What challenges do small businesses have to face in Vietnam?, Small businesses in Vietnam, Challenges of small businesses in Vietnam

Challenges of small businesses in Vietnam

Businesses must first understand the concept and requirements to ensure the type and size of their business before engaging in business activities.

Small businesses in Vietnam

A small business is a business that was established, organized, and operates in accordance with the law on enterprises, has a small operations scale, several workers, and sales volume, and meets the Government’s specified requirements for small businesses.

Small enterprises are defined in Clause 2, Article 5 of Decree No. 80/2021/ND-CP, which regulates the implementation of the Law on supporting small and medium-sized businesses:

  • Any small enterprise in the field of agriculture, forestry, aquaculture; industry, and construction that has an average annual number of employees who participate in social insurance not exceeding 100 people, total revenue in the year not exceeding 50 billion VND, or total capital of the year not exceeding 20 billion VND, except micro-enterprises mentioned in Clause 1 of this Article.
  • Any small enterprises in the field of commerce and service that has an average annual number of employees who participate in social insurance not exceeding 50 people, total revenue in the year not exceeding 100 billion VND, or total capital of the year not exceeding 30 billion VND, except micro-enterprises mentioned in Clause 1 of this Article.

What challenges do small businesses have to face in Vietnam?

In addition to the benefits that small businesses provide, such as simple organizational structures and straightforward administration, there are also significant difficulties and challenges. Before going through the process of setting up a small business, many organizations and individuals are curious about the challenges of small businesses.

Capital difficulties

Currently, only a very small number of businesses can receive formal, long-term loans, leaving the majority of businesses with no access to formal loans or only access to short-term loans.

Bank representatives claimed that the majority of such businesses are newly established businesses, have a small size, and have not met the requirements for collateral or demonstrated the feasibility of the project.

Difficulty in terms of ability

This is regarded as a result of the difficulties in accessing capital. Small enterprises with little capital coming from external loans or self-financing are difficult to improve and maintain over time.

Furthermore, if businesses do not have enough employee incentive policies, it would be difficult to attract highly competent human resources. The cost of employee training is a challenge for small businesses.

Market difficulties

Market difficulties are one of the next challenges that small businesses encounter. In a market that is continuously changing and customer expectations are constantly increasing, organizations must transform to fulfill market demands.

Because of their coverage, big businesses frequently comprehend and effectively foresee developments in the consumer market. Small businesses, on the other hand, can encounter several problems in collecting market information.

Management difficulties

In the case of small businesses, the owner must handle all tasks. Big businesses, unlike small businesses, have each department conduct operations such as sourcing capital, collecting market information, recruiting personnel, and so on.

Taking on multiple roles, especially non-specialist ones, will make it harder for business owners to execute all of the business’s management operations. This is a challenging problem for any small business.

Revenue difficulties

The revenue generated by small businesses will be spent to pay employees, pay interest rates, and enhance the quality of machinery, among other objectives. If the market is volatile and the company situation is not favorable, revenue will be insufficient to compensate for the capital invested, resulting in business losses.

Legal issues

Many small businesses encounter legal issues because they lack a specialized legal department and lack the funds for a professional legal consulting unit. Small businesses become confused while carrying out legal procedures or implementing regulations connected to production and commercial operations because they do not comprehend the provisions of the law. This is the source of the legal risks that cost these businesses heavily in the form of sanctions.

ASL LAW is the top-tier Vietnam law firm for doing business in Vietnam. If you need any advice, please contact us for further information or collaboration.


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