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factors to consider when starting a business in another country

5 Key Factors to Consider When Starting a Business in Another Country

“Can I start a business in another country?”

At one point or other, many seasoned entrepreneurs will ask themselves this question. 

Done right, starting a business in another country offers unique benefits that domestic markets cannot provide. The operating phrase here is, of course, ‘done right’.

For entrepreneurs looking to take the leap, here are five top considerations when starting a business in another country.

Overview

  • This post assumes you intend you either live or spend a significant amount of time in the target destination
  • The five factors covered are ease of doing business, language barriers, existing markets, immigration and property ownership, and incorporation requirements
  • Check out the World Bank index to see which countries have a favourable score for ease of doing business
  • If you are a native English speaker, check out Education First’s International English Proficiency Index to see proficiency levels across the world
  • Check with a country’s immigration department to understand their requirements for visa and dependent passes for your spouse and children
  • Hire a local business consultant to skip the headache of specific local requirements

1. Ease of doing business

We’re referring to the standard set out by the World Bank which aggregates ten parameters impacting the process of doing business in a country.

world bank ease of doing business ranking
World Bank Ease of Doing Business Global Index

The parameters are: 

  • Starting a business
  • Construction permits
  • Electricity
  • Registering property
  • Getting credit
  • Protecting investors
  • Taxation
  • International trade
  • Enforcing contracts
  • Resolving insolvency

Each parameter is scored out of ten and the total aggregate score is out of 100. The World Bank publishes this index annually, and while some of its results are fairly predictable (such as Malaysia being high on the list), you may be surprised to learn that your dream location is less than ideal.  

Conversely, you may discover potentially lucrative locations that are a lot closer to home which you had not considered before, so be sure to give the latest index a look – you can see a detailed breakdown of scoring for each country, or rank them based on scoring for a specific parameter. 

2. Culture and language barriers

If you are a native English speaker, the Education First 2022 International English Proficiency Index can serve as a useful indicator of what to expect. Between two business locations that are equally attractive, it will probably be easier for you to deal with locals and government officials in the country with higher English proficiency. 

EF global english proficiency rnaking
EF global English proficiency ranking

While experiencing different cultures and languages make for a great holiday experience, for the purposes of doing business, you want the exact opposite.

As language is a powerful influencer of cultural adoption and adaptation, a common tongue can make doing business in a foreign country significantly easier, not to mention cheaper (no need to hire translators or learn a second language).

3. Existing market and competition

Assess existing markets and competition, then find a gap you can address before committing to starting a business in another country. Even if there are no rules explicitly stating it, certain industries may be effectively closed off to foreigners, and this is not a lesson you want to learn the hard way.

niketh vellanki QkSN 8XcXwQ unsplash
Well, at least there’s no competition out here.

If your plan is to start a business in another country and compete with local businesses without a unique selling point, you might be better off staying domestic!

Even in ideal locations, speak to local sources to conduct market research and understand demand, customer preferences, and the viability of niche opportunities. 

4. Immigration & property ownership laws

If you intend to live or spend a significant amount of time in the new country, you’ll need to consider whether you and your family qualify for permanent residency and property ownership. While different countries will have specific conditions, all consider the value vs risk you bring to the table and will pay attention to:

  • Your net worth
  • Your income
  • Your education level
  • Initial paid-up capital in the new venture
  • Any existing family ties you have in the country

Also bear in mind that if you have children and a non-working spouse, they’ll most likely come under a dependent pass linked ot your primary visa, which can affect their work and study in the new country. For example, in Malaysia, children 18 years and above must apply separately for a student pass.

Once you have identified a suitable location, contact the country’s immigration to check their requirements (this is where sharing a common language helps!)

5. Incorporation requirements

Say you’ve found the perfect location; all that’s left is to incorporate your business.

While we understand the following advice is biased, it has your best interests at heart: hire a local business consultant to handle your foreign incorporation

Each country has its own procedures for business incorporation. Researching specific requirements for registration, permits, licenses, and tax obligations is time-consuming and frustrating – the perfect recipe for making costly mistakes. 

Local business consultants who are intimately familiar with the legal framework can help save you the hassle of dealing with the incorporation process and ensure compliance with local regulations.

That last part is crucial – unless you’d like to add ‘prison hospitality’ as one of the factors to consider when starting a business in another country! 

emiliano bar OeAWU9VSHzo unsplash
The perfect spot for a lemonade stand.

By the way: Malaysia is a pretty great location, and MISHU is pretty great at helping foreigner owners open a company. Check out our foreign incorporation package and get in touch!

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