to over-rely on financial products as overloaded debts can make it harder for your business to grow.

CompareHero.my is dedicated to raising financial literacy in our country and to helping everyday Malaysians make smarter and well-informed financial decisions in life. Visit their blog to learn more!