Starting up a business abroad is something that many consider and few follow through. This can include everything from running a bar or restaurant in the sun to expanding an existing business in your home country to a new country. The move can be driven by the desire to live abroad or by the business opportunity which is represented by another economy. Whatever the motivation it is vital that sufficient research is done to understand the regulations, market conditions, HR issues, competition and other factors that will drive success of the business.
The first issue when deciding to set up a business anywhere is whether you have a realistic business plan and this is made even more of an issue when you plan to set it up in a location outside your home environment. You may be taking a business you already operate in your home market to a new market, but even then the differences need to be fully understood to ensure that the idea will translate. If you are planning to set up a business that you have not been involved with in your home market you will need to be even more certain that it will be viable and that you have the right skills, knowledge and character to succeed in an alien environment.
Research is clearly essential to understand the market in the country where you plan to set up. Identifying the differences between your home market and planned destination will be essential in assessing the viability of both the idea and the location. Any retail or catering proposition will need to ensure that you understand the competitive offerings already available in the market as well as local tastes, expectations and preferences. Potential customer volumes, footfall, pricing, input costs and availability of a reliable supply chain all need to be established. It is vital that facts and figures rather than presumptions and impressions from a passing visit are the basis of the business pan.
Understanding the market is probably the most important ingredient of success for most businesses and so you need to know who your customers will be, what their likely ability to pay for and interest in your product is likely to be and to what extent do they already have access to competing products or services?
As with any business plan it is best put down on paper to ensure that in this way there is the opportunity for others to assess and question your plans. This will also be essential if you need third party funding to finance the business.
The next issue that will need to be considered is the legal and regulatory environment that your business will be operating in. You will need to identify whether the visa you have or plan to obtain allows you to run a business in your destination country and whether there are any restrictions.
In many countries foreigners are not permitted to operate without a local partner and so a joint venture will need to be set up. In some cases it is only possible to own a minority share in any business. It is therefore essential that you take advice from lawyers who specialize in these sort of issues and who are likely to ensure you have the right visa and will be able to advise you on the sort of structures that will meet local requirements.
You should also understand employment regulations, laws and social costs so that you have a clear idea of any liabilities you take on by employing people in the new market as well as the costs associated with each employee taken on.
Taxation provisions in your chosen country can have a significant impact on the profitability of your venture. Sales tax, VAT, import and export duty as well as corporation, income tax or other forms of tax on the company and the individual need to be understood and assessed to identify how much of the revenue generated will remain in your hands. Social taxes can be significant in some markets and can impact the cost of taking on employees.
You will need to understand reporting requirements to ensure that you submit required reports and make required payments on time to the relevant authority. You should also understand any Capital Gains taxation as this may impact you when you decide to leave and return to your home country. An outline of the tax rules in each location are shown on the individual World of Expats destination pages.
When starting a business you need to be sure that you have adequate financing to cover capital requirements, such as premises and equipment as well as working capital requirements to cover the costs of relocation to the country, the purchase any inventory, deposits, start up expenses, marketing and operating costs incurred prior to receipt of revenue. You need to have a working capital cushion to cover any unexpected costs or delays in building revenues and the amount of this will depend on the nature of your business.
If you do not have the funds to cover this yourself you will need to see whether to take on an equity partner (potentially tying in with the requirement to have a local partner in some countries) or to seek bank financing. This will depend on the nature of the finance gap as for any business.
Whatever the financing requirements you will need to understand the local banking sector and the nature and costs of services offered relevant to your needs. If you have international payments to be made, you will need to understand their capabilities in these areas and any differences in trade finance arrangements.
There are many opportunities for expats who seek to make use of their skills to set up a business. Follow this link for some New Business Ideas for Expats