Trying to adapt to modern realities, more and more entrepreneurs are thinking about opening a business abroad. And this is not surprising, because the conditions for entrepreneurs in Ukraine cannot be called ideal: bureaucracy, unstable political situation, military operations, high interest rates on loans for business development, corruption, and practically no state support for entrepreneurs.
However, only a small number of domestic businessmen move from dreams to real actions in this direction, and there are a number of reasons for this:
– objective: lack of necessary capital, low competitiveness of the product;
– subjective: lack of necessary knowledge, skills, contacts, partners, free time, as well as unwillingness to take risks and start everything from a “clean slate”.
For those who still decide to create their own business abroad, a difficult initial period begins, which involves the need for instant adaptation to the new business environment and prompt adoption of the right management decisions.
When launching a new project, we think more about prospects, success, profits than about problems. A positive attitude is important, without it you shouldn’t even start.
But it is even more important to pragmatically assess the situation, anticipate difficulties, and plan a course of action, especially “at the start” – the period of time from creating a business abroad to reaching the planned level of profitability.
The problems that Ukrainian businesses face “at the start” are mostly common. Most often they are related to the difficulty of adapting to new conditions and successful work in such conditions. So, let’s consider possible problems when creating your own business abroad from the very beginning. The field of activity has been chosen, we choose the territory.
Business abroad: how to choose a country?
There are a number of key characteristics that need to be taken into account when choosing a country:
– simplicity in the legal registration of the company. Of the closest neighbors, Poland is the best: there is an opportunity to establish a company online, being in Ukraine, and having only a valid international passport;
– political stability. The leaders are the EU, Canada, Australia and the USA. Here you can safely develop a business in any direction;
– tax burden;
– analysis of the sales market for your product;
– developed infrastructure;
– labor costs;
– comfort of doing business (the leader is Japan). This means a low level of economic crime and respect for other people’s property;
– the possibility of taking a loan for business development, the availability of state support (benefits, subsidies, grants);
– mentality and culture (similarity of language, traditions, customs). These are important characteristics, since with significant differences, your adaptation may take a long time.
Business registration abroad – options.
- Buying an existing business abroad.
This is one of the easiest ways. In countries with developed economies (EU, USA, Canada) it is quite common. But it assumes the presence of significant capital.
A ready-made company immediately eliminates a number of “start-up” problems: market analysis, choice of form of activity, preparation of documents and their registration, recruitment of employees, search for suppliers and sales channels, forecast of prospects and profitability.
Important! Before buying a business, it is necessary to involve professional lawyers, auditors to conduct a thorough legal examination, check the reliability of economic indicators, and carry out a full inspection of the object of purchase. Otherwise, you can fall for unscrupulous sellers and lose your own capital by buying a loss-making company.
2. Opening a representative office of an already operating company.
When there is a need to declare your business outside of Ukraine, then, having spent a small amount, you can open a representative office of the company. In this case, you save time and money on company registration.
The representative office may not carry out commercial activities, but monitor the market situation, provide advice on the company’s services, attract clients, and refer them to the “parent” company.
Important! Before opening a foreign representative office abroad, it is necessary to carefully familiarize yourself with the economic and legal features of the selected country, involving relevant specialists. This will allow you to avoid unnecessary fines for non-payment of local fees, taxes, untimely submission of documents, etc.
3. Opening your own company “from scratch”.
This option, with a completely independent registration and start-up process, is quite expensive in terms of nerves and time. Also, according to statistics, it is foreigners who have just registered their own business who incur the largest share of fines.
Important! We recommend that you immediately budget the costs of legal and accounting support, hire professionals for registration, and immediately be able to provide quality services. After all, the primary task of an entrepreneur is to do business, overcome competitors, and make a profit.
Business is launched, what next?
Typical problems and how to avoid them.
Now let’s take a closer look at the main problems that may arise after opening a business abroad.
Risks of a new business environment.
- Jurisdictional features.
One of the main problems after establishing a company abroad is conducting business in compliance with all local laws. Each country has its own rules for conducting business activities. This applies to the terms and procedure for obtaining permits or licenses, the features of concluding and executing business contracts, hiring and firing employees, taxation of entrepreneurial activity, accounting, etc.
As experience shows, ignorance or misunderstanding of foreign legislation often creates problems for business, sometimes with catastrophic financial consequences.
It is simply impossible for an entrepreneur who has just started work to immediately understand the requirements for the procedure for conducting business in new conditions for him. Therefore, a necessary condition for a successful start is the presence of professional consultants, primarily an accountant and a lawyer.
There is no need to dwell in detail on the importance of proper accounting, timely submission of reports and proper payment of taxes. An accountant must work with the company constantly, and this is relevant for any system.
The situation is different with a lawyer. His constant presence at the company is not mandatory. However, you should always have the opportunity to quickly get professional advice on legal issues.
It is best when the business is served by the same lawyers. This reduces the risk of leakage of confidential information and allows you to receive legal assistance taking into account the specifics of your business.
2. Market features.
A number of problems that arise after opening a business abroad are related to a lack of understanding of the needs of the market to which you are introducing your product, and the place that the product will occupy in this market. This is one of the main reasons why most businesses cease their activities in the first year of their existence.
Such difficulties arise due to the lack (incorrectly conducted) of a preliminary detailed study of the needs, opportunities and prospects of the new market for your product.
To avoid such a problem, a detailed marketing research of the “new territory” is mandatory. Ideally, entrust its implementation to specialists.
3. Mental characteristics of counterparties.
Separately, it is worth paying attention to the problems that arise due to ignorance of the mentality of a foreign counterparty, in particular, its cultural or even religious features. Thus, the ways of doing business of Germans, Italians, Poles, and Turks are radically different.
This factor must be taken into account at the stage of agreeing on the procedure for relations with the counterparty and concluding a cooperation agreement with it.
4. Mistakes in the behavior of the business manager.
A separate group consists of problems that arise due to the peculiarities of the behavior of the company manager in a new business environment, his ability to make the right decisions in unfamiliar conditions.
The following reasons for such problems can be distinguished:
- Overconfidence.
In new conditions, business managers often behave too self-confidently: “I know everything!”, “There is nothing complicated here!”, “Everything works the way it does in Ukraine!”.
Of course, the boss’s confidence in his actions is a necessary component of a successful business. However, excessive self-confidence does not allow him to adequately assess the realities, to weigh all the advantages and disadvantages of a particular step.
- Euphoria.
Such an effect is sometimes observed after an entrepreneur signs a very valuable agreement with significant earnings. Then the euphoria that arises on this basis prevents him from making thoughtful subsequent business decisions and adequately assessing risks.
- Lack of strategy.
A fairly common problem at the beginning of entrepreneurial activity is the lack of any strategy for doing business abroad. The key phrase: “We register a company, and then we’ll see..”.
As experience shows, with such a “start” of a business, it is rarely possible to reach the next level.
- There is no business structure.
It is also not always possible to properly organize the work of all divisions of the company and its employees. We are talking about the goals, responsibilities, and powers of the company’s departments in general, and each employee in particular.
A clear structure contributes to the involvement of the optimal number of employees, the rapid completion of tasks, and the economical use of available resources.
The lack of structure causes the expected negative opposite effect.
Separate attention should be paid to the situation when a business manager tries to carry out operational management of production processes simultaneously in Ukraine and abroad. As a rule, the effectiveness of such a manager decreases in both directions at once.
Summary. It should be noted that entering new foreign markets is an action worthy of respect and admiration! We hope that following a number of recommendations given above will help minimize typical problems at the start when opening a business abroad
