Six Elements to Starting a Business Overseas

Starting a business in a foreign country might be easier than you think, provided you keep in mind six things when planning your start-up.

Long ago, taking advantage of market anomalies in distant parts of the globe usually involved sailing across oceans, battling storms and deadly illnesses, but these days, starting a business overseas might actually be much easier, less risky, and more economically sound than setting up a business in your home country.

There are ample opportunities in emerging markets for entrepreneurs and small (or large) business owners with a skill set that is distinct from that of the local population. Following are six key elements to take into consideration when starting a business.

#1 - Political Climate and Property Rights

Some countries around the world have a record of confiscating property and/or businesses owned by foreigners. You'll probably want to steer clear of those countries. Others have impeccable histories with solid property rights and full access for foreigners. Finding a jurisdiction with minimal political risk is crucial. Taking a look at an index of international property rights can be very helpful with this.

#2 - Economic Situation

Countries with low debt-to-GDP ratios, low or declining unemployment, and strong consumer spending normally make for good prospects. A growing middle class, low inflation, and rising incomes are all positive signs. It's definitely possible to form a profitable business in a country with a stagnating economy, but it very well may be an uphill battle.

#3 - Your Personal Knowledge of the Industry

It's not always necessary to be an expert in the specific industry you're looking to enter, but you should remember that bringing in managerial help will add to start-up costs. Partnering with a trustworthy local, who already has experience and contacts within a given industry, can definitely increase your likelihood of success. Finding situations where you have some skills to bring to the table (other than just start-up capital) are usually best.

#4 - Market Research

You'll want to spend a significant amount of time analyzing local spending habits, as well as how much time, energy, and capital will be dedicated to marketing your products or services. If feasible, try setting up a trial run or conducting surveys before investing very much capital. Don't overlook how much you'll have to pay employees, nor what work habits are like in the country.

#5 - Language Barriers

If your business will cater to other foreigners, this might not be much of an issue. However, being able to easily converse with the local population will make launching your venture much more straightforward. If you're not fluent in the language of your target country, try to avoid paying for translation services, except for the most important procedures (such as revising contracts and/or the constitution of the business if used). Hiring a translator will significantly increase your expenditures in most cases. Instead, look for a bilingual individual that you can employ on a weekly or monthly basis, someone who can help with the language when necessary but who will also be useful for general tasks relating to the business.

#6 - The Incorporation Process

The International Finance Corporation and the World Bank have a great page that compares the costs, amount of time, and number of procedures involved with forming a business in 183 countries around the world. The page is specifically for businesses with between 10 and 50 employees, but can be a helpful tool for those looking into both smaller and larger operations.

Some examples:

  • In New Zealand, you can form a business in a single day with minimal paperwork (two days in Australia).
  • In Panama and Chile, setting up a business involves six or seven procedures and can take less than two weeks.
  • In Portugal, the process can take as little as five days and involve as little as five procedures, but the general economic prospects in Portugal are not so promising.
  • In Singapore and Hong Kong, setting up a business involves three procedures which can be completed in three days. Opportunities exist, but startup costs could be high, depending on your type of business.

Spending thousands and thousands of dollars on a business degree or an MBA isn't the only way to prepare for opening and operating a business overseas. While studying business can certainly be helpful, the years you spend in the classroom could instead be productive, income-producing years, if you select your market and jurisdiction carefully.

Starting your own business overseas will definitely require due diligence and careful consideration of the six factors listed above, but with under $1,000 USD (even under $100 USD in some places), becoming your own boss might not be as hard as you would think.

Editor’s Note: One expert on operating a foreign business whom we’d highly recommend is none other than Doug Casey, the original International Man. Doug’s been to over 145 countries and started businesses in a number them. He wrote a thick and detailed free guide on this topic, including his favorite countries. It’s a must-read for those interested in this extremely important topic. Click here to download the PDF.

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