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Advice for a 1st time farang business owner?


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Sorry for the wall of text, it's not a simple subject.

 

I have decided to open a tiny restaurant/juicebar in Phuket. Nothing huge, it would be a total of 500k baht investment, 350k for all setup fees (business creation, renovation, kitchen equipment) and 150k for 6 months of rent + employees. I have no experience running a business in Thailand. I know this is a red flag but considering I won't go bankrupt over 500k, I still want to give it a shot.

 

I'm more worried about things going wrong after I put in the effort and becomes as successful as I hope. The location I found is 90% of the potential, it's in an up-and-coming area I feel will be full of wealthy tourists within 2 years. There will definitely be sharks circling the water at that point.

 

The sort of things I'm worried about:

 

1) Having the company taken from me or shut down using some technicality. I'm being advised and encouraged by a friendly farang who owns multiple restaurants, and he says not worry. For example "you own 49% of the business and an invisible paper thai partner 51%, but don't worry, the lawyer takes care of the 51% and you keep all profits". And "law says you must invest 2 million baht to open a business, but don't worry 500k is enough, the lawyer takes care of it". That's a lot of faith in this lawyer.
My intention here is to have a 2nd independent lawyer look at any papers before I sign, but is that enough?

 

2) Having the space taken from me by not renewing my rental contract. As I said the location is 90% of the potential. "Move somewhere else" would be the end of the business. I was told by my acquaintance I can sign rental agreements that give me the option to renew year-on-year up to 9 years, with price control. Can those be enforced in 18 months when someone offers my landlord double/triple the rent to not let me renew?

 

3) Someone pulling strings so my work visa is not renewed. It would be an easy way to close my business. Any chance of that happening?

 

Gotcha stories I have been told by expats with business that I've chatted to and which are worrying me:

  • One told a story of the lawyer writing the farang's name slightly wrong when writing it in thai on the contract (eg, Georgie being written as George), which is later used to say you're not that person
  • The "invisible silent thai partner" deciding he wants more money or he pulls the plug. Apparently this is why Tiger Muay Thai in Chiang Mai didn't open 8 years ago, even after they built all the buildings.
  • I was told you have to pay off both police and mafia, but only after you become successful. This is the least worrying tbh.
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5 minutes ago, scubascuba3 said:

How long have you been in Thailand? your two threads make you sound very naive, so alarm bells are going off

2 months. What's the problem? I can't wait until I've been here 5 years before I try to do the things I want to do now.

 

I'm a big believer in learning from trial and error (within reason). I will use trial and error to learn how to run a small restaurant and business in Thailand, where the consequences of failure is a couple of <deleted> off customers, having to pay some random supplier a bit more for a few months, buy a replacement frige, etc. But it's not a valid approach for the legal foundation of your business.

 

My choices now are to:

a) stick to the support/advice I have now (lawyer, random local farang businessmen),

b) use all the people from #a, and on top of those get advice from this forum.

I choose B.

 

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Get yourself a "real" lawyer totally unconnected with your "friend" and his "lawyer".

 

If you start a business on a shoddy/illegal basis now in T.I.T.S. it will come back and bite you in the bum later with "tea money" etc the least of your problems!

Edited by DezLez
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45 minutes ago, weelittletimmy said:

150k for 6 months of rent + employees.

How is 150K going to cover both rent and Salaries for 6 months?

That does not even include all your other monthly recurring expenditure like your tax/WP/Elec/water/SS/ accountant fees etc if you are doing it legit!

 

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Quote

I have no experience running a business in Thailand. I know this is a red flag but considering I won't go bankrupt over 500k, I still want to give it a shot.

Surely investing half mill baht into something you 'know' would be a better idea.

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If you are a US citizen, you can own 100% (well, 99% in reality) of the company under the Amity Treaty. If you are not a US citizen, but you know a US citizen you trust, and they are interested in partnering, the same applies. Personally, I would never start a company I did not own. Especially as a foreigner in Thailand.

 

That said, many foreigners have successfully run businesses with 49% ownership. Do not use random Thai citizens for partners. You need a reputable legal firm who can setup the ownership for you in a way that you have voting control and get the majority of the profits. The startup costs will be higher, but worth the investment. Hopefully they can assist you with locating your Thai partners. More ideal is a legitimate Thai partner who is investing alongside you, and stands to profit from success, but this may not be easy to find, and can still present risks.

 

As for your work permit, I would not worry too much about this. With a good agent, this should never be a problem.

 

You also need to have a very reputable accounting firm supporting you. This is important.

 

As for the renting of the shop, this is possibly your highest risk of a problem if you are successful. There are not many ways to reduce this risk. Having a proper lease agreement that has been vetted by your lawyer is about the best you can hope for. Being a solid tenant helps, as landlords know what bad tenants can do to their cashflows. And having a lease agreement that guarantees the landlord increasing rents, which you will be happy to pay if you meet with success, will also help.

 

You also need to factor in expenses that are not immediately obvious. Accounting fees, legal fees, immigration costs, work permit costs (you do not want to handle the work permit on your own), bad employees costing you money, theft from the cash register, equipment failure, inflation, etc.

 

It is very high risk. Period. But, if you are willing to fully risk your initial investment, and you enjoy running a business (many people just see the success and profit, not the hard work and risk), and you plan on being in Thailand long term, then it may be a good endeavor regardless of the outcome. You will certainly learn a lot and build a network that you would never acquire sitting in your room. Sometimes this first failure can lead to the second success.

Edited by timendres
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I wish you all the luck in the world but make sure you have a lot more than 500,00 to invest, there are going to be over runs on most things you have budgeted. Brave dude to start up a business with so little knowledge of Thailand. 

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I would say w/a high degree of certainty that the 2nd lawyer will know the first lawyer... 

 

and for a longer time then they know the party of the third part... you. 

 

But, business anywhere has its risks... mostly that if you are successful there will be 3 similar shops coming soon - don't expect any business anywhere to be hassle free... you will have to deal w/employees, competitors... etc etc.. 

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2 hours ago, weelittletimmy said:

2 months. What's the problem? I can't wait until I've been here 5 years before I try to do the things I want to do now.

Imagine someone would tell you about those great business opportunities in Timbuktu. 

You never visited but it all sounds great. And what should possibly go wrong?

Would you do it?

 

Just to be sure there is no misunderstanding I will answer my own questions: Any sensible person would not do it. Because we all have no idea about the way things work over there. Sure, it might be possible to lean how things work, and maybe all will be fine. But how high is that chance? About 0 to nothing!

And you can ask basically every farang here about stories from people (trying) to open a new business, and making money. Maybe if you listen 100 times you will hear one story which kind of worked. Maybe.

 

Thailand is different, very different! Many of us get kind of used to it after many years. But getting used to it doesn't mean understanding it. And most of us are sensible enough not to open a business in Thailand - even if we live here since years and know people and think there is a good opportunity. 

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8 minutes ago, 1FinickyOne said:

I would say w/a high degree of certainty that the 2nd lawyer will know the first lawyer... 

 

and for a longer time then they know the party of the third part... you. 

 

But, business anywhere has its risks... mostly that if you are successful there will be 3 similar shops coming soon - don't expect any business anywhere to be hassle free... you will have to deal w/employees, competitors... etc etc.. 

And worst case someone put a gun to your head and tells you it's time to sell the business for next to nothing. What are you going to do? Go to the police and complain? 555

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5 minutes ago, 1FinickyOne said:

I would say w/a high degree of certainty that the 2nd lawyer will know the first lawyer... 

 

and for a longer time then they know the party of the third part... you. 

 

But, business anywhere has its risks... mostly that if you are successful there will be 3 similar shops coming soon - don't expect any business anywhere to be hassle free... you will have to deal w/employees, competitors... etc etc.. 

Business Ideas and business models are always stolen, after all if a foreigner can do it a Thai can do it better and cheaper.  Had a friend who started a company, had 5 employees, company making pretty good money creating cellphone cases with special designs.  One of the employees just up and quits one day and opens up a similar business not far away and taking the supplier away from the original company.  Friend goes out of business as he is now loosing business to the other shop and is having to pay more for his supplies.  The other shop lasts a year as the Thai owner is now taking all of the profit for his own use instead of putting it back into the company.....Friend tries to sue the Thai, but is told it is an unwinnable case as he did not have the designs trademarked......

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One on year contracts with price guarantee can not be enforced.
Don't worry about the visa renewal. Pulling strings there is for nearly everyone not possible.
AFAIK the 500k is not enough on Phuket at the moment, the demand is for a 2 mio investment. Staring of with shady practices I would not recommend.

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I would suggest unless the OP is fluent in Thai, it's a probability of 0.999999999 he will be taken to the cleaners, one way or another. He may as well wear a neon sign saying ATM.

 

It's something I have noticed about businesses run successfully by foreigners here, they have been in Thailand for many years, and they speak the language as well as any Thai.

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1 hour ago, Cardano said:

Guy comes on here to ask for positive advise and all he gets is the usual negatives. Why not give him credit for at least willing to try something new, instead of spending each day with his thumb up his <deleted> and complaining about everything Thai as most expats here do.

 

Best advise I can give you is go and talk with the expats running successful businesses in Phuket.

you have a point.    we ex perts  are a bit tough on newbies.    

my only defense is that most i have met start telling ME  what thailand is all about after they have been here a very short time .   

 

 

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31 minutes ago, OneMoreFarang said:

And you can ask basically every farang here about stories from people (trying) to open a new business, and making money. Maybe if you listen 100 times you will hear one story which kind of worked. Maybe.

Off the top of my head i can think of two "business models"  that seem to have a better chance than most others.     1.  If someone is a really good chef and has had restaurants before..... then i know around CM  a few that have done fairly well.  Good food,   good service,  a wife that has some decent skills in managing (usually the husband is the cook) .  (italian food seems to do well )

2.  A bit risky..... but having some land and putting a few rentals on it can succeed.  Less intensive than cooking every day... but more of an investment .    The risk of course is....... well,  i am sure most here can guess.      

 

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22 minutes ago, Lacessit said:

I would suggest unless the OP is fluent in Thai, it's a probability of 0.999999999 he will be taken to the cleaners, one way or another. He may as well wear a neon sign saying ATM.

 

It's something I have noticed about businesses run successfully by foreigners here, they have been in Thailand for many years, and they speak the language as well as any Thai.

Cmon...... my thai is not THAT  good    ????

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For someone that never owned a business:

 

If a dish sells for 60 baht, what is the cost to make that dish for the ingredients, cooking oil etc. 

 

6o baht, minus the cost of the dish, lets say 30 baht cost, leaves you with 30 baht profit

 

Same thing with drinks however, many drink water these days

 

Add up all your monthly bills. Rent, electric bill, water bill, trash bill, licensing, salaries for 4 Thais and any other fees

 

Divide that total cost by 30 (profit for 1 meal). This will be the amount of meals every month you will need to sell just to break even.

 

Divide that number of meals by the number of days you will stay open per month (20? 30?)

 

This will give you the average number of customers you will need, every single day you are open just to break even.

 

When you actually do a business plan and not just dreaming about being a business owner, you can prove if the business is viable or not.

 

Often it is impossible to get the daily number of customers you need to be successful and to make a salary for yourself

 

Another thing is restaurants compete with local street food vendors for the same customers. If the street food vendor is selling for 30 to 40 baht per dish and your same dish is 60 baht, guess what? Thai food is something any Thai can do. Remember that.

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7 minutes ago, Lacessit said:

It impressed the hell out of my GF.

as you know...... takes time to learn language,  the attitudes of the people,  how to adapt ,  etc etc

 

coming here as a newbie and rushing into anything  is like buying a wrench and then thinking 

you can go fix the leak in Bhumibol Dam

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10 minutes ago, rumak said:

as you know...... takes time to learn language,  the attitudes of the people,  how to adapt ,  etc etc

 

coming here as a newbie and rushing into anything  is like buying a wrench and then thinking 

you can go fix the leak in Bhumibol Dam

I'm too old to attain fluency, I'm just happy to get along.

Even with all the research I did for 6 months before coming here, there was still truckloads I did not know.

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