Micro, small and medium enterprises (MSME) are often regarded as the engine of growth in developing and developed countries given their contribution to a country’s economy and employment. In Cambodia, MSMEs represent 70% of employment, 99.8% of companies, and contribute 58% to the Gross Domestic Product. How MSMEs are defined is important for access to finance and Cambodia support programmes targeted specifically at enterprises that can be classified as such.
Cambodia has a legal SME definition that was developed under the SME Development Framework in 2005. It disaggregates firms by size and includes criteria of both employment and value. In accordance with the result of the 2nd Meeting of the SME Promotion Committee (SMEPC) at the Council Ministers of Cambodia on January 21, 2021, SMEs are categorized into three sectors: (1) Agriculture, (2) Industry, and (3) Services and Trading. SMEs shall comply with two conditions: (a) Number of Employees (b) and either Annual Turnover or Asset.
Cambodia SMEs are active in the service and trading sectors. According to 2015 data from the National Institute of Statistics of the Ministry of Planning, 59.60% of Cambodian SMEs are classified under the wholesale and retail trade sector, while 26.50% are part of the service sector.
The most important service activities in Cambodia are associated with tourism, which is one of the major sources of overseas investment and the fastest-growing segment of the economy. Tourism has become an important source of revenue and foreign exchange and has helped mitigate the effects of large trade deficits. Much of this investment goes into constructing hotels, developing resorts, and enhancing service facilities for tourists visiting Angkor Wat and Phnom Penh. Before the COVID-19 pandemic, the number of tourists had been steadily increasing and diversifying.
Trade is important for Cambodia’s growth strategy for three key reasons:
1. Cambodia has transformed its trade sector into an engine of economic growth over the last two decades and that provides momentum for further liberalisation and development of trade for future growth.
2. Regional economic integration has moved towards regional free trade zones as the way to boost trade and promote prosperity. Given the country’s strategic location in the fast-growing Southeast Asian region, these dynamic regional cooperation and integration processes represent huge opportunities for export growth, diversification, competitiveness, and growth.
3. Most analysts agree that much remains to be done in Cambodia’s trade sector development. Despite noteworthy progress, the trade sector remains weak and vulnerable. In addition to being at the low end of the value chain and lacking diversification, Cambodian exports are constrained by cumbersome customs procedures, infrastructure bottlenecks, poor logistics and trade facilitation and lack of capacity to meet technical standards.
Are you thinking about starting a business in Cambodia but feeling overwhelmed by the lack of information? Look no further! We provide comprehensive guidance on navigating the business landscape in Cambodia. Discover how to obtain a business license, manage tax obligations, and even close your company when your venture concludes. Let us help you turn your entrepreneurial dreams into reality! There are also professional Service Providers who can help you through some of the steps or even through the complete setup process. Before you start, check if you’re ready:Starting a business requires effort and commitment. It’s important to know what’s involved and whether you’re actually well suited to business and self-employment. We recommend you first take some time to critically evaluate yourself and learn about the challenges of owning a business. Are you really ready to own your own business?Whether you’re starting a new business or buying an established one, you’ll need to be prepared. Consider these key areas to make sure you are ready. 2. Refine your idea Once you are certain you’re cut out for running your business, it’s time to review and refine your business idea. A great way to do this without diving directly into a lengthy and detailed business plan is to use a tool such as the Business Model Canvas. This gives you a single page snapshot of the key elements of your business and how they work together. You can find a free download here. The Business Model Canvas ensures that you start thinking about your mission and value proposition from the very beginning. You will need to think about and make notes about the following key areas: Customer segments:Who are your customers? Value proposition:What are your products or services? What problems are you solving for your customers? Revenue streams:Where does your income come from? Channels: How do you communicate with your customers? How do you deliver your goods or services? Key Activities:What do you do every day to run your business? Key Resources: Who are the people, the skills, the tools and the finances you need to run your business? Key partners:Who are your key partners in running your business? Cost Structure:What are your main costs? More information about this tool can be found here: https://www.businessmodelsinc.com/about-bmi/tools/business-model-canvas/. Ngeay Ngeay also offers a free video course in Khmer to help you through the Business Model Canvas here. 3. Conduct research market To start and run a successful business you need to understand your customers and your target market. Market research can help you to understand and make informed decisions about the marketing of your products and services. There are different types of market research: primary and secondary. Primary research involves gathering information first-hand through surveys, interviews, and talking to (potential) customers and other businesses. Your research can be formal or informal. Secondary research uses information and data that has already been collected and analyzed by others. You can research your markets using information such as government statistics and trade publications. Evaluate your target audience A key purpose of market research is to get to know your target customers. You need to understand who is going to buy your product and why? What are their needs and pain points? How can you reach them? How do they make a decision to buy? Where will you find and how will you communicate with them? Research the competition and market saturation You need to know your competition, so you can beat them and prevent them from taking your customers. Remember competition is not always a bad thing; it means there is already a healthy market for your product or service and that customers are willing to pay. Learn as much as you can about how your competitors attract customers, what value they provide and anything they are missing. At the same time, check for market saturation. You may think that the coffee shop or the flower shop in your neighbourhood looks like a great business idea, because it seems to be flourishing, but you need to consider: are there enough customers for this type of business? Maybe the market is already saturated with numerous businesses offering similar products or services. If you want to enter an already crowded market, what will be your Unique Selling Proposition (USP)? How will you stand out and be different? Will you have a more specialized service? A lower price? Something that no one else can offer? Simply copying another business or business idea is not a winning approach. You need to understand the market size and the portion of this you can potentially captur Validate your idea It’s a good idea at this stage to field test your idea, product or service. Speak to potential customers and get their feedback on your proposed product or service and see how interested they are in it and whether they would be willing to pay for it. You can do through by sending out surveys, talking to people in person or on social media, running ads or attempting a pre-sale campaign to gauge interest. Ngeay Ngeay also offers a free video course in Khmer to help you prepare a marketing strategy for your business here. 4. Write a business plan A business plan is a must if you are thinking of getting outside financing through a loan or investment. However, even if you are starting small and starting with your own funds, a business plan will help you to plan: how much money you’ll need to get started, how to get profitable, what you need to do and what the longer-term future looks like. Think of a business plan as a road map for your business, a tool to help you manage your goals and track your progress. If you’ve already developed a simple overview of your business, using a tool like the Business Model Canvas, this will be a great starting point for you. How formal or structured your business plan will be, will depend on whether you plan to use to raise funds or use only as an internal document. What goes into a formal business plan? There are different ways to structure a business plan, but most contain at least the following elements: Executive Summary Your team Company overview Industry and Market Analysis Marketing Plan Operational Plan Financial Strategy A great way to get support in writing a business plan, check the list of training opportunities here. [link to training opportunities page] You can also seek support from the list of service providers here. [link to service providers page] There are also numerous websites that can provide you templates, guidance and advice on writing business plans. 5. Make your business legal To start and operate a business in Cambodia, you will need to get registered. The first step will be to review the different types of business structures and to decide which one is the best for you. You will also need to decide on a name and check if it is available. To help you decide, you should research the structures and pros and cons of the above types of businesses and select the one that is most suitable for you and your business. A good place to start is here. This site contains a table comparing the different registration types along with the benefits and drawbacks of each. Registration Steps and Requirements in Cambodia In Cambodia, you can register your new busines through the One Portal system here. This User [insert pdf download here] Guide from the Ministry of Economy and Finance is very useful to help you get prepared for this process. It includes an overview of how to use the system and the documents you will need to prepare for submission. The main steps in registering your business, whether you use the One Portal system, or a service provider are: Name Search and confirmation Business registration with the MOC Tax registration with GDT Declaration of opening with MoLVT Licensing and other requirements based on operations and industry. Read more about licensing here. [link to content on licenses]You may need to secure additional licenses and permits in order to have approval to do certain activities based on your type of business and industry. You can find more information on licenses and permits in the Business License section of this website.You may also choose to register a trademark. Registering a trademark can protect your brand assets, such as your business name or logo. To learn how to register a trademark, see the links below. EN_ Official Video Explanation on Online Trademark Filing System in Cambodia Official Portal to Trademark Registration in Cambodia If you have staff members you will also need to apply for National Social Security Fund (NSSF). You can learn more about NSSF and how to apply here. 6. Financing your business Whether you’re starting a business from scratch or buying an existing business or franchise, some approaches you may consider for funding: Fund your business yourself through self-funding Secure venture capital from investors Use crowdfunding Get a small business loan Small and Medium Enterprises investment programsIt’s important to remember that investors such as business angels and venture capitalists may expect some level of existing self-funding or existing equity in the business in order to invest.You may also require financing for other areas of your business such as property, vehicles, machinery and tools, or inventory. There are different types of financing that may be available for you such as: A bank or MFI loan A line of credit Leasing Trade credit from suppliers Loans InvestmentsFor guidance on deciding which methods are the best for your business, you can find counselling services through our resource partner network (see Service Providers). 7. Preparation for operations As a registered entity, you will need to submit monthly and annual tax declarations to the General Department of Tax (GDT). To help you to do this, you will need support, at least initially, from a bookkeeper or accountant who has experience in this area. You will need to set up a well-organized filing system, prepare numbered receipts and invoice books, making sure you keep very detailed and careful copies of every transaction. This is in addition to setting up and using a system such as QuickBooks to keep track of income and expenses and so that you can create monthly, quarterly and annual financial reports. These are not only needed for reporting but also help you analyse your business and make best decisions for operations and growth. Even if you are starting small, correct and accurate financial record keeping is a must. If you are not planning to engage a full-time accountant, you can hire a service provider to help you with monthly submissions. 8. Prepare for growth As you begin your business, you will experience successes and set-backs. You need to see these as learning opportunities. With your Business Model Canvas or business plan in hand, you can re-evaluate and re-assess your strategy and plan for future growth based on experience. You should review your progress each month, looking at the numbers from the monthly accounting reports and reviewing your strategy. Repeating this quarterly and annually will allow you to track your performance and make decisions based on results and data in hand. This helps you to prepare for all types of situations before they arise, making sure you are ready for the ebbs and flows of the business.
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