People come to Thailand and fall in love with the lifestyle and the country. Many want to come and live here permanently. To do so, a way of making a living needs to be found. Business start-up in Thailand seems a perfect way of doing this. It is important to be realistic. Don’t be too seduced by what happens during high season when visitor numbers and expenditure is high. In low season which covers at least six months of the year, the picture is not the same. Doing business in Thailand where culture is very different is challenging. It’s a tough competitive environment and business failure rate is high. Here are some tips based on my experience of business start-up in Thailand.
Tip 1: Ensure you have calculated the real cost of business start-up in Thailand
Before considering business start-up in Thailand, you need deep pockets. Setting everything up in line with the legal requirements of the country is expensive. Remember this is not your home country. If things go wrong, you will be at a disadvantage in any dispute involving a Thai national. This is particularly if the dispute involves the ownership of property or land.
You will need sufficient capital to see you through both the start up process and the early years, especially if the business is seasonal. Bank loans for foreigners are difficult to obtain or expensive. Loans from other agents are expensive and carry risk factors. Banks in first world countries are reluctant or refuse to loan money for business start-up in Thailand.
The 28 day credit for settling invoices you might be used to, is usually unavailable in Thailand. Cash on delivery or even upfront is the norm. Your cash flow always needs to be good.
If you do not have sufficient financial reserves to start-up within a legal framework or to see you through the difficult times DO NOT DO IT. To go ahead would mean you stand a good chance of losing what money you do invest.
Tip 2: Do your research
Make sure that what you are offering is what people really want. This sounds obvious, but it is surprising how many people don’t do it. Assess the competition and how they are performing. Are there other businesses nearby offering the same or a similar thing? Ask yourself how are they are doing. Make a realistic assessment of whether your proposed business can do any better.
Tip 3: Come up with a unique business proposition
In the light of Tip 2, assess what the opportunities are for the business you propose. Ask yourself these questions. How can my business stand out? Where can I locate to give the business a competitive advantage? What can I offer that is different from my competitors? How will I market my business? This is not a time for idealism. You need to be realistic. The going can be tough and you need to create a profitable business in order to survive.
Tip 4: Find yourself a good lawyer
I cannot stress the importance of this enough. I was lucky and was introduced to Nitipat Interlaw Ltd (www.nitipatlaw.com) very soon after I arrived in Phuket. The advice and support they have given me over the years has been invaluable. They have helped me set my company up, advised me on contracts with business partners/suppliers, and on meeting the legal requirements of both working in Thailand and running a business in Thailand. They have very good English speaking staff there.
Tip 5: Find a Thai speaker whom you can trust
This is a crucial point and should not be overlooked. You need to fully understand what you are getting yourself into, especially if you are signing contracts with land owners, business partners etc. I was lucky in that my daughter learned to speak Thai very quickly after we arrived. She now not only speaks fluent Thai, but reads and writes it too.
Once the business is up and running you need to be able to communicate with and understand your Thai staff. Getting a basic grasp of the language is very important. I now speak intermediate level Thai. However, my Thai is not good enough to explain ideas and thoughts to staff. Communicating the reasons why I want things done in a particular way is also a challenge for me. On a day to day basis, I am supported by a Thai national brought up in the UK. I also have working with me an English speaking local Thai whom I have known for a long time.
Tip 6: Find the right Thai business partner
Again this is a crucial step in the process. Often Thai people have a very different concept of what being a business partner actually entails. Culturally there can be a huge gap in understanding of business practice and philosophy. Choosing the wrong business partner is a mistake that can cost you your company and ergo a lot of money. I have been caught out twice with respect to my choice of business partner. However, because on both occasions I had a legally binding contract drawn up by a lawyer, my losses were mitigated.
Tip 7: Do not go into loose arrangements with Thai Business Partners
During the seven years I have been here I have seen many foreigner businesses come and go. The two most likely causes of this are not setting up the business within a legal framework in the first place and/or problems with the Thai business partner. Any business in Thailand has to have majority Thai ownership. In view of this, having a business partner/s you can trust and who has a similar business philosophy is of paramount importance. These can be difficult to find. Often the person themselves is trustworthy but they are subsequently subverted by members of their family or friends. Chose your Thai business partner/s very, very wisely.
Tip 8: Make sure any contracts are legally binding
There have been many, many instances of foreigners investing in business infrastructure only to be subsequently evicted by the landlord. Make sure this doesn’t happen to you by getting your lawyers to draw up a legally binding contract. In the case of land lease agreements, try to ensure that your rights as a leaseholder for the period of the contract are registered with the land office.
Tip 9: Respect the Your Host Country
As a foreigner, it is very hard to build genuine respect within the wider thai community, especially the business community. One way to assist with this is by minimising any negative impact of the business on the local community. Deal with any complaints immediately. On a wider platform, abide by the country’s business law. Foreign staff should have work permits, register for VAT and pay taxes. Foreigners found to be working without a permit risk serious repercussions, including imprisonment and deportation. Be an ethical employer and register staff for Social Security. Have the right licenses in place. It’s not too expensive to do this in Thailand. Getting information about these requirements, however, can be a challenge. Again we are blessed with the firm of accountants we use Phuket Consult Co Ltd (www.phuketconsult.com). Their MD Angela Prajantabut, who has joint British and Thai nationality, has been an invaluable resource for us.
Tip 10: Know your market and reach out to them
Once you have setup a secure and sustainable business framework, the hard work really begins. Phuket is a very competitive business environment. You need to have your foot on the pedal from the start and never take it off again. Know what your target market is and never stop reaching out to it. The internet has provided new opportunities for foreign businesses in Thailand. We are no longer dependent on the local taxi mafia to bring business to us. Embrace these opportunities in the most creative and imaginative ways possible.
Although we have now built a sound business base at Sumalee Boxing Gym many mistakes have been made along the the way. We have tried to learn form these mistakes and would like other people to benefit from this learning. If anyone is thinking of starting a business in Thailand, please feel free to contact email@example.com to ask for advice.
Profile of Lynne Miller
Dr Lynne Miller is the owner and managing director of Sumalee Boxing Gym (a subsidiary of Island Master Company Ltd). Before her business start-up in Thailand, Lynne ran a successful research and marketing consultancy in the UK. Lynne was involved in one other business in Thailand before opening Sumalee Boxing Gym in Phuket. She is currently studying for a post graduate qualification in Digital Marketing.
Sumalee Boxing Gym (www.sumaleeboxinggym.com) provides Muay Thai training and yoga in Phuket. Within a relatively short period of time, Sumalee Boxing Gym has built an international reputation for the standard of training and service it provides. Over the coming year Lynne intends to write a series of blog posts on the experiences gained and the challenges faced in running a Muay Thai training camp in Thailand.