Its An Interesting Subject...

[doppa]

i would imagine there's lots of theories and reasons why, and i'll imagine you'll discuss them.

who are the sucessful ones in chiangmai.

[Maccheroncini]

Who are the successful ones?  Those that place the banner ads above I suppose.   

i would imagine there's lots of theories and reasons why, and i'll imagine you'll discuss them.

who are the sucessful ones in chiangmai.

[doppa]

Who are the successful ones? Those that place the banner ads above I suppose.

i would imagine there's lots of theories and reasons why, and i'll imagine you'll discuss them.

who are the sucessful ones in chiangmai.

well thankyou for that in depth response.

[WinnieTheKhwai]

I'm not sure it's difficult at all.. Maybe the issue is that it's difficult to have a regular job as an employee, i.e. not your own business. The result is that people start their own business who don't really have entrepreneurship in their veins, and struggle as a result.

Or, the mind-set is different: People who start a business at home do it becasue they see a killer opportunity. (And also there, most start-ups fail) In Thailand on the other hand the prevailing thought is "how can I find something to do that makes me money so I can stay in Thailand." Or "I'm retired and kind of bored.. I'll start a business so I have something to do."

And then they fail.

( Sorry if I spoiled a planned rant-a-thon against Thailand )

Edited September 12, 2009 by WinnieTheKhwai

[Greenside]

Ahhhh, the power of advertising....

[doppa]

I'm not sure it's difficult at all.. Maybe the issue is that it's difficult to have a regular job, i.e. not your own business. The result is that people start their own business who don't really have entrepreneurship in their veins, and struggle as a result.

so based on your observation, if you havn't been a success in your own country, as a buisness owner, and apart from working for someone else, it looks as if it's a non starter then.

[doppa]

Ahhhh, the power of advertising....

as someone very famously said' 50% of the advertising works, the only problem is , we don't know which 50%', or something like that.

[Theyreallrubbish]

One of the issues is language. Many don't understand Thai and thus rely on a staff member/GF/wife to handle many things and so how well that gets done is obviously dependant on the quality of the person helping. If its a GF/wife then she probably wasn't chosen initially for her business/management skills.

The other is human resources in general and getting good people. I've seen inside the top of many large Thai companies and they're still essentially family companies. Those outside the family aren't trusted, and often for very good reason. A foreigner arriving here doesn't have the family members of long term relationships to get good, honest, high quality staff.

The most common cause of failure I see in small businesses set up by foreigners is that they splash out too much cash at the beginning and maintain too high overheads so the business can never be profitable, so it only lasts as long as its subsidised. If they're bringing over the proceeds of a house sale in the west, then it doesn't seem like that much money, but when the business is operating at a monthly loss, its astonishing how quickly money can run out. If the partner is a Thai woman then she will be encouraging this and telling him all kinds of things the business "needs" partly because she loves shopping, partly for her face in having a business that looks good and partly as she probably has no real business skills and doesn't understand how a business cash flow works, or even where the foreign money came from or that it might run out. Those that take a leaf from the local's book and keep costs and overheads as low as possible until the business has been operating a while and real revenues and margins are discovered.

[doppa]

One of the issues is language. Many don't understand Thai and thus rely on a staff member/GF/wife to handle many things and so how well that gets done is obviously dependant on the quality of the person helping. If its a GF/wife then she probably wasn't chosen initially for her business/management skills.

The other is human resources in general and getting good people. I've seen inside the top of many large Thai companies and they're still essentially family companies. Those outside the family aren't trusted, and often for very good reason. A foreigner arriving here doesn't have the family members of long term relationships to get good, honest, high quality staff.

The most common cause of failure I see in small businesses set up by foreigners is that they splash out too much cash at the beginning and maintain too high overheads so the business can never be profitable, so it only lasts as long as its subsidised. If they're bringing over the proceeds of a house sale in the west, then it doesn't seem like that much money, but when the business is operating at a monthly loss, its astonishing how quickly money can run out. If the partner is a Thai woman then she will be encouraging this and telling him all kinds of things the business "needs" partly because she loves shopping, partly for her face in having a business that looks good and partly as she probably has no real business skills and doesn't understand how a business cash flow works, or even where the foreign money came from or that it might run out. Those that take a leaf from the local's book and keep costs and overheads as low as possible until the business has been operating a while and real revenues and margins are discovered.

luv the part about having a thai partner, how right that is.

[lannarebirth]

Two things I see that limit foreigners chance of success at business here. 1) Many of their businesses are oriented to serve other foreigners or tourists only which may be only 1% -2% of the population. They limit their potential income alot with such a narrow customer base. 2) They do not own the land on which their business resides. --- While there are certainly examples of successful businesses that rent their spaces and still make money, personally I've never seen a business prospectus here that allows for sufficient income if rent costs or land purchase amotization costs are included . Better if you just own it already.

oh yeah, and you should probably be sufficient capitalized to run at a loss for 3-5 years.

Edited September 12, 2009 by lannarebirth

[Douggie Style]

Two things I see that limit foreigners chance of success at business here. 1) Many of their businesses are oriented to serve other foreigners or tourists only which may be only 1% -2% of the population. They limit their potential income alot with such a narrow customer base. 2) They do not own the land on which their business resides. --- While there are certainly examples of successful businesses that rent their spaces and still make money, personally I've never seen a business prospectus here that allows for sufficient income if rent costs or land purchase amotization costs are included . Better if you just own it already.

oh yeah, and you should probably be sufficient capitalized to run at a loss for 3-5 years.

A good point 1) lannarebirth

have to respectfully disagree with point 2. Generally speaking purchasing the land should be based on an analysis of the land itself solely as an investment

reasons include commercial land is generally of less 'quality' meaning less likely to appreciate than housing (that is a broad generalisation, there are many specific examples that disprove that and it is also based on assumptions), secondly you lose allowable business deductions, tie capital up in a very illiquid asset (part of the value which is tied to the business) and thus generally lose better opportunities.

Many people hold a dream of owning the business premises for reasons of control and that can be a valid reason but financially it is usually not the best move

[Drew Aitch]

who are the sucessful ones in chiangmai.

Successful at what? Making money? Keeping fit and healthy? Relationships with Thais? Speaking the language? ad infinitum....

Success in business has a lot to do with fitting in and personal attitude, 0h, and an entrepreneurial flare is always a good qualification...

Aitch

Edited September 12, 2009 by Drew Aitch

[lannarebirth]

Two things I see that limit foreigners chance of success at business here. 1) Many of their businesses are oriented to serve other foreigners or tourists only which may be only 1% -2% of the population. They limit their potential income alot with such a narrow customer base. 2) They do not own the land on which their business resides. --- While there are certainly examples of successful businesses that rent their spaces and still make money, personally I've never seen a business prospectus here that allows for sufficient income if rent costs or land purchase amotization costs are included . Better if you just own it already.

oh yeah, and you should probably be sufficient capitalized to run at a loss for 3-5 years.

A good point 1) lannarebirth

have to respectfully disagree with point 2. Generally speaking purchasing the land should be based on an analysis of the land itself solely as an investment

reasons include commercial land is generally of less 'quality' meaning less likely to appreciate than housing (that is a broad generalisation, there are many specific examples that disprove that and it is also based on assumptions), secondly you lose allowable business deductions, tie capital up in a very illiquid asset (part of the value which is tied to the business) and thus generally lose better opportunities.

Many people hold a dream of owning the business premises for reasons of control and that can be a valid reason but financially it is usually not the best move

I agree with all that. It's a drag on ROI but that's the way things work here. You can't really evaluate it in the same way as you might in the West. The sole benefit of operating a business here is to exploit cheap labor.

Edited September 12, 2009 by lannarebirth

[cmsally]

While you guys are pondering ; I thought about inviting this guy to Thailand and taking him on a little tour . Even on 5 Bt entry fee could be a winner.

Lottery stunt

[CobraSnakeNecktie]

I know a Thai woman here who has a well established and moderately successful retail business but is getting older and keeps trying to find employees who don't steal and its really wearing her down. She spends money on anti theft cashier software and tries to enforce a tight inventory accounting system but again and again her bottom line profits dwindle. Lately she requires that a cashier post a substantial deposit if they are allowed to handle money and inventory. This kind of works but not that well because its possible to exceed the deposit right before the employee skips town. Also its difficult to pin down which of the staff is the thief. The owner is no dummy and will only hire younger and theoretically less crafty girls who have some references but still she is exasperated by their conduct.

[KevinBloodyWilson]

Two things I see that limit foreigners chance of success at business here. 1) Many of their businesses are oriented to serve other foreigners or tourists only which may be only 1% -2% of the population. They limit their potential income alot with such a narrow customer base. 2) They do not own the land on which their business resides. --- While there are certainly examples of successful businesses that rent their spaces and still make money, personally I've never seen a business prospectus here that allows for sufficient income if rent costs or land purchase amotization costs are included . Better if you just own it already.

oh yeah, and you should probably be sufficient capitalized to run at a loss for 3-5 years.

That seems about right. I budgeted to be in loss for 2 years and it was about right/

Also, the major reason (imho) that many farang businesses fail, is that the Thai business model is much more based on relationships and not commerce. If you are competing against Thais you will go broke unless you have Thais to front for you at the sharp end.

I am sure there are many and complex reasons.

Edited September 12, 2009 by KevinBloodyWilson

[doppa]

I know a Thai woman here who has a well established and moderately successful retail business but is getting older and keeps trying to find employees who don't steal and its really wearing her down. She spends money on anti theft cashier software and tries to enforce a tight inventory accounting system but again and again her bottom line profits dwindle. Lately she requires that a cashier post a substantial deposit if they are allowed to handle money and inventory. This kind of works but not that well because its possible to exceed the deposit right before the employee skips town. Also its difficult to pin down which of the staff is the thief. The owner is no dummy and will only hire younger and theoretically less crafty girls who have some references but still she is exasperated by their conduct.

quite a number of buisnesse including major retailers use a system where the cashiers are responsible for the sales total to be the same as the tills total, if its not, it is them that have to make up the deficit, harsh , especially if it isnt them who's fiddling.

[Deke]

One of the issues is language. Many don't understand Thai and thus rely on a staff member/GF/wife to handle many things and so how well that gets done is obviously dependant on the quality of the person helping. If its a GF/wife then she probably wasn't chosen initially for her business/management skills.

The other is human resources in general and getting good people. I've seen inside the top of many large Thai companies and they're still essentially family companies. Those outside the family aren't trusted, and often for very good reason. A foreigner arriving here doesn't have the family members of long term relationships to get good, honest, high quality staff.

The most common cause of failure I see in small businesses set up by foreigners is that they splash out too much cash at the beginning and maintain too high overheads so the business can never be profitable, so it only lasts as long as its subsidised. If they're bringing over the proceeds of a house sale in the west, then it doesn't seem like that much money, but when the business is operating at a monthly loss, its astonishing how quickly money can run out. If the partner is a Thai woman then she will be encouraging this and telling him all kinds of things the business "needs" partly because she loves shopping, partly for her face in having a business that looks good and partly as she probably has no real business skills and doesn't understand how a business cash flow works, or even where the foreign money came from or that it might run out. Those that take a leaf from the local's book and keep costs and overheads as low as possible until the business has been operating a while and real revenues and margins are discovered.

This is a pretty good assessment.

I'd put it like this:

1. Language

2. Cash flow

3. Professional expertise

4. Competitive advantage

If you're trying to sell something that someone else is already selling cheaper, you're doomed to failure. Likewise, if you are marketing a service that someone else is already marketing, you need to be somehow better or you will have problems.

In my experience, the people who succeed are professionals (attorneys, engineers...) who have specific expertise in areas that are needed here. There are exceptions, of course, but I think they are few.

[sassienie]

Very difficult for Farangs to do business here in Thailand, mostly due to the prohibited professions and property ownership ACTs.

Many Farangs don’t have the funds until they are in their 50s and older, after a lifetime of work in their home countries. Once here, they seek some younger Thai lady to shack up with, become a behind the scenes business owner by using his young Thai bit of hot totty as the front person for the business.

But her loyalty to the guy requires huge financial incentives and after a short period, the guy discovers that he is solely running the business for the sake of having the luxury of a young trophy wife/girlfriend who is skimming off all the profits from the business.

After a couple of years, when the guy’s funds have been depleted, the girlfriend has left for pastures anew and finds himself subsidising his failing business, he either returns back home or becomes a hassler scratching around for employment, such as for teaching work, doing visa runs until eventually the once influential high flying business entrepreneur ends up destitute having to face whatever fate has planned for him.

[Abrak]

I have had 2 businesses here which I have sold at a tidy profit. The key in my opinion is to have a Thai partner with mutual respect and trust. The first business sold 70% to farang and the second 95% to Thai.

Ultimately I believe that Thais and farang can work extremely well in partnership because one side makes up for the other sides weaknesses.

Finding the right Thai partner is however very difficult. And I do not believe either business could have been a success without one.

[getgoin]

There are many successful foreign owned and operated businesses in Chiang Mai and its surroundings. Some businesses are owned by large foreign corporations. Some are owned by individuals. Bars, restaurants, tour and travel and retail are what most people see and also seem to be the businesses that go in and out. Most of the time this is because of a lack of experience by the owner/operator rather than any major fault with the better half. It goes back to the old saying that just because you like to drink that that does not mean that you can run a successful bar.

The list of successful businesses is endless and even includes prohibited occupations.

Mountain Biking

Elephant Camp

Fly Fishing Lure Manufacturing

Strip Clubs

Restaurants

Book Stores

Furniture Retail

Import/Export

Real Estate Sales

Business Services

Tour Agencies

Antiques

Interior Design

Sweater Manufacturing

Herbal Supplements

Bars

Tourist Magazines

Manufacturing for Export

Electronics

Product Design, Development and Manufacturing

Thai Magazines

Floor Plan Designs sold over the internet

Retail Clothing

Animation and Design

Saa and Elephant Dung Paper Manufacturing

Many Internet Businesses

Farming

Food Product Manufacturing

Teaching

International School Management

The list goes on. All of these types of businesses are presently doing good business in and around Chiang Mai. Some have no Thai partners. So I would have to disagree with the phrasing that foreigners have difficulty doing business in Thailand.

[noise]

I have had 2 businesses here which I have sold at a tidy profit. The key in my opinion is to have a Thai partner with mutual respect and trust. The first business sold 70% to farang and the second 95% to Thai.

Ultimately I believe that Thais and farang can work extremely well in partnership because one side makes up for the other sides weaknesses.

Finding the right Thai partner is however very difficult. And I do not believe either business could have been a success without one.

Abrak,

I haven't seen it mentioned, so let me ask: How many hours did you spend a day and how many days a week did you work to get your businesses to the point where you knew what to expect day to day, where you felt "established"? I bet it was many, many hours 7 days a week.

[Abrak]

I have had 2 businesses here which I have sold at a tidy profit. The key in my opinion is to have a Thai partner with mutual respect and trust. The first business sold 70% to farang and the second 95% to Thai.

Ultimately I believe that Thais and farang can work extremely well in partnership because one side makes up for the other sides weaknesses.

Finding the right Thai partner is however very difficult. And I do not believe either business could have been a success without one.

Abrak,

I haven't seen it mentioned, so let me ask: How many hours did you spend a day and how many days a week did you work to get your businesses to the point where you knew what to expect day to day, where you felt "established"? I bet it was many, many hours 7 days a week.

Well it was a tail of two companies really.

The first sold to foreigners and I worked really hard. 5 days a week only but from 6.00am to 8.00pm and often entertaining to 1.00am. It wasnt really 'my' company but Thailand accounted for 60% of profit and I arranged the deal that sold it on 5x book. I owned less than 5%.

The second company sold to Thais with us acting as the intermediary with the banks. I had little to offer really and eventually moved from CEO to Chairman (kicked upstairs as they say). I only worked 3 days a week and that was mostly investor relations (we were listed). Eventually sold out to the richest man in Thailand (at below book!). It was a crap deal (the company never made a monthly loss) but me and my partner were so bearish on prospects. The big problem you face nowadays is that the number of people who can splash out US$50m for a company in Thailand can be counted on one hand. One of those has just had his assets confiscated and another is a weirdo recluse.

Still the key point with the second company is both the MD and CEO were both Thai and well beyond 99.9% of farang I have come across in Thailand.

[orang37]

Sawasdee Khrup, TV Friends,

First, I think it is difficult to do business anywhere, including your "home" country. Most business start-ups fail. Most partnerships have real problems, etc.

Second, I think the reason why many farangs have problems doing business in Thailand is :

a. the system is "rigged" against farangs; I don't think there's anything particularly "Thai" about this : expats have the same problems doing business in many other countries around the world. the fact is a farang business owner here will be held to standards of taxation, and business reporting, employee supervision around issues like firing, and inspection of records and place of business, that Thai owners, in general, will not. The farang will, also, not have recourse to certain extra-judicial privileges that many Thai business owners will have (I'm being deliberately vague here).

b. the farangs who start businesses here are often people with no skills, experience, or track record in the type of business they are starting and include lunatics, imbeciles, aging fools who flatter themselves they are "princes of commerce" (or are flattered by Thais into thinking so), etc.

Third, I think the reason we hear so much about the unsuccessful farangs here is that the make a great deal of noise as they fail, and find every excuse but : their own lack of preparation, their own lack of putting in the hours necessary to make the business work, due diligence, planning, experience germane to the type of businesses they are operating, etc. for why they are abjectly failing, being ripped off, etc.

Fourth, many of these businesses started by older farangs are, as has been commented here, "vanity businesses" started to give themselves, or the mia noi, or the mia boy something to do. They are a pasttime, a hobby, and it is not surprising most of them go belly up.

Fifth, I agree with Khun GetGoin; there are success stories here, and, I think, in general they don't make a lot of noise about themselves and the long hard effort it's taken them to become successful; the trials they've been through balancing work permits and visas, etc.

The dramatic failures, the betrayals, the rip-offs, create stories that "pass into" the swollen body of the lore of "faranghood,' while the success stories do not ?

Finally, I find the comments by Khun Abrak implausible : I consider it possible he or she is making up tall stories, preening in the great tradition of so many TV posters who are "legends in their own minds." imho successful Thai/Farang business partnerships that have not ended in theft, mayhem, bankruptcy, or balcony-leaping are "rare as hen's teeth" : but I do know of a few, and they are based on a stable relationship (a marriage with chlidren, a farang who has learned Thai well and loves this country).

A special category, however, are farangs who have had long-term careers here in association with Thai institutions like Universities, hospitals, etc.; but, they are employees. And then there's missionaries, but we'll spare them in this post )

best, ~o:37;

Edited September 13, 2009 by orang37

[Galong]

Other than the occasional employee ripping me off (which happens everywhere), I find it extremely easy to do business here. I find the amount of freedom compared to doing business in the US (my home country) favorable. Operating costs are much, much less than they would be at 'home'.

I had no business experience whatsoever when I started. I made a few big mistakes and still make some... most of these now relate to trust rather than control. Control everything that you can and you'll do much better, in my opinion.

Another problem I have is foreigners copying my tours and doing so without being 100% legal, be it no Thai guides, lying about their business being the 'original' this or that and trying to poach my staff. I have no problems with any of my Thai competitors and try to be friends with as many of them as possible. I've kept my company fairly small on purpose. Whenever there is a media-generated scare (various flu scares, etc), political turmoil, etc, I survive just fine. I keep my overhead at a minimum and don't act like I'm rolling in $$. I don't make myself a target for jealousy.

So, in a nutshell, you have to fit into working here and you have to realize what works here (in particular) and what doesn't. But, I guess it's the same everywhere though.

[Ulysses G.]

Fourth, many of these businesses started by older farangs are, as has been commented here, "vanity businesses" started to give themselves, or the mia noi, or the mia boy something to do. They are a pasttime, a hobby, and it is not surprising most of them go belly up.

It is easy to forget that many, many of these hobby businesses are kept afloat only by pensions from overseas. If the owners had to live off of business "profits", they would be living alone in a cardboard box, over a heating vent, back in the old country.

[Greenside]

Also, the major reason (imho) that many farang businesses fail, is that the Thai business model is much more based on relationships and not commerce. If you are competing against Thais you will go broke unless you have Thais to front for you at the sharp end.

Looking at the smaller end of the commercial scale, I think this is even truer than one might imagine. I have often wondered why it is that your average row of shophouses seems to be populated by people with almost identical commercial offerings. I used to think that there were subtle differences that I couldn't appreciate but I'm beginning to think these people start the ninth noodle emporium on the block simply to serve their friends and family (and of course the ninth one is bound to be lucky, right?).

[getgoin]

As far as theft goes, Thai's are perhaps one of the most honest and trustworthy races on the face of the planet. Try doing business in the West. Theft is guaranteed.

And I would say that some of the benefits of doing business in Thailand, besides the honesty, is reasonable labor, rents, utilities, insurance and medical bills.

While it might be great to think that in a perfect world Thai labor could be on a par with the West it would probably mean that 90% of the foreigners who live in Thailand would no longer be able to afford it.

[sassienie]

Ahhhh, the power of advertising....

as someone very famously said' 50% of the advertising works, the only problem is , we don't know which 50%', or something like that.

Hi,

My fiancee started a business here in Thailand and does have a banner add on Thai Visa that DOES generate sales.

www.latexinnovations.com

And there are many easy ways to track what advertising works and what does not. When you find out whats what, you need to cut the advertising that does not generate sales, and focus on what does, as it can get expensive really quickly. I think she finds that its a balance of how much to spend every month on ads, and cash flow.

Some traits that I noticed about her business that helped her succeed are:

-Her product is of very high quality, and as we all know, quality in Asia is sometimes an issue

-Her product is sold at a substantial discount compared to her competitors due to her business model that keeps overheads to a a minimum.

-Her product is in demand, as the general mattress in Thailand is quite hard for western tastes. Also, many people suffer from back problems.

-She sincerely believes in her product, and is genuinely pleased when she hears of peoples satisfaction from her toppers and mattresses

-She focuses on customer service. Replying to quotes and emails in a timely fashion, and keeping the customer informed about whats going on with their order.

-She is flexible and adaptable in regards to meeting the customers needs.

There are many more traits that I see, but those are the main ones that I think contribute to her success. Someone said its not possible to only target the foreigners here in Thailand, well, that is her sole market and her business earns income month after month. There is no "set in stone" way to do business. Each business is like a recipe, compiled of different ingredients in different amounts that will, of course, give you a specific out come. The key is to know what outcome you want, then vary the ingredients accordingly.

I don’t think this is good advice.

Many Farangs here in Thailand are using their wife’s/girlfriends as fronts for the running of their businesses that are usually financed by the Farang.

For example, mattresses fall under the laws of the prohibited professions ACTs.

The problem with this is, that if one day the authorities really do decide to clamp down and fully impose the laws regarding these Farang financed businesses, than one could be shut down literally over night. This means that the behind the scenes business owner or partner is taking a huge risk as he has no legal status within the company and no claims towards the wife in the case of a divorce settlement or Thai girlfriend/partner/s if they decide to cheat him and the Thai authorities if they close down the company.

Operating as an illegal behind the scene business owner is at your own risk and I certainly wouldn’t recommend this to anyone unless they are in full knowledge of the risks involved and prepared to lose all gambling that they wont get rumbled, cheated and closed down.

Edited September 13, 2009 by sassienie

[monkfish]

VIBE may be you need to read the title of the thread again, nice plug for wife's business though.

Fact is that the odds are stacked against any foreign owned business succeeding unless they are able to achieve a profit of BHT1000000 in the first year.

The main reason being company TAX which alone will cost be around BHT120000 p.a. on top of that comes income TAX on BHT600000 p.a. social security, book keeping, auditing and many more extra costs which a Thai run company will not have.

My advice, let the Mrs set up shop and don't get involved. (don't invest too much though)

This way you will have minimum costs and more likely to succeed.

Did you know most Thai run small businesses in fact are not registered companies and thus able to reduce there costs even more.

i.e. no accounting, income tax, social security etc.

Would be interested to Know if VIBE's wife's company is registered?

as it could also account for the success of the business.

Actually I see know information on the website about the companies legal status or even address.

May be you should sort that out?