In my time overseas I met some expats (including an ex-roommate) who started businesses abroad. Most of them failed. Starting a business is incredibly difficult, and starting one in a foreign country is even more difficult. But it is possible.
The idea for this blog post comes from this article on CNN.com about expats who have started businesses in exotic locales. All of the businesses have one thing in common: they all cater to other westerners.
Why is that? First of all, starting an expat business to cater to locals almost always fails. If you start a business in the developing world, your business will have to appeal to people with many. In poor countries, the locals don’t have money. Even if your business appealed to local people, it’s unlikely that they would have the money to make your business generate a sizable profit.
What kind of businesses should an expat start?
If you are building a business overseas you should try to appeal to a demographic you already know: your own. That means appealing to people of your own nationality if possible. Choose a business that either exports a locally produced commodity, or choose a business that will appeal to tourists. Most expat businesses that successfully appeal to tourists are located in tourist areas. That means tours of cities or beautiful exotic locales like beaches, jungles, mountains etc.
When you appeal to tourists, you want your business to take care of everything. A tourist is not an expat. They are not looking to rough it. They want to be coddled, and they want a temporary experience. They don’t want to stay in your new country indefinitely like you. Appeal to that person, not to the person inside you.
Beware the local supplier
I would say that one of the hardest parts of starting a business overseas is dealing with suppliers. The poorer the country you’ve started your business in, the more unreliable the supplier. In watching friends set up businesses overseas, I would regularly witness them have to deal with suppliers that simply didn’t supply what was necessary even after being paid. Suppliers could also be totally incompetent in delivering materials on time and up to standards.
If you start a business overseas, try to make use with as little local support as possible. I don’t mean to say you should import from your home country supplies, but try to create a business that requires very little materials at all. Avoid building something locally, but feel free to use buildings and offices that have already been built for you. Keep start up costs to a minimum.
It is difficult
Starting a business overseas can be a nightmare. There are advantages, many of them tax related, and there are disadvantages, many of them infrastructure related. At the end of the day most expats do it not because they are entrepreneurs (though that plays a role in it), but because they love where they are living and want a reason to stay. When you add it all up, starting a business overseas is so risky, it probably doesn’t make a whole lot of sense. But the sense of adventure that most expats have makes rational decision making take a back seat to the enjoyment of life, and starting a business overseas can be a very enjoyable experience. If it succeeds of course.
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Hi Rick, nice niche blog that you have going on here. I find it very valuable particularly because I live abroad (American in Amsterdam) and as many expats I meet, many want to make the leap to try something local but feel very uncertain. Language can definitely act as a decelerator toward business actions. Look forward to reading more of your blog. Thanks