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Can SAT result be trusted?

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invincibleDame
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Can SAT result be trusted?

Postby invincibleDame » Sun, 23 Jul 2017 2:21 pm

Hi All,
Hoping to get few answers here. I started a small family run grocery shop, not operational yet but the company is registered and I am halfway with the setup. I wanted to hire family member from India who already has good retail experience(business graduate, 15+yrs exp), he is listed as director of company and shareholder.

I hired a consultancy firm to put his EP application but it got rejected, we followed the salary the agency gave us based on SAT results for company managing director. But EP rejection reason is salary quoted is too high. Our initial capital investment is 150k, the EP qualifying salary was 6900 but we applied with 7200, which got rejected. My dilemma being now is I don't see any point in reducing salary by few 100's but the agency insists(read is hell bent) it has to be 6900, and does not agree on lowering it. Will it be wise to forgo SAT results and quote salary at par with market.

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Re: Can SAT result be trusted?

Postby ecureilx » Sun, 23 Jul 2017 2:30 pm

invincibleDame wrote:Hi All,
Hoping to get few answers here. I started a small family run grocery shop, not operational yet but the company is registered and I am halfway with the setup. I wanted to hire family member from India who already has good retail experience(business graduate, 15+yrs exp), he is listed as director of company and shareholder.

I hired a consultancy firm to put his EP application but it got rejected, we followed the salary the agency gave us based on SAT results for company managing director. But EP rejection reason is salary quoted is too high. Our initial capital investment is 150k, the EP qualifying salary was 6900 but we applied with 7200, which got rejected. My dilemma being now is I don't see any point in reducing salary by few 100's but the agency insists(read is hell bent) it has to be 6900, and does not agree on lowering it. Will it be wise to forgo SAT results and quote salary at par with market.
Did MOM really say salary too high ?

invincibleDame
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Re: Can SAT result be trusted?

Postby invincibleDame » Sun, 23 Jul 2017 2:48 pm

Yes, the agent asked MOM. To the person who processed the application probably - the application cannot be approved because the MOM is not sure if the company is able to pay for employee's salary and business expenses based on its business activities.

I get that it says grocery business will not generate so much revenue, the only thing to address that, is to give a business plan, but being a startup I do not have numbers to backup. I have my suppliers list and rates, I can see that the margins are good and I am hopeful that the salary can be supported. But I still want to lower it further to improve chances.

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Re: Can SAT result be trusted?

Postby Strong Eagle » Mon, 24 Jul 2017 1:59 am

Your problem is that you have idiots for consultants and a business plan and pro forma statements that are not well thought out.

Your consultants are idiots because they think that the only thing that matters is a big number for a salary for EP. But, that doesn't work for a startup... where is the money that is supposed to pay the big salary going to come from? MoM sees through poorly thought out and ridiculous salaries like looking through a stripper's veil. You need to have the smallest salary that gets you the EP you need and makes sense in your business plan.

Your pro forma financial statements need to show your cash spend until you reach break even, ie, profitability. You need to be able that you have either cash on hand or loans available to ensure that you can not only support the expenses of the business but the salary of the EP as well. You going to pay him $7,000 per month? You think you might be profitable in a year? Then you need to have $84,000 in cash reserves to make the EP salaries, and more still to support other expenses of the business. Don't have this kind of money? Then you are doomed to fail before you start.

You say, "but being a startup I do not have numbers to backup". Listen, if you cannot put together a business plan that shows your anticipated revenues and expenses for five years out, you shouldn't be even thinking about getting into business. You need to have a realistic plan. You need to demonstrate how much revenue you expect and how you plan on getting it.

Without a plan, the odds are very high that you will fail. The odds are also very high that you will never get an EP approved because you look like an amateur and not someone who knows how to start and run a business.

Here's an example of a business plan... you don't need every last shred of this... but you should have the essential elements if you plan on being taken seriously.

http://www.herberts.org/miscdocs/Sample ... ntents.pdf

You might also read my article in the business forum about starting a business and the entrepass... somewhat dated, and, good information about what you can do to increase your chances of approval.

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Re: Can SAT result be trusted?

Postby invincibleDame » Tue, 25 Jul 2017 9:54 am

True, the consultants turned out clueless people, even after 100s of good reviews online and 10 different awards mentioned on their site.

Also true that I am amateur with a very busy BFSI day job. But sincere thanks for your many pointers I was looking forward for a reply from you honestly, as I read a lot of your replies and previous threads. You have good insight, hopefully with good study and dedication I will be able to pull this off.

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Re: Can SAT result be trusted?

Postby Strong Eagle » Tue, 25 Jul 2017 11:31 am

Nothing on TV and I don't feel like working... so I am going to ramble a little bit.

You make the statement, "I have my suppliers list and rates, I can see that the margins are good." Let's run with this one for a little bit.

You say you are going to run a "small family grocery shop". I assume this means you are looking at 1000 to 2000 square feet max, of the size of the Cold Storage in Greenwood Plaza or perhaps Heng Heng Food Suppliers, located in the same shopping center.

https://www.google.com/maps/place/Cold+ ... 103.806744

https://www.google.com/maps/place/Heng+ ... 03.8070726

Am I on track at this point? So, you are looking for commercial property in an area that has local shoppers who might drop in on a daily basis, while saving larger shopping trips for the NTUC or some such.

So... you need a place with reasonable foot traffic... it's not as crucial as a restaurant, where traffic is a make or break... still, you need someplace reasonably convenient for people to pop in (and those people are going to need to be reasonably affluent... I see no way you compete against wet markets like you find in Holland Village, for example.

Have you found such a place? Then you know what your rental costs are. Add in the costs of utilities, plus amortize the costs of improvements (coolers, shelving, lighting) over three years or so and you have your monthly/yearly fixed costs that you must cover just to have a door to open every morning. For fun (and don't you wish it would be that cheap!) let's assume that you must cover $2,000 per month in fixed expenses.

We haven't started talking about food costs yet, nor salaries, nor a profit. So, let's talk about this. You need to fill the place up with things to sell... perishable and non-perishable. You say that "the margins are good" in the grocery business... I cannot speak for Singapore, and therefore, again you need to do some research about your gross food margins. But, let's assume for the moment that the margins you have are correct.

You already know how much sales volume you must generate to cover fixed costs... that amount represents the difference between what you pay for your merchandise and what you sell it for. For fun, let's assume that your gross margin on foods is 50 percent... you buy lettuce for one dollar and sell it for two... that's a 100 percent markup... understanding the difference is crucial.

If you have a gross margin of 50 percent and $2,000 in fixed expenses, then you must sell $4,000 of food per month to cover your fixed expenses. Now add in a $6,000 salary and we see that you will need to sell an additional $12,000 per month in food to cover the salary.

You can see that you need to generate $16,000 per month in gross sales to cover rent and the salary for the EP. Now that you know that absolute minimum amount of business you must generate to keep the lights on, start working this backwards into the number of people you are going to have to serve on a daily basis.

You'll need to have some sense of the average spend per consumer... you can get this by asking other shop keepers in the area or digging around at SMU... somewhere, somebody has compiled a survey like this. But, we can make a SWAG (serious wild ass guess) for the purposes of an example. Let's say your average customer spends $50. Then you must have 320 customers month. If they only spend an average of $20 each, then you need 800 customers a month... that's somewhere between 10 and 30 customers per day if you are open every day. Will your location and traffic model support this?

This is only a rather simple example. A quick check says that you will pay $5 to $8 per square foot per month for decent retail space... a 1,000 space will cost you $5,000 to $8,000 per month. Add $1,000 for utilities and you are looking at $8,000 per month or more in fixed costs. So, if you had $8,000 in fixed costs, plus the EP salary of $6,000, you need to generate $28,000 per month in gross revenues... 560 sales per month at $50, 1400 sales per month... 50 sales per day... at $20. Can you do it?

You have to account for loss by spoilage and theft, which can often be a significant expense. You've got many other expenses not listed here... insurance, for example. You will get screwed by your suppliers who will demand discounts on sale prices to move products, or force you to buy much more than you need in order to get the right price. Or they will force you to buy product you don't want in order to get the product that you do want. Distributors can be a big big hassle.

You can use what I've put here to layout your first set of pro forma financial statements... years 1 thru 5. I'd be interested to know what your numbers look like. In the USA, grocery stores are highly competitive. The big stores have a net profit of 2 to 3 percent... sell $100,000 of product, make $3,000 when it's all said and done. Smaller stores have a somewhat better net profit... but still only 5 to 6 percent.

I don't know Singapore grocery (although I do know that Singapore restaurants have similar margins to those in the USA), and I predict that you should ultimately expect about a 5 percent net profit (pre-tax) on sales... labor costs are lower in Singapore but rents are much higher, as are food costs.

Finally, I judge that if you are trying to open a shoe string operation, you will never get an EP approved. It's simple... because the gahmen is going to reserve the shoe string operations for Singapore locals... the ones who scare up $10,000 to start selling vegetables... if you are planning on going down this road, it won't work.

The gahmen will expect a foreigner to have sufficient capital to create a small grocery that can compete against a neighborhood Cold Storage or mini Fair Price... a cut above the average stall you might find in town. My guess is about $100,000 to properly outfit a store... but that's just a SWAG.

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Re: Can SAT result be trusted?

Postby Strong Eagle » Tue, 25 Jul 2017 12:45 pm

And... while I am rambling... you need to decide who your target market is and what you will be selling. For example, the Cold Storage on Greenwood targeted people like me... affluent neighborhood people who stopped in for fresh produce, spices, sandwich meats, wine, limited meats, and canned goods like soups. We conveniently pick up crap for dinner. Is this you?

Or are you going to be more "ethnic", catering to specific tastes, with harder to find specialty items that might cause people to travel a longer distance to get what is more rare.

Or, are you going to be like the food stores at petrol stations that sell candy, drinks, and beer?

Your selection is going to depend a great deal upon the demographics of the area you intend to serve, and the marketing plan you have devised... you can see that the business model in my mind, as I write, is that of a small convenience market that makes it easy for a person (or their maid) to pop down and grab some stuff for dinner... this may or may not be what you had in mind.

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Re: Can SAT result be trusted?

Postby invincibleDame » Sun, 13 Aug 2017 12:56 pm

Thanks for the rambling O:) The time I posted the query, I already had a place rented out 1000 sq ft around at 4000 rental. The locality is upcoming, with new condos all around which have recently TOP'ed and old landed houses behind. Possibly because of which the rental is still low. There is a new mega residential + commercial project under construction across the road but that TOPs in 2020. There is small similar project just in front of me, with 5 retail units, I do not think any major grocery store will come there, if they have to, the bigger project looks like more viable option.

My initial investment was 100K but I had to increase it to 150K, because I already used up ~40K for setup lol and I still need to stock up which will be another 20k. Different categories have different margins, but over all I will say the margin is 15%. I cannot really go for 3 year breakeven as of today, with the high salary. I spoke to the agent again and he told me the system does not allow to enter anything less than 6900 which I think he is BS'ing me. I have been busy getting licenses and suppliers and a few more last things cctv, air curtain, POS system installed. So I could not really login in and try to fill an application on my own. Besides my focus is now to get the shop running asap, that will at least give me an idea of how deep the waters are.

But with the above numbers roughly 50k spanned over 3yrs say, monthly cost comes to 1300. Plus fixed cost 4000 rental+1000 utilities & maintenance, and a store manager 2.2k total. Monthly expenditure comes to 8500. Monthly sales has to be ~57000, daily sales ~1900, at 20$ per head 100 people to come to the store in a day. Hope my calculations are correct here.

Before taking up this rental shop I had gone through a month long search of business to take over. The asking price was always between 100k-150k no stock included. And the owners claiming minimum 3k daily sales max claiming 5k sales. But the owners were mostly off putting people, so I decided to start from scratch. Also I was paying 100k for store fixtures bought nearly 5yrs ago. 100k just for good will and suppliers list.

Anyhow since regular job releases are done, grabbed the first opportunity and booked 2 weeks leave I will go full throttle now and get opening done in 2 weeks time. If anyone is listening air curtain seems to be a good business as very few players in Singapore and honestly their sales team sucks. With you running around them that pls let us buy from you ](*,)


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