Starting a Business in Thailand (1): The basics

February 1 2010 Categories: Doing Business In Thailand, Thailand Business No comments yet

They are more than a few Tom, Dick and Harry that come to do business in Thailand armed with a “colonial” false sense of superiority. This is a mistake, even if Thailand did not yet achieve European, Japanese or US standards in all matters do not be mistaken about it. Thailand is a developed country. At least economically, politically that is a story for another day.

Thailand classify as “a middle income” developed country. Anyone who thinks that being an American or French or an Australian will give them a head start over the locals is in for a big surprise.

The “Colonial Attitude”

The worth problem with what I call the “Colonial Attitude” is this. Those who are afflicted by the “Colonial Attitude” are so sure that everything is better in their own country (then why come in Thailand in the first place?) that they will never make the effort to learn and understand how things work in Thailand and this refusal to open their mind will be a constant drag on their endeavors.

Being a foreign investor in Thailand does not give you a head start over the locals (but for the exchange rate) to the contrary as a newly arrived foreign investor you will:

- Be unable to read, write to understand the local language;

- Have no knowledge of the local market and us and coutumes;

- Have no knowledge of the local regulations, and so on…

So your first move should be to try to understand how things works here.

Relying on Others

Because, of your lack of knowledge you will have to rely on others to help you to start your business whether Thai or Foreigners. Of course you will need professional help, but professionals such as lawyers for example will be able to help you with the legal formalities of starting up your business and help you to address certain issues but they cannot run and manage it for you.

If you rely on Thais your problem will be that most of them are very informal by opposition to Thai laws that are very formals. Basically they will tell you not to worry about anything and you may end up in lot of trouble for not having worried about a few issues.

If you rely on other foreigners the problem is that many of them are out there to get you the new kid in town who don’t know a thing.

I’m not saying that all Thai are honest and you are not at risk to be cheated by a Thai. What I’m saying is that my experience over a 12 years period is that foreigners are very good at preying on each other’s and I have seen more foreign investors losing their money into the hand of other foreigners than into the hands of Thai people.

Putting the Plow before the Horse

I still see too many foreign investors who are putting the plow before the horse. What I mean by this is that they come to Thailand many times as tourist love the country and want to make a life for themselves here. Unfortunately they are not wealthy enough to live without working and will need a source of income to sustain their stay.

They will schedule a meeting with a lawyer and start the meeting explaining that they want to start a company.

But when you ask them what business they want to do they have no clues yet.

They want a company. In their mind the company is the first step. The company will give them a legal vehicle to do business and to support their work permits and visas.

What they do not understand is that a company itself is not a source of income. A company is a source of costs, incorporation costs, accounting costs, tax costs and so on… The source of income is the business that will be run by the company.

I’m not saying you must not start the company before the business; to the contrary you will need a legal vehicle to develop your business what I mean is that there is no point starting a company if you don’t know yet what you want to do in Thailand.

The Receipt for Success

There are no miracles. Whatsoever business activity you may want to do success is not a given.

The fact that other foreign investors have succeeded in this line of business does not mean that you will also succeed.

Contrarily to what you can read there are no absolute tips or no magical receipt for success. Over the past 12 years I have assisted hundreds of customers to invest in Thailand. I have seen some succeed but I have seen my share of failures.

In some cases failure is easy to explain because if they are no absolute receipt for success there is a long list of things one should not do.

The Don’t Do

One should definitively not:

- Start a business without a basic business plan

- Launch a new concept or a new product in Thailand without a basic market study. The fact it works elsewhere is not a guarantee because it is my experience that Thailand is an atypical market.

- Start a business without understanding the legal, tax and other implications of such business

- Start a business in a sector he is not a professional or without surrounded by professional of the sector

- Start a business without sufficient capital to finance not only the initial investment but also a few months of cash flow

- Start a business when everyone is telling you that this is a bad idea.

- Buy into a business without proper due diligence.

I could continue a while because the list of don’t is quite long.

The Do’s

The list of what you should do to be successful is more complex to establish because when I compare the files and the cases of some of my clients that failed by comparison to those that succeeded there are sometimes simply no rational explanation as to why one succeed and not the other.

Guess luck may also have something to do with it.

Finally the fact is that some of my most successful clients have not always been successful in all their endeavors.

They will start a business that succeeds, and then they will start a second business that fails then a third one that is struggling and a fourth one that is again a success.

Investing against the Odd’s

As much as I would love to tell you that I will help you to succeed in any case (that would be a good marketing move) I cannot.

What professionals like us may offer you is to guide you through the legal issues, warn you against all the don’t, assist you with the study or preparation of your business plan, warn you of the legal, tax or accounting issues that may affect your business on the short or long term but at the end of the day whether you succeed or not will be on you.

But the one thing you should always remember is that whatsoever the country you are investing in the odds are always against startup companies and that when investing in Thailand the odds will even be more in your defavor because you are investing into a environment that is completely stranger to you.

Be careful

Originally posted 2009-11-03 08:15:01.

Doing Business in Thailand