PETALING JAYA: Small and medium enterprises (SMEs) remain upbeat on their prospects and project Malaysia’s economy will continue to expand in 2024, amid concerns pertaining to low revenue, growing costs and cash flow.

These were among the findings of the 2024 Malaysia SME Sentiment Report conducted by Employment Hero, based on input from a sample of 500 local SMEs.

According to the survey, an average of 79% of SMEs are confident about their growth prospects in 2024, especially for the medium business segments, with 50% being somewhat confident and 33% being extremely confident.

Employee Hero Asia managing director Kevin Fitzgerald said this is as the majority of medium-sized companies are more optimistic on the market’s potential for growth and feel that the economy is in a much better shape than it has been in recent years.

Added with government initiatives such as the likes of the Human Resource Development Corp and Malaysia Digital Economy Corp, especially in terms of digitalisation, Fitzgerald said SMEs feel more empowered to be on a journey to deliver and execute what needs to be done to drive revenue.

As for micro and small businesses, the survey found the businesses are likely to be less confident about their growth prospects, with 22% feeling less confident and 3% not being confident at all.

This is believed to be due to the numerous risks that micro and small enterprises must face, especially in terms of having a much smaller number of employees as well as smaller revenue to go after.

However, on a plus side, the survey found that there is still a healthy level of confidence in micro and small businesses for their prospects in 2024.

“I think this is the year where SMEs can really get a grip on things and the economy and start to drive growth in their business,” Fitzgerald said.

As for SME projections for Malaysia’s economic performance, an average of 50% of SMEs felt confident that the country will perform well in 2024 and despite 18% expressing caution, it is believed that businesses are taking their time to see how the year plays out.

Both micro and small businesses as well as medium-sized enterprises project good and average economic performance for the year.

With 62% anticipating good performance among medium-sized businesses, it is believed that these businesses see opportunities in both local and international markets.

Fitzgerald said following the observed hike in consumer spending as compared to previous years, in which they saw a “knock on” impact towards their businesses, the majority of SMEs are now placing more focus on the local market.

As for micro and small businesses, 39% of the respondents predict good performance for the Malaysian economy in 2024, followed by average performance and poor performance at 37% and 24%, respectively.

In that sense, Employee Hero believes that SMEs are essential contributors to the Malaysian economy, especially given that it constitutes the majority of businesses in the country.

It also comes as no surprise that 32% of respondents find the potential in automation, artificial intelligence and digital transformation, given these technologies have actually been around for a while and will play a significant role in corporate operations in the years to come.

Fitzgerald said that from the findings, the majority of SMEs have come to the conclusion of the significance of adopting technology tools as well as leveraging on digitalisation.

“Digitalisation is not only about buying the system, it’s about leveraging a system, upskilling talents using the system and finding new information about your business that you might not already know,” he added.

This is followed by 31% of the respondents seeing potentials arising from global expansion and eCommerce and 28% for opportunities from employee education and training, making these the top three opportunities for SMEs in 2024.

Meanwhile, the respondents shared that the major challenges for SMEs coming into 2024 will be the rising costs at a 47%, cash flows (28%) as well as low revenue (23%).

When it comes to rising costs and inflation, Fitzgerald said it has been a challenge not only to SMEs but to the entire nation as well, particularly in terms of costs of goods and services.

He believes that the challenges in the past few years have forced SMEs and business owners to “step a little further back into the corner,” adding that this has affected their business.

“But I think SMEs are in a much stronger place in understanding what they can do, especially by using the right tools and having the right people in their business, to serve up the information and make good decisions on their next steps,” he said.

Fitzgerald added that SMEs have taken actions to mitigate these challenges, which are cost control measures, expanding product and service offerings as well as expanding their businesses to new markets.

“Generally, when people are in the mindset of being concerned about costs as well as worrying about different things, they would usually retract from taking any risks.

“But what we are seeing from SMEs today is there is a sense of confidence, which brings them to look towards expanding in different areas,” Fitzgerald said.

On a separate note, Mindgem founder and chief executive officer Ratna Juita shared that the competitive market for top talents, toxic workplace practices and poor people management practices are often times the key challenges in talent management within SMEs.

She believes that these issues must be addressed, particularly in light of talents emerging from the younger Generation Z, which typically begin their career development in SME enterprises.

Employment Hero is redefining human resources, payroll and employee engagement through its innovative platform and superapp, Swag, aiming to enhance work globally.

The group’s mission is to empower employers and employees, elevating the employment experience to new levels.

Employment Hero streamlines business operations, boosting productivity daily, serving over 300,000 businesses and acclaimed for making employment management easier for 85% of business leaders.