Tough business climate calls for smarter, bolder entrepreneurs

Approximately 95% to 97% of businesses fail to survive beyond five years, whether in Macau or elsewhere, yet it is crucial for aspiring entrepreneurs to cultivate a resilient mindset and adapt to market competition instead of simply complaining about the challenges they encounter, said James Sitou, president of the Macao Startup Club.

In recent years, the economic downturn has resulted in a noticeable increase in vacant shops across Macau, with many ground-floor stores shutting down and some displaying “for rent or sale” signs at their entrances.

According to the Statistics and Census Service (DSEC), 913 new companies were established in the first quarter of this year, while 186 companies were dissolved, resulting in a net increase of 727 companies.

The newly established firms were primarily focused on the wholesale and retail sector, as well as the industrial and commercial services sector, with 302 and 279 companies, respectively.

The government launched the Youth Entrepreneurship Aid Scheme in 2013 to encourage young people in Macau to explore new opportunities beyond traditional employment and pursue their entrepreneurial dreams.

This initiative followed the establishment of the Small and Medium-sized Enterprise Aid Scheme in 2003, which offered interest-free loans of up to MOP600,000 to SMEs. Both loan programs have been running concurrently.

However, recent statistics from the Monetary Authority of Macao (AMCM) indicate a 25.9% decrease in the credit limit approved for SMEs in the second half of 2024 compared to the first half, totaling MOP3.3 billion. Additionally, the outstanding loan balance fell by 3.2%, reaching MOP78.4 billion.

Given the challenges of high rental costs and labor expenses, what steps can young aspiring entrepreneurs take to begin realizing their business dreams?

“Macau is actually a blessed place with many advantages, including its coastal proximity, strong relations with mainland China, and a tourism industry that has remained resilient – except during the Covid-19 pandemic,” he said.

Acknowledging the impact of recent business closures on SMEs, he emphasized that this situation also offers an opportunity for businesses to readjust their operations. He further remarked, “From a business perspective, the wave of closures in Macau can sometimes be viewed as a strategic move to cut losses.” He added, “As long as the mountain remains, there will always be firewood,” a metaphor suggesting that as long as fundamental resources or opportunities exist, there will always be means to sustain oneself or thrive.

“Having the ability to determine the fate of one’s business is a strategic choice. This does not imply that Macau’s environment will stagnate; such a view is overly pessimistic.”

In an interview with the Times, James noted that entrepreneurs and the business environment in Macau should embrace a “survival of the fittest” mentality.

He emphasized the importance of observing local needs before starting a business, as this approach is the most effective. Key elements that contribute to an entrepreneur’s strength include mindset, location, financial resources, and human resources.

As an entrepreneur himself, he encouraged those starting out or re-launching their businesses to persevere. “Look beyond Macau and don’t fixate on the challenges here as if they were the end of the world,” he remarked, emphasizing the advantages of Macau’s entrepreneurial environment.

“While it’s tough, I believe the survival rate is slightly higher because the government provided multiple policy supports during the pandemic, and the city’s six gaming operators also offered substantial assistance to SMEs.”

He noted that, compared to neighboring regions, Macau enjoys a higher startup success rate, although some entrepreneurs still choose to close their businesses. This decision does not imply that starting a business in Macau is particularly difficult.

He believes that any business capable of generating revenue can be considered a startup, provided there is a solution and demand. These businesses have the potential for growth, and the key lies in effectively transforming resources and efforts into viable business opportunities.

The  government has been providing support for young entrepreneurs from Macau to innovate and start businesses in Hengqin through various measures, including financial assistance, service support, training programs, exchanges, and entrepreneurship competitions.

“Over time, Hengqin might become a good place. After all, Macau has limited space, and the current environment makes many people feel that it is not yet mature enough and lacks business opportunities,” James remarked.

He cited three core elements essential for entrepreneurs: capital, talent, and location, asserting that Hengqin possesses these conditions. While acknowledging that Hengqin still has room for development, he emphasized that this does not mean it lacks potential.

“We cannot dismiss the potential of this place, but currently, Hengqin is still in its early and nascent stages, much like our startups. We cannot predict which startup will become the next unicorn. We might overlook certain investment opportunities.”

As artificial intelligence emerges as a key trend for future development, James, however, rejected the notion that Macau lacks opportunities in the technology sector. He argued against the idea of focusing solely on a single industry, stating that technology should be integrated into various businesses rather than pursued for its own sake.

“Why limit ourselves to this place? For example, Macau’s tourism and entertainment industries are thriving – why not consider starting a business in these fields? Why forcefully combine them with concepts like AI, technology, or cryptocurrency?” he questioned.

James stressed that entrepreneurs in Macau should adapt to their environment, observe local needs, and then launch their businesses, asserting that this approach is the most effective for success.

He believes that any business capable of making money can be considered a startup, as long as there is a solution and demand, providing these businesses with opportunities for growth. However, he cautioned entrepreneurs against taking on excessive debt, saying, “such as borrowing millions from banks,” as they may struggle to handle the consequences if the venture fails.

At the same time, James urged entrepreneurs not to make government assistance their sole goal. “Entrepreneurs should not solely rely on the support of the Macau government or state-owned enterprises. Instead, I believe the Macau government or mainland state-owned enterprises should focus on creating a favorable business environment. Doing business is not solely dependent on venture capital or bank funding; the ultimate goal is to achieve sales and sell valuable products.”

He emphasized that the Macau government needs to improve policies by refining legal regulations and addressing legal loopholes to better manage business opportunities. He argued that “these measures are more critical than financial support for promoting business development, as the government cannot invest billions of dollars in SMEs or startups.”