Doing business is it easy to be successful?
May 27th, 2010
Is Thailand open to foreign investment?
Absolutely, many foreigners are exempted from visas requirements and as you will see foreigners are welcome to invest in nearly all sectors of activities in Thailand without needing any prior authorization providing that they do a minority investment (less that 49% of a business shares in a few cases less than 25%).
Foreigners may also take majority participation in most manufacturing sectors without requiring a prior authorization.
Overall they are not a lot of activities that are prohibited or controlled but there is alot of bureaucracy involved.
Who are the foreign investors?
There are three kinds of investors in Thailand.
The first are established multinationals or SME that come into Thailand to open a branch, subsidiary or representative office in Thailand.Those are experienced investors who often have already successfully invested in several other countries.
The second types are individuals that will come here to start up their own businesses. They are often people with a successful professional track record.
The third are individuals that just come in Thailand to purchase real estate.
Do all foreign investors succeed in their businesses endeavors?
I would like to be able to tell you that all our clients or that all foreign investors in Thailand succeed.
I mean what better publicity for me if all my clients succeed. As much i would like to tell you they all succeed, I have seen over the years more than a few (too many as far as I’m concerned) of our clients failed.
That is one of the realities of investing in Thailand; it is easier to fail than to succeed.
Do established companies that invest in Thailand often fail?
No, established companies (multinational or SME) that come to Thailand to open a business rarely go out of business or fail in the way individual investors do. In general they will leave because their profitability here does not match the initial expectation of the head office; for example, they have underestimated the local competition or did not take into account the fact that the Thai market is not a typical market. More than a few simply leave out of frustration because they cannot understand the way things work in Thailand.
Do Start-Ups often fail and why?
Yes they do, half of them fail for reasons that are inherent to start-up businesses the other half fails because the business owner did not understand how to do business in Thailand.
What are the challenges awaiting a start-up owner?
Some of the challenges awaiting the start-up owner are the same everywhere.
Getting clients, making a name for the business, organizing contacts, managing cash flow or even designing your business cards and all the other things you will have to learn on the fly as I did.
When I started my business I did not even have aprevious management experience. I was a litigator for the first ten years of my career and a senior associate with a foreign law firm for the next four. In other words I did not have a clue of the obstacles I would have to face.
Imagine yourself having to learn to become a manager while marketing your business, managing clients, chasing unpaid bills, and dealing with “non-consulting” aspects of your consulting business.
I barely had time left to spend on consulting and working on clients files.
Like the challenges, the main causes of failure of start-up companies in Thailand are common everywhere. Inadequate planning of the business; insufficient initial capital for the start-up period and the development stages, over estimation of the market demand for the product or the service offered; the lack of management ability; or a bad concept or a wrong location.
Even when you pass the cap of the start up danger period successfully it does not mean that you are home free. Indeed, small consulting business will be very sensitive to external event such as economical or political crisis. In Thailand we have been in state of crisis for the past two years and this as definitively affected all consulting services provider.
Now manage your cashflow carefully because if a period of crisis ever occur you will be on your own. One of the problem in Thailand being that if you are a SME, dont own real estate assets you will not have access to bank loans and overdraft in period of slow activities.
Are they causes of failure that are specific to Thailand?
A start-up or a new investment is a challenge in itself but a new investment in a foreign country is even more difficult.
It does not matter how educated you are; from one day to the next; you will become ignorant.
How easy do you think it can be to go through the hurdle of incorporating and running a business when you cannot read, write or understand the local language, when you do not understand the local culture and the dos and don’ts, when you do not know or understand the local market, have no basis to compare the cost of fitting an office and of hiring employees, do not know what licenses you have to apply for before starting your business, that you cannot read the lease agreement for your office building and so on.
What should you do?
From time to time I meet some clients who come for my advice to establishing a new company but they does not have a clue what they really want to do. It seems incredible but it is true. There are people out there that thinking that a company means profits and who believe that opening a company is the important thing, the activity being secondary only.
Have you ever heard of a business plan?
Now there are those who know what they want to do but who do not have a business plan or a market study and don’t even understand why they should need one in the first place.
These people fail because they underestimate the costs of running a business here. I mean I have seen investors failing from the start simply for having underestimated their initial investment costs. Of course a business plan itself does not mean success because things rarely happen as planned.
I don’t think I have ever seen a business at the stage of implementation actually following the initial business plan. But the exercise of making a business plan in itself is an experience that will help you in your future endeavor.
About the Author:
The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.