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Starting up a business in a new country Example module for the partners
Are you familiar with other How to communicate in a cultures? new culture? (Cross-cultural skills) (Ccommunications skills) How to develop my How to build networks? entrepreneurial skills? (Networking skills) (Entrepreneurial skills and traits)How to start up a business in How to expand your business a foreign country? to a foreign country?
How to start up a business in a foreign country?This module gives you basic understanding about starting a business. The focus is onaspects related setting up a business in a foreign country, but the information offered isapplicable also if you are planning to start a business in your home country.The topics to be covered in this module include formalities of business start-up, marketinformation, business planning skills and funding. We also provide you some links toadditional information about the topics. Business planning skills Formalities of Market information business start-up Learning materials, tips Funding and links
Business planning skillsEvery business needs planning. No matter if it is a start-up or a long establishedcompany. The goals and aims of a firm need to be set, the steps toward the goals needto be planned, as well as the criteria for monitoring your success.Core competency areas needed in business planning 1. goal setting 2. organizing, analyzing and gathering data 3. diagnosing problems and their causes 4. predicting and forecasting 5. communicating 6. evaluating and comparing courses of action 7. implementing and monitoring actions. (Dan J. Power of Planningskills.com)A business plan is a document which helps you to manage your plans.
What is a business plan?“A business plan is a document that summarizes the operational and financial objectives of a businessand contains the detailed plans and budgets showing how the objectives are to be realized.Because the business plan contains detailed financial projections, forecasts about your businesss performance, and a marketing plan, its an incredibly useful tool for business planning. For anyone starting a business, its a vital first step.”(by Susan Ward, About.com Guide)
What is a business plan? (cont.)• There are different forms for different audiences 1. a written presentation for external stakeholders 2. an oral presentation 3. an "elevator pitch" 4. an internal operational planA written presentation for external stakeholders is mostcommonly referred as a business plan.
Why do I need a business plan? • By creating a business plan you’ll make the your ideas more explicit which gives you an opportunity to evaluate them critically and change your plans when needed. • A good business plan is a living document. It should be updated regularly. • It is a concise way to inform your potential financers and investors about who, what, when, where, how and why – some financers and investors even require a business plan. • Thorough planning is even more essential when starting in a foreign country!
”Business plan made it easier to communicate our business idea with otherpeople. It was very useful when searching for the premises to rent and when applying for public grants and financing.” ”My mentor was a great help for me. He encouraged me in entrepreneurship and helped me in further developing and testing my business plan. It is important to have some ”outsider” to comment your business plan.”
What should I write into a business plan?• The plan should define specific business objectives and goals with general parameters to guide the organization• What should it include? • basic information of the business (ownership, business form etc.), • business idea, • business environment, • goals and strategies, • marketing plan, • product development plan, • production and logistics, • organisational and personnel plan, • financial plan, • risk analysis.Remember: Business plan should be simple, specific, realistic and complete.
What should I focus on when planning a business in a new country?• The customer behaviour and needs may vary from country to country: ”We came from Persia and started an ethnic retail shop in Finland just before Christmas time. We ordered lots of figs for the season, which all went bad. We just did not know that it was not a custom in our new home country to eat figs during Christmas time. Now we know better, and order many kinds of special nuts for the holiday seasons. And they sell very well.”• A marketing strategy that is efficient in one country may be inefficient in another: ”The Finns seem to be obsessed with the Internet! Being visible in the social media has helped our grocery in many ways.”• Not only social environment (habits and valuations) differ, but also the physical environment – and it affects the business as well: ”After moving to Finland I soon realised that the high season for selling garden furniture is quite short. Between August and April hardly anyone will buy garden stuff. The gardens will be mostly frozen that time. Coming from South-East Asia this was something new. ”• The value of skills and competences is always in relation to the environment you are in. Matching your skills and competences to the needs of the new environment might be a key to success. Eg. ability to speak fluent Spanish in Spain, may not be much of a skill, but in some other country it is an asset that gives you competitive advantage, when starting a business dealing with Spanish speaking countries or enables you to work as a freelance Spanish teacher.
Why not start today? It’s fun.It is not hard!You can also get help if you need (see the links below)Free business plan templates and more info on using thebusiness plans:• Bplans.co.uk, Free Sample Business Plans and UK Business Plan Software http://goo.gl/jF84v• Bplans.com, What makes a good plan, Business Planning Basics, http://goo.gl/KMXzl• Bplans.com, Business Plan Outline and Instructions: http://goo.gl/7QIMB• US Small Business Administration at http://goo.gl/34qge• About.com, Small Business Information, at http://goo.gl/3xQsc• VA-Interactive, Developing a Business Plan http://goo.gl/2XOA1
Legal forms of businessAfter you have decided to start a business one of the important issues is the form ofbusiness entity that will serve as the vehicle in pursuing the business.There are many legal forms of business available for you as a business owner.• Choosing the form of business that best meets your needs may: • Protect you from unnecessary risks • Help you to minimise your taxation liability • Save you time and reduce paperwork • Help you to avoid government regulation and unnecessary bureaucracy
Legal forms of business• The following three forms are the most common ones for a start-up entrepreneur: – Sole proprietorship/sole trader – Partnership – Limited liability company (LLC)• It should be noted that – the regulations governing particular forms of business may differ a lot between countries. – there might be also other kinds of business forms available, depending on a country.• You should always check the country-specific information. European Commission’s web portal Your Europe, your opportunity - Practical guide to doing business in Europe provides country- specific information and links to Points of Single Contact in each EU country.
How do I choose the legal form of business?• Choosing the right form of business is important because it will determine for example how your business is organised, and how your business is taxed.• It is good to know that your initial choice of a business form doesnt have to be permanent.• It might be advisable consult business professionals when choosing the form of business.• There are no fixed rules determining which is the most suitable form of business. The most suitable and appropriate form of business depends on the individual circumstances of each business owner. Considering the following issues might help you to choose the most appropriate form of business for yourself: – Number of founders • If you start your business alone, you can choose between sole proprietorship or limited liability company. If you have one or more partners then you have more alternatives. • You can think about your working habits: Do you prefer to do things alone? – Required capital • The amount of capital needed for the business depends on the type and scope of the activities. Usually sole proprietorship requires little capital whereas in a limited liability company a monetary investment is required. • If you aim at having a large number of investors, a limited liability company is the most suitable. – Division of responsibilities • A sole trader is responsible for any liabilities of the business with his/her personal property. The partners in a partnership have a similar personal responsibility. The responsibility of shareholder in a limited liability company is limited to the capital they have invested in the company. (Enterprise Finland. Different forms of business. http://goo.gl/VXcYB)
How do I choose the legal form of business? (cont.)• Flexibility of operations – A sole trader makes all decisions alone and is responsible for the activities with his/her personal property. The partners in partnership make decisions either solely or jointly. Limited liability companies are usually represented by their Boards of Directors. – Limited liability company requires more statutory paperwork to take care of than the other forms of business.• Continuity of existence – A sole trader’s business operations are the most vulnerable on the death of the entrepreneur. In a partnership the share of the partner may usually be transferred to another person with the agreement of the other partners. In a limited liability company changes in the shareholders do not affect the existence of the company.• Profit distribution and loss coverage – A private entrepreneur retains any profits himself/herself, but is also responsible for the losses incurred by the business. – In partnerships profits and losses are distributed among the partners, but there are some variations between the specific types of partnerships. – A limited liability company pays its shareholders a dividend. Only the profit of the previous accounting period and unrestricted shareholders equity may be used for dividends. A shareholders losses will only amount to the investment.• Taxation – Tax treatment varies depending on the form of business. Also each country has their own laws and regulations that need to be followed. – When determining the tax burdens falling on different forms of business, attention must also be paid to the tax burden of the entrepreneur. The joint effect determines which form of business is the most profitable in terms of taxation. (Enterprise Finland. Different forms of business. http://goo.gl/VXcYB)
Sole proprietorship / sole traderA sole proprietorship is a business owned by one person.As a sole trader you may operate the business alone or may employ others. • An easy way to start to • You are personally liable Cons + Pros run a business for the debts incurred by the business • Usually does not require lots of capital • There’s no job security when you work for • You have control over yourself your work: what you do, how much you work, • Might be lonely when you work • Irreregular income – it • Keeping records and might take a while accounts is fairly simple when you start earning • You can keep all profits you make!(Business Link: Business Structures, http://goo.gl/t1djE)
Limited liability company (LLC)A limited liability company is a flexible form of enterprise that blends elements ofpartnership and corporate structures. It is owned by its shareholders, but has aseparate legal entity from its owners. • It allows you to separate • There are more Cons + Pros business and personal paperwork and affairs accounting • It protects you from requirements for LLC personal bankruptcy – than for a sole trader you are not responsible • It might require some for the debts of the starting capital business • It might be considered • There are more rules more credible business governing the activities of limited companies • It allows more flexibility than there are for sole in arrangements traders and between its shareholders partnerships and directors(Business Link: Business Structures, http://goo.gl/t1djE)
PartnershipA partnership is a business owned by two or more people who agree to share in the profits orlosses of a business. The three typical classifications of for-profit partnerships are generalpartnerships, limited partnerships, and limited liability partnerships. • It is easy to set up • You need to share the Cons + Pros profits between partners • Does not require high investments • Each partner usually has unlimited responsibility Pros • You can yonnn business share the of liabilities responsibilities, costs and the workload with your partner • You do not have total control over the business • You and your partner can support and motivate each • You need to make other compromises • You do not have to know everything by yourself – you can compliment each other’s skills with your partner(Schaefer: Is a Business Partnership The Right Choice for You? http://goo.gl/B4YLc; Business Link: BusinessStructures, http://goo.gl/t1djE)
How do I register my business? Administrative procedures related to business start-up• The business registration procedures vary between countries• There might also be different registration procedures for each form of businesses• Typically, as a new business owner you need to register your business to the authorities• Also you need to take care of social security registration and tax registration• In some countries it is also mandatory for a business owner to insure himself against retirement, unemployment and death Each EU member state has set up “Points of Single Contact (PSC)” that are e-government portals helping businesses complete their administrative procedures on-line. You can use the "points of single contact": • to get detailed information about doing business abroad or in your own country • to complete administrative formalities concerning the establishment of a business or the cross-border provision of services. Points of Single Contact – Easy completion of formalities for service providers: http://ec.europa.eu/internal_market/eu-go/index_en.htm(European Commission. Your Europe – Start-ups. http://goo.gl/Dl6vo)
Market informationKnowing your target market is extremely important for allbusinesses. Get a business ideaBut when you are starting a business in a country other thanyour origin, the knowledge about the markets becomes evenmore important.No matter how good your product or service is, in order to sell ityoull have to convince people they want or need it. Learn the needs of your customersThis means you have to first find out what it is your customersactually want or need. Then you need to know your competitorsin order to compete in the marketplace. No matter what youreselling, the chances are your customers are already buyingsomething similar from someone else. Find out who the competitors are andOnce you know your customers needs, you can align yourproduct or service to meet them and get those sales. Use this what they doknowledge to differentiate your service or product from the onesoffered by the competitors. Making customers aware of howyour business is better is how youll convince them to buy fromyou. Rework on your businessThis section provides you information on the essentials of idea to offer somethingmarkets: what do you need to know and how and where you can special to your customersfind the information?
Market information• When you start a business you need to be aware of your markets: – In what kind of markets are you planning to operate? – What is your target market? – What are the needs of your target market? – Is there lots of competition in the market? Who are the competitors? What are they doing? – What are the market trends?
Where do I find information on markets?• There are many sources of information you can exploit for identifying potential markets: – Reports and articles: business magazines and the business section of the newspaper provides information on the economy and the effect it’s having on different types of businesses or markets. – National statistical offices can give you an idea what’s happening in the economy, population and trends – Trade associations for your industry can offer industry-specific information – Local authorities and Chambers of Commerce can provide local information – Market reports can be found free of charge from the web, also market research companies sell them online – Market research is an excellent way to gather various kinds of information
How do I conduct a market research?• Some basic market research is usually essential in order to be able to develop and provide high-quality service or product to the customers• If you have money, you can hire a marketing research company to do the resreach for you• Alternatively, you can do the market research by yourself• TO BE CONTINUED
Do I need some funding for my business?Starting a business requires funds. There are many things that you’ll need topurchase – office equipments, means of production, stock, etc. You’ll need toensure your own living during the first months, too.How much funds are needed depends on the type of business you are starting,too. The cost are much lower when starting up a consulting firm or a hot-dogstand than when starting a high-tech factory or a leisure centre.But even if we are talking about different amounts of money, the fact is thatsome money will be needed. Most business-owners tend to underestimate theamount of money needed for start-up. Read more about estimating realisticstart up costs at http://goo.gl/cy0T4.Where can you get funds? Your own savings perhaps? Your family and friends?Bank loan? Public grants? Privat investments?How to get them?
Where can I get funding?• Own savings + You will be independent and don’t need to worry about instalments of loans - The amount of money is often quite limited; your business idea will not be tested by ”outsiders”• Family and friends + Family and friends can be trusted; owing them motivates you to work even harder for your business - If the financial situation of the firm gets bad, there is a risk of disagreements, which can harm the family or the friendship• Subsidies + Free money that you don’t have to pay back - The amount of money is often quite small; the procedures involve reporting and other red tape• Bank loans + You don’ t loose your command on the business - The money is on a market price, many times you’ll need a solid security
Where can I get funding (cont.)?• Public guarantee schemes and public loans + reduces your need for solid security - ??• Angel investors + looking for high growth and high return, more likely to invest smaller amounts than venture capitalists; also with lesser ownership - you will loose some right of disposal in your company• Venture capital + ready to invest large sums of money, usually in high-growth and high-tech industries, willing to invest in start-ups - you will most likely loose more than 50% of your ownership
When starting a business in a new country, how do I know where to look for help in financing?Raising funds in a new country without networks and connections is a little bit harder thanat your country of origin.Every European country has its own public funding system as well as business supportsystem, which you should find out before starting a business.Country-spesific information and links to locan support organisations can be found at YourEurope Portal: http://goo.gl/K599• Other helpfull places to start are: European Small Business Portal, Obtaining funding http://goo.gl/E4es9 What is it? European Small Business Portal gathers together all the information provided by the EU on and for SMEs, ranging from practical advice to policy issues, from local contact points to networking links. Enterprise Europe Network: http://goo.gl/qh31R What is it? The Enterprise Europe Network brings together business support organisations from across 49 countries. They are connected through powerful databases and know Europe inside out. With more than 580 member organisations they are always close to where your business is based. European Commission, Enterprise and Industry, More risk capital http://goo.gl/hnKV5 What is it? EU policy highlights overview with useful definitions and links. EBAN (European Business Angel Network): http://goo.gl/xhsFR What is it? EBAN is a representative of business angels, business angel networks, seed funds and other early stage investment professionals across Europe.
”We sold our land back home in Greecebefore moving to the UK. So, we had little money to invest. And when we faceddifficulties in finding jobs, we decided to start up a business of our own. ” ”We got a start up loan as well as a start up grant when we started. The local start up agency helped us a lot and explained us all where we could get financing. A well written and specific business plan helped us to ’sell’ our business idea to the financers. ”
How can I plan my needs of financing?You’ll need to sit down with a calculator and spend some time in planning your future.Don’t get scared, it is not as hard as you think.If you need help, look for an accountant at your area. Especially, when operating in anew and foreign country a local accountant is priceless. There are numerouspracticalities and regulations that you must be aware of when running your businessand in a new society it is not always easy.Three essential parts of financial planning: 1. income statement 2. balance sheet 3. cash-flow statement
What is an income statement?• Income statement is a companys financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or the "bottom line"). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. (en.Wikipedia.org.) templates for income statement: Microsoft Office templates http://goo.gl/4nMTW, SME Toolkit http://goo.gl/vyG9f , Vertex42 http://goo.gl/Mqqhh and with search engines you’ll find many more – even on your own language!
What is a balance sheet?• Balance sheet is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a companys financial condition". Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business calendar year. A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities. (en.Wikipedia.org.) templates for balance sheet: Microsoft Office templates http://goo.gl/SOjLi, SME Toolkit http://goo.gl/FdPNM, Vertex42 http://goo.gl/KKwsq and with search engines you’ll find many more – even on your own language!
What is a cash-flow statement?• Cash-flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. (en.Wikipedia.org.) templates for cash-flow statement: Microsoft Office templates http://goo.gl/fkL3c, Small Business Arena http://goo.gl/0yFh0, Vertex42 http://goo.gl/Z45jq and with search engines you’ll find many more – even on your own language!
Is it ok, if I think of the financing only when starting up my business? Plan Evaluate Execute Monitor• Financial planning and the financial resources are tools – not goals themselves.• Financial plans are living documents which you should update on a regular basis. Plan also for the future. Big investments and their financing need to be planned well ahead.
Learning materials, tips and links• Financing for for-profits: http://managementhelp.org/businessfinancing/index.htm#anchor800883• Financing tips http://entrepreneurs.about.com/od/financing/Financing_Funding.htm• Financing options for start-ups http://www.startupnation.com/business- articles/890/1/AT_FindingFundingThatsRight.asp• How to raise money for your business? http://www.entrepreneur.com/howto/raisemoney/index.html• Practical guide for doing business: http://ec.europa.eu/youreurope/business/index_en.htm• www.entrepreneur.com/ A valuable resource for entrepreneurs and those who think about becoming one.• www.entrepreneurship.org - Resource center for entrepreneurs, lots of blogs etc.• http://hbr.org/ Harvard business review, lots of blogs etc.• www.sba.gov/ U.S. Small Business Administration (business plan templates, information on starting a business and managing a business, help on various issues)• http://ecorner.stanford.edu/ Stanford University’s entrepreneurship corner, lots of knowledge and inspiration• www.bplans.com/ Business Planning Central, advice in writing business plans, how-to-articles etc.
Learning materials, tips and links• Points of Single Contact – Easy completion of formalities for service providers: http://goo.gl/a1X9• Business Knowhow, Starting a business: http://www.businessknowhow.com/startup/• Open a European Company. The European Company Formation Experts: http://www.openaeuropeancompany.com/• Startups. Build a better business: http://www.startups.co.uk/• Startupnation. Everything you need to build a business: http://www.startupnation.com/• Tips and tools for conducting market research: http://www.inc.com/guides/biz_online/online-market- research.html• How to conduct market research: http://managementhelp.org/marketing/market-research.htm• 21 market research tips http://www.sitepoint.com/market-research-tips/• Survey monkey -tool: http://fi.surveymonkey.com/