“Just a few more questions,” a new client explained on a recent sales call. “What would happen in the event of a tsunami?” In the past, our answer would have been something along the lines of, “ummmm….hmmmm.” We know this and many other answers now, but this wasn’t always the case.
We were 22 years old when we opened our first office in Manila, Philippines. Four years later, we had survived typhoons, official shakedowns and being robbed by our own management team, twice. At times, the decision to start our business abroad seemed insane. Navigating past the bumps, bruises and near death experiences in our early years, we are fortunate to have built a family of 300 amazing employees in a country that has come to define the spirit of our company.
Here are four rules for starting a business abroad successfully:
#1: J.D. & CPA, The Five Letters That Matter Most
Don’t do anything before securing a well qualified accountant and lawyer. If your budget allows it, secure several. It’s imperative that you understand the nuances of the labor and tax code. In the Philippines, employees are paid an annual bonus equivalent to one month’s salary called 13th month’s pay. Imagine discovering this at the end of your first year in business. Goodbye to the profits we thought we made! Avoid the typical set of questions. Ask your advisors: Is government corruption a problem? What do we do if we get shaken down? What if an employee sues us? Most lawyers and accountants will provide initial consultation free of charge. Use your imagination and prepare an extensive list of questions before your first meetings with your legal and financial advisors.
#2: Visit First, Explore Before Deciding
Under no circumstances should you ever start a business or even open an office in a foreign country without visiting the location first. Alternative means such as Skype are insufficient. There is no substitution for first-hand experience. You will learn infinitely more about the people and culture within five minutes of face-to-face communication than a month of video chatting. Our initial trips to the Philippines were true adventures and provided the framework for what would eventually become our business.
#3: Listen & Learn, Culture Is Important
Europe, Africa, South America, Southeast Asia or other. Regardless of location, the culture you are dealing with is bound to be vastly different from your own. Patience and persistence are needed to fully grasp and accept these differences. Unfortunately, we learned this lesson the hard way. Offending your employees or clients is unintentional, but it will happen. Observation is the key. Avoid pushing your ways and etiquette. Instead, listen and observe the way people interact. The quicker you adapt, the better you can communicate and focus on the tasks at hand.
#4: Find Your Allies, Build Your Core Team
It took us eighteen months and three management teams to find a core group that we could trust and with whom we could work. Our first two management teams stole money from us, which is a risk you take when allowing a team abroad to manage their own P & L (funded by you personally). Internal recruiting has since become our single greatest resource for developing dependable managers abroad. We recruited young, ambitious people within our organization and gave them greater responsibilities. Two years after adopting this recruitment strategy, we have quintupled in size and assembled a top-notch team in the Philippines. Also, don’t forget about the EO networks. Connections, introductions and cultural knowledge from the EO Philippines Chapters was invaluable during our early growth years.
A few bonus thoughts:
– Exchange Rate: Monitor trends. Assume their currency will strengthen by 20%. Can you still operate at that rate? This happened to us.
– Bank: Look for a bank that gives you the best exchange rate. Shop around. Insist they provide a direct deposit payroll service that can be monitored from abroad.
– Holidays: Get an official list of holidays that are observed in their country. What type of employee payment implications do you need to plan for? The Philippines is notorious for complicated holiday payment regulations.