Business Article - Buying Businesses Abroad
The Internet has made the world a small place, and with it has come a whole new market for purchasing and selling businesses abroad. This has opened up a new demographic of people who are buying businesses over seas in hopes for profit whether in business or resale. There is a great potential for making a profit overseas, and the ultimate goal of every business owner is to reach a point where profit is steady and work become delegated to others, reserving only the most important aspects of the business to the owner(s).
Purchasing a business in a country that is not your own is a risky move. It involves far more aspects than purchasing a local company, and can result in stiff penalties and court action if not done correctly. Currency is different and will need to be dealt with. Customs will be different, and the business will need to function correctly for that country. Marketing research will have to be commissioned in that country, and the results could be costly. Often times, the owner will need to make trips to the business, sometimes frequently. The financial burden of this will need to be considered before purchasing. Beyond these matters, laws concerning business ownership will need to be dealt with both in the home land, and in the foreign land.
The responsibility of owning a foreign business is huge. There are often stressful times, especially in startup, and the owner must be able to physically handle these situations. Clear thinking and sound logic, as well as good interpersonal communication skills and the ability to articulate are essential skills.
There are many aspects to consider. The following advice will make the transition to foreign ownership easier and less stressful.
Know the Contract
Understand every aspect of the contract. Read it through several times, write down any questions you might have, and then ask those questions. Have the contract looked over by a lawyer who deals specifically in this area, and have the money figures analysed by your accountant. Understanding a contract in full will prevent misunderstandings and unexpected obligations.
Ask About Debt
Is there any debt associated with the prospective company right now, and if so, how much? Are you willing to take on the debt, and how will it be handled if you are over seas? Will you need to hire an accountant in that country to maintain the debt, and if so, how much will that cost?
All these aspects should be taken into consideration before continuing. Taking on business with debt, especially a business that is in a different country, can be a risky move. Are you willing and financially able to assume that debt? And what happens if you should default on a payment? How is that handled in the specific country you are dealing with?
Use the Relevant Currency
When securing financial assistance, try to secure it in the specific currency you are going to be receiving money in. This will make it easier to keep track of incoming versus outgoing money, and will protect you against currency fluctuations.
Consider a Partner
A partner will be able to help with the financial costs of purchasing a business overseas, especially if that partner is located in the same country as the business you are considering. If you do get a partner, working out the obligations for each party and the daily responsibilities will make the business work out more smoothly. Determining financial information ahead of time and signing a partnership contract will be necessary to avoid any legal issues if a disagreement occurs.
Learn Foreign Law
You will need to thoroughly learn about the regulations, laws, ordinances, licenses, and taxes that are associated with the area your prospective company is located. Failing to follow the local laws could result in fines or penalties, or even court action if the mistake is great enough.
Opt-Out
Ask about an opt-out clause in the loan contract. If there is not one, get it.
Hire a Translator Full time
If you are going to be communicating with someone in the foreign country often, or constantly be receiving documents, hire a translator that is fluent in that language. A native speak is ideal, and they should have technical knowledge for translating legal documents and other papers.
Go Slow
Don't jump onto an opportunity because it seems to be too good to be true, and don't act promptly. This will only result in mistakes and frustrations later on. All documents, debt, ordinances, and contracts will need to be carefully reviewed and planned out before anything is signed and committed to.
Analyze the Market
Just like with every other business, the market should be analysed and the potential profits of the company determined. Hiring a research marketing firm in the country you are buying may be necessary. Use the information gathered to determine whether or not the business is even worth the investment. Also, this information can be used to determine whether or not the asking price is fair.
Ownership Restrictions
Some countries have restrictions on outright ownership for a foreigner. Most laws prohibit a foreigner from possessing the majority of shares in a company. The best solution to this would be to develop a partnership with someone residing in that country, and arrange the company so that your partner holds the majority of the shares.
Understand Customs
Depending on the country you will be purchasing a business in, there may be customs you need to know about and set your business around. For example, it is common in certain parts of England for there to be a break for tea. In the US, there are usually 5 minute smoke breaks every hour. In the middle east, there are usually breaks for Muslims to have their daily prayer. Understanding the customs of the country and people will make the working day go much more smoothly.
Develop Interpersonal Skills
Being able to articulate and communicate effectively is absolutely necessary. You will not be conducting business in person or meeting with management regularly. Because of this, being able to express your thoughts, needs, and requirements adequately and effectively will be assure that you are not misunderstood.
Increase Your Education
Take some business and foreign affairs classes at a local college. These classes will increase your knowledge of both business in general and in relation to foreign business. In addition to taking classes, take some courses on the laws and customs of that particular country. Learn about the way that countries tax system, business system, economy, etc. all work and function.
Once you have taken some classes, schedule a visit to that country. Stay long enough to notice the way marketing and advertising works, how TV commercials are designed, and read the current papers and magazines. Dine are restaurants, shop at stores, and learn everything you can about the way that country operates. Finally, be sure to visit a business that is very similar to your own. Striking up a conversation with the owner is bonus, as they may be willing to talk to a foreigner, and you can gain some first-hand knowledge.
Plan for Extra Expenses
The purchasing price of the company is only one of many costs that will be incurred over time. Plane tickets for over-seas visits, fines and penalties that may occur, and transactions between countries are all costly. The cost of maintaining business licenses in both countries, the cost of marketing, translators, phone calls, etc. will all be in addition to the regular fees of maintaining the company.
Know that You are Responsible
The responsibilities of working in a foreign land are very high, and you are assuming the responsibility for everyone in your business. Everything that happens in your company, everything your management does (or fails to do) will be your responsibility first and foremost. You are the owner, and as such, you are the one who will be held accountable should the company fail to follow regulations.
Get Regular Checkups
Owning a business, especially a foreign business, is a stressful thing. The stress can lead to poor nutrition, lack of exercise, too-little sleep, and a host other problems. Have regular physicals at the doctor. Join a gym and take time out to exercise. Perhaps most importantly, take an hour or two a day to do something enjoyable and non-work related. This will make a vast difference in your ability to work and think clearly.
Are you comfortable with the thought of having to attend a foreign court, work with a foreign law system, and (though unlikely) face jail time in a different country?
These tips are meant to make the transition to foreign business ownership easier. The skills and knowledge needed to proceed with a purchase are demanding, and this form of business ownership is definitely not for those easily stressed or without experience. The first key is to be sure that you can financially handle the burden. Finances are the first causes of closures, mistakes, defaults, overdrafts, and even illnesses. The demands that are placed will be very high, and should never be taken lightly. For someone who is experienced and who has the financial means, this can be a very exhilarating time. Enjoy the experience, learn from it, and do your best to succeed.