Experiences Of Setting Up And Running A Medium Sized Company In Thailand

[mynextgig]

I would like to hear the experiences of any members that have setup and are currently or have previously managed a company in Thailand with a turnover of 50-100M +

Lets not get into which business ideas work and which dont, i am purely interested in the actual logistics of managing a medium sized company such as legal aspects, tax, staffing, marketing etc in comparison to other countries.

I see many posts on here discussing how difficult it is to run a business in Thailand and that the majority fail in the 1st couple of years, but i think that actually that's true in most other countries.

In the west, it is a low percentage of people that actually setup their own companies, most generate their income by working for someone else. In Thailand there are not the same opportunities open to foreigners and so its reasonable that a higher percentage of business ventures will fail because not everyone possesses the necessary business accumen to be successful on their own.

Keen to hear some experiences from those that have been successful.

[schuimpje]

If you are talking about a 50 - 100 mil THB turnover, yes then I fall within your criteria.

Started the company close to 5 years ago.

Currently employ 19 people.

Just moved to a larger factory/warehouse in a Free Zone

The first 3 years where living hel_l.

Let me know if you'd like to hear more about it and I'll go into more details.

[mynextgig]

If you are talking about a 50 - 100 mil THB turnover, yes then I fall within your criteria.

Started the company close to 5 years ago.

Currently employ 19 people.

Just moved to a larger factory/warehouse in a Free Zone

The first 3 years where living hel_l.

Let me know if you'd like to hear more about it and I'll go into more details.

Hi Schuimpje

Definately keen to hear more, no need to talk specifics of what your company does, but really keen to hear some of the stumbling blocks you hit along the way, how you overcame them and why you chose to do business in Thailand.

Also, do you speak or read Thai and do you think this was a benefit/hinderance to your success ?

Rgds,

gig

[richardt1808]

Hi,

I've been invilved in the setting up of both medium sized and a small company here over the last 10-12 years and honestly, I think that there were a lot fewer headaches with the medium sized company, compared to the smaller company.

In terms of business laws and legal requirements, I think that Thailand provides a pretty favourable environment and most times when we have needed to have questions answered or issues addressed by the Commerce department, we have always got straight answers and good guidance from them. Sure, we have had headaches, but these have normally revolved around our own ability to find good staff in key positions who are able to make and enforce decisions.

I think that a lot of the pain and suffering encountered by posters here on this forum, relate to issues of poor planning, financing and in some cases pure lack of proper business skills. In general, if we were to compare Thailand with other countries it is perfectly feasible for foreigners/foreign companies to do business here. The key issue is that you need to accept the issue that a foreigner will never have full control over a Thai company, so a person like Rupert Murdoch may not be able to totally run the roost and single-handedly call the shots at a single company; but that's not always a bad thing. Companies all over the world have diverse shareholders and they don't always agree - but that's business. Setting up a company in any country is all about finding the right people to own it and the right people to run it. Once you have gotten your head around the fact that you are not going to be the single largest shareholder in a compay, then you take things from there. So, first, you require a Thai partner in some shape or form. Either you create a joint venture, or you find trustworthy partners/shareholders which are necessary for registration of a Thai company. As long as you have proper legal guarantees, contracts or other means of ensuring trust, then there is a pretty good playing field. But this is a key issue. People who place their trust in their gf from upcountry or any love interest which they then try to mould into a business interest, are pretty much doomed to fail. Other than this; if you do your research, get the product mix right and run according to a proper business-model there is no reason why any business should not succeed.

There are loads of very profitable and well-run Thai companies. Due to lower salaries than in the west, Thai companies actually tend to be better at taking care of the small stuff than western companies. Things like full-time maid-service for coffees lunches and cleaning; parking attendants and security officers, drivers and interns to carry out even the most menial tasks can make life a pleasure here. Of course, I've generalised quite a lot here, but at least there is food for thought and points for further comment.

Cheers,

Edited May 4, 2010 by richardt1808

[schuimpje]

If you are talking about a 50 - 100 mil THB turnover, yes then I fall within your criteria.

Started the company close to 5 years ago.

Currently employ 19 people.

Just moved to a larger factory/warehouse in a Free Zone

The first 3 years where living hel_l.

Let me know if you'd like to hear more about it and I'll go into more details.

Hi Schuimpje

Definately keen to hear more, no need to talk specifics of what your company does, but really keen to hear some of the stumbling blocks you hit along the way, how you overcame them and why you chose to do business in Thailand.

Also, do you speak or read Thai and do you think this was a benefit/hinderance to your success ?

Rgds,

gig

Hello Gig,

I don't speak Thai, but married with a Thai lady.

Not mastering the language is an absolute hinderance but you can overcome that with a trusted person to help you.

But let me try to start a bit more structured.

In 2005 I was looking for a new job after finishing a project in the US. With our son on the way, we settled in Thailand, when an old colleague of mine called me. They where setting up a company spanning various countries in Asia, with most of them already known from the past. So I jumped on it, (without any experience of setting up a company before all by myself), but ok.

To setup in Thailand, for the industry we are in, you are scraping for Satangs at times and unlike your typical Bangkok crowd where English is common, the moment you get out in the industrial estates where we have our customers, it's all Thai and forget about any other language.

So stumbling block number one was to get past that Yes Yes No No and I don't know what you say anyway-secretary.

It doesnt help to visit a factory, you'd never get past the security-guard as well.

So how to get in contact with companies I need for my business?

Two things:

1. I got in contact with an English guy who runs a small business that collects and maintains databases with company information.

I bought a database from him and started looking for potential customers. The information was not always correct and up to date, but it provided me with so many company-contacts that where English, American, Japanese, etc. Names, emails, tel-numbers of companies past that Thai secretary.

Here's the link: http://www.bangkokcompanies.com/bcompanies_006.htm

2. After a while, I got in contact with a high ministry official at DIW. He introduced me (and one of my bosses from Singapore) after some nice dinner in State Tower to a Thai partner. I consider myself very lucky to have met him and over the years I have found that it was the lucky break I needed.

This guy has opened doors that I could never have even found by myself. I'm not talking about greasing the wheels in any way. Just pure knowledge and persistence of him to get the right persons to talk, the right documents to fill in, everything except paying money for it as many people in Thailand think needs to be done to get work done.

So language is the first and biggest stumbling block. Don't ever underestimate it, even now, after 5 years, I still run into that wall almost daily. (I still don't master Thai language which I consider my weakest point, but with very bad ears and 6 day work weeks, I don't see it improve anywhere soon as well)

Ok, let me finish this first post now, before I'd loose all the work.

Will continue in a next post.

[schuimpje]

So, with that Thai partner, we started to seriously look for business. Even though you don't ask for it, it's essential to the story to say that we are a recycling company dealing with Electronic Scrap.

For this type of business, we need a host of special licenses and it's a real pain in the A@@ to get them.

This is a very nice part of setting up your company. Let me explain very roughly how the process works:

When you decide to start a business, you need to register your company. Nothing new.

But to do that, first get a lawyer, and define very precisely what your company will do and make sure you include all types of business you can imagine your company might be doing in the future as you grow and expand your business. This is very important as this description/information is put into the company registration forms and is used with the license applications for a factory. (assuming you'd go into a manufacturing/logistics direction with a warehouse or factory somewhere in Thailand).

So your company has been registered with capital, your tax-number, etc. You walk into DIW (Department Industrial Works @ Rama 6).

That's the National Government part of DIW. You also have the provincial and local offices...later on that.

DIW is a very useful source of information, help, guidelines, anything related to the actual setup of a factory.

They grant licenses, they audit, they control the industrial sector in Thailand and at times it's perfect, at times it's a mess, but overall the people I encountered there are friendly and try to help you as good as they can. You'll be there as a startup almost every week to find out that there is one more detail that you missed out on.

But ok, process. You collect information from them for what license and requirements there are to setup your business.

They will give you a list of requirements and you start to work on that. Once you have all that ready, you are supposed to go to the provincial office where you setup your business. This is where the Thai language is a must again, hardly any English available and really, you typically can't trust a Thai person to understand you talking English even though they say they do. It's nobody's mistake, it's the face-issue. So make sure you have a Thai person with you who fully understands and translates what's being said.

I can almost guarantee you that they will offer you help to setup the company. For a small 'fee' to the charity of their choice, they'd easily and speedy approve your applications. This happens in almost every Provincial DIW office I know of. Sad, but corruption like this is commonplace.

We managed to do without the 'help' because of my Thai partner being persistent in it and our high-up friend in DIW but it took us 8 months to get our licenses.

What happens if you decide not to help their charity-fund?

They could flat-out tell you in the face that your license would not get approval.

Or they delay and stall wherever they can.

Worst case, they'll get you peddling it back and forth between DIW-Province and DIW-National with each time some small change to be made.

In our case it was the last one but being stubborn helped us to eventually get it. Looking back, I don't know if I'd ever have the energy again to go through the setup-process over here again. It drives you nuts at times and makes you cry for the rest of it.

It is not only this problem. The language, translation from your english description of company-business and all the documents that you're asked for.

Numerous times we had to work through stacks of documents, changing some details, sign and chop all of them again, resubmit them...

I tell you, Thai love documents in 2, 3 or 4 fold and every document to be signed and chopped.

If I'd get 1 baht for every signature I'd be driving a nice BMW now...

[emsfeld]

No experience to contribute here, but this topic is very interesting. Thumbs up to schuimpje for taking his time - interesting read! Keep them coming

Edited May 4, 2010 by emsfeld

[schuimpje]

Thanks Emsfeld, just finished lunch, fingers on the keyboard again.

Ok, I'd like to add to earlier information that our licenses and permits are not your usual factory for production. Recycling Electronics is a difficult and controlled industry which does add to the trouble we had getting everything.

Another choice that we made was budget-wise. An absolute minimum spending, scratching for pennies to get there. Because we went low budget, we did not get any BOI-support, which makes everything a breeze when setting up a medium-sized company. We also stayed out of the Industrial Estates, opting instead for a general zone small warehouse, again adding to the pain of getting all licenses and permits done.

It's a choice we made and despite many people, from DIW-officials to lawyers to (potential) customers, telling us it's impossible what we wanted, we did get what we want within every legal border.

Again, this clearly supports the importance of language and a trusted and good local partner. A local partner is essential in many countries where you set up your company, but here in Thailand it really shows.

Back to the next part of the story...employees.

So you have your factory and licenses. You can start operations. Good luck...lol...you'll change your hairstyle, either by pulling them or because they turn grey. Don't get me wrong, as Richard mentioned in a post above, you'll be able to really enjoy working for a medium sized company because you'll have many people working all those nitty-gritty things. At times you'll feel like a king with all those people bowing when they pass by you, though I have always found that very irritating, I just don't like people doing that for me, being young and having started from scratch in a warehouse with a broom myself...

Ok, so try to find employees. In Thailand, there's a large workforce readily available.

You can go through many different routes getting employees. All the normal services are available, from agencies to labour-departments, from advertisement to people who just walk in and ask.

Don't allow friends of friends or brothers, sisters, aunties and uncles of your employees to join your workforce! You are guaranteed to get trouble one way or another! This is a common problem not only in Thailand, just as a warning, don't...

Very important: Be aware that as a managing director or director, you are directly responsible for everything your employees do or fail to do!

That means for example that if your accounts have not been done properly, you'll serve your time even though you only sign the cheques.

Same for safety, accidents. Your foreman causes a bodily injury, they could sue you for negligence.

This is a topic that has been widely discussed and is easy to search for. Guess ThaiVisa has info on this as well.

Expect your workers (if you pay them minimum wages), to just drop off the face of the earth if they have something else to do. I've so many times come to work in the morning, only to discover that 2 or 3 out of 9 people in the warehouse suddenly decided not to come anymore for any given or not given reason.

Don't assume something will be done like it was done last month. I've come across so many situations where suddenly people started doing things slightly different, then a bit more, and another bit. Next thing you know they're using black paint where it used to be white paint. Daily or weekly work-meetings and repeating job-instructions is a must. Remember that many of your minimum-wage workers had only basic schooling.

Ah. Schooling. The never failing and amazing standards. You put out an advertisement, asking for a university graduate with English language skills.

Now, you'd get a dozen applicants who've sent their resumes and all of them have at least a A - or B + level of English according to the University diploma. I tell you, you'll be in for a cold shower. I've gone through a dozen of those ladies/gents that have as above but they'd not be able to understand yes from no. It's not their fault, they're in for a rude shock as well, but again, English outside of Bangkok is non-existing period.

Accounting, another nice part of your work. Find yourself a good, english speaking accountant. You can get one on the cheap doing all the accounting work for 5-6k Thb but forget it. You'll get yourself in trouble if you don't have an accountant that understands you and thinks for you.

You need a good one, pm me. My accountant (external) has been running that extra mile from day one and eventually, when we got an accountant full-time in the office, he put her on a test first to see if she really talked the talk and then had her for 2 weeks in his office to make sure she knew what to do.

Takes away a lot of worries, believe me.

Go for electronic banking and stay away from banks as much as you can. Time-consuming frustration I call it.

Bangkok Bank is good if you need nearly instant payments electronically. Especially from BBK to BBK accounts it's immediately, within a few seconds.

SCB is good as well, easier to have a secretary prepare payments where you then approve them.

Security wise, Bangkok Bank with random password key but that's negatively affected by using Internet Explorer only with all its security problems.

Other banks, no experience.

Most banks will require 3 years of business operation before they would start talking about credit-facilities or credit/debit cards for a company. Very strict controls on documents and again, many many signatures.

(This is good, the recent global financial crisis hardly affected Thailand and its banks. They learned their lesson well from the 1998 crisis.)

[mynextgig]

Schuimpje, what a great story and a real testament to the perseverance required to be successful at a startup business in general and especially when doing it in a completely new language and culture.

I have a friend that owns a recruitment company, sourcing employees for factories in Thailand. He speaks some Thai but certainly not enough to conduct business in the language and he has told me that he frequently finds that the more senior managers at the companies that he recruits for will simply not deal with him because of this fact, even though they are totally fluent in English having to converse with their foreign suppliers regularly.

I think many people completely under estimate the task of setting up any company, small, medium or large. It is crucial to keep overheads low and cash flowing in the early stages, which means you end up doing everything yourself, including the menial tasks. Anyone doing this in Thailand because they want an easy life in the sun should think again, 12 hours a day, 7 days a week i think will be pretty normal.

Any more experiences out there ?

[schuimpje]

Gig, yes, I understand your friend's problem. At all times, he should have a 'partner' with him that is at the same level.

For my company, with my Thai partner, I also got a Japanese one with it... So over the last 5 years, we have done so many customer-visits, but always, there was a minimum of 2 persons going in.

For Thai customers, I would come along, say the usual things like hello, coffee please and yes I'm married but don't speak the language.

After that, my colleague takes over and starts the sales-talk. No need for me to say or understand anything.

Same for Japanese companies, we'd go there 3 of us. Say pleasant things, then my Japanese colleague takes over...my Thai colleague talks with some of the Thai people attending the meeting and I enjoy the coffee and answer questions if and when they come.

Crucial to Thai people (I think) that you show them: hey, yes I'm Farang, but I know very well that I can't do it without my Thai colleagues.

Does give funny situations every now and then as well. My colleague always drives, has a nice Camry and I always sit next to him in the front. Several times we get to the security guard, my colleague talks with him about who we want to meet (The Japanese boss for example) and then tells him to drop me (boss) off at the entrance first and then park the car over there....

[RAZZELL]

Schuimpje, what a great story and a real testament to the perseverance required to be successful at a startup business in general and especially when doing it in a completely new language and culture.

Seconded.

Schuimpje....Thanks for taking the time to post...fascinating reading

RAZZ

Edited May 4, 2010 by RAZZELL

[mynextgig]

Gig, yes, I understand your friend's problem. At all times, he should have a 'partner' with him that is at the same level.

For my company, with my Thai partner, I also got a Japanese one with it... So over the last 5 years, we have done so many customer-visits, but always, there was a minimum of 2 persons going in.

For Thai customers, I would come along, say the usual things like hello, coffee please and yes I'm married but don't speak the language.

After that, my colleague takes over and starts the sales-talk. No need for me to say or understand anything.

Same for Japanese companies, we'd go there 3 of us. Say pleasant things, then my Japanese colleague takes over...my Thai colleague talks with some of the Thai people attending the meeting and I enjoy the coffee and answer questions if and when they come.

Crucial to Thai people (I think) that you show them: hey, yes I'm Farang, but I know very well that I can't do it without my Thai colleagues.

Does give funny situations every now and then as well. My colleague always drives, has a nice Camry and I always sit next to him in the front. Several times we get to the security guard, my colleague talks with him about who we want to meet (The Japanese boss for example) and then tells him to drop me (boss) off at the entrance first and then park the car over there....

Never under-estimate the cultutal differences of doing business in Asia. I have lived and working in several countries in Asia for 10 years now and without a doubt knowledge of and adherance to certain cultural nuances make all the difference in building lasting relationships and succeeding in business.

There are a number of books out there covering business culture in China, not sure i have ever seen one for Thailand. Maybe a business opportunity there....

[schuimpje]

Agree 200% Gig,

Same here, started in Singapore, moved to UK, back to Singapore and a stint in the US before starting here in Thailand.

Of all the countries, Thailand was the most difficult, purely because of language and culture. Singapore relatively easy with a very western culture and english mainstream language.

One of the mistakes that I see happening many times is that people come here and think that they are king of the hill.

Be humble and willing to listen to and accept advise from local people. Always double check if translations are done properly or your meaning is fully and correctly understood. Ask ask ask and keep your patience although it might be very difficult at times.

For my company, we've strictly adhered to the principle of doing straight business. Even though you might be able to get big customers if you'd go ZigZag as they call it here, we've stayed away from it. It has resulted in getting some other customers who would go out of their way to help us with other customers telling them to use our services. Hard work and provide that extra service that others can't give. You can gain customer loyalty for long times to come with that here in Thailand.

[Valjean]

I started a company here 20 months ago after working for a multinational here for 3+ years. Our turnover is only about 10M now but we're growing fast. We're also a services business so don't have really any costs here except for people and office (rent, internet, etc). We'll get to 20M+ next year and more beyond...

Today I have 12 full-time employees including me. We have 3 expats so I've had to capitalize and hire people to meet the Work Permit bar (hiring now).

I'm American so I was able to use the Treaty of Amity provisions and have 100% ownership

I speak some conversational Thai but not functional business Thai. In our line, internet services to companies outside of Thailand, I really hire people with English skills only. All college grads. I have one person who really has less English than I do Thai - it's OK but all things being equal I take the time to find at least basic English speakers. The point before of school English versus actual ability is on point. But they are out there. I just hired a really bright Thai-Indian who was sent to India to study. Fluent Thai, English and Hindi. Green but she'll learn fast. You can find them. Patience.

There is about a 50% fail to show up for interview appointments. Send in a resume, schedule an appointment, then don't come. I haven't figured this one out yet.

I tend to favor younger, go getters over experience. You can shape them to your company work culture faster. All things being equal I'd hire a Thai woman before a man. That's another long post...

People are always a challenge. That's the same everywhere. Workers from each culture have + & - to them. You need to understand both and work with it. That's leadership and management 101 as far as I'm concerned. Complaining is for complainers. Read every book you can on Thai culture, things can be learned and you'll be happier and understand what's happening around you better.

This is true in my start-up or the multi-national. You need some Thai's you can really trust, and that your team knows have the inside track to you. My wife's cousin fills this role for me now. Trust her more than my wife in many ways. But she's the one that staff go to with problems, when they want a raise, when they want to sit at a different desk - big to small they don't always feel comfortable coming to me. I'm easy going (OK not every moment of every day) and we all work in one big room but the Thai (Asian) way is indirect. Make sure your indirect channels are working. There are important things you need to know.

The Thai love for paperwork can drive me nuts but that's a fact of life. Get used to signing your name a lot :-) If you have to go to the bank bring a good book or your laptop - you'll be there for awhile if there's anything to set up or change with your account. Just relax.

Get a good attorney and accountant. It's good to have them represent you to the government when needed. My accountant deals with revenue department and others like that. I costs a little but it's not just the language, they know their way around the system and people. As noted before your point of contacts must be fluent in English. You can't mess around here - you need to have 100% understanding with them. I use Libra Accounting (aka MSNA) and Siri Manop and happy with both.

I'm starting to look into Board of Investment status. Some good tax advantages.

Overall I'm having a lot of fun and growing a fantastic company. You have to be a smart businessperson like anywhere and have the know-how and money to make a run at it.

Happy to chat if you want to contact me and get the details.

Best of luck,

[schuimpje]

Faljean, you summed up in one post shorted than most of mine most of the things I tried to say. Has always been a problem for me. Great post.

Indeed, your comment on 50% no show...I still don't know why as well. No matter what position or what type of job, it happens all the time. Agree on the fact that there are people out there meeting the required skills but it takes as you say a lot of patience.

A very positive I've noticed is that once people really settle in the company, (office especially, my warehouse is another matter), they are very loyal. It took me quite some time to have a team forming in the office, but over the last 2 years, we've only added people with increasing work-load, none left.

Might add that hiring contractors is another challenge. You can bargain and bring down every price, by a good margin, but there's hardly any contractor I've ever met in these 5 years that finishes a job on time and exactly within specifications unless you're really paying big bucks which is not an option for a small startup.

As for the bank, typically, I just sent my staff there first and they'll call me when I have to come or they'd have everything prepared and signed in the office.

But I understand that it's a bit more difficult doing that in Bangkok than it is in most of the banks outside BMA

Edited May 4, 2010 by schuimpje

[Microwave]

Interesting experiences, thanks!

[chiangmaibruce]

There are a number of books out there covering business culture in China, not sure i have ever seen one for Thailand. Maybe a business opportunity there....

Hi guys. Following this thread with interest also. There are actually a number of books on Thai business culture out there. In the book I recently published (see www.burning-bison.com) I provided a list of these (p 112 if you can grab a copy), otherwise i'll pm the info to you.

[schuimpje]

Might add that to all the frustrations and trouble you can encounter setting up a business in Thailand, it is far outweighed by the plus side of it.

As Faljean mentioned, business in Thailand once you have things more or less started and under control, is fun. The advantages of cheap labor, low startup cost, the many opportunities, the variety of people, it's fun working here and see your company grow.

[Valjean]

Might add that to all the frustrations and trouble you can encounter setting up a business in Thailand, it is far outweighed by the plus side of it.

As Faljean mentioned, business in Thailand once you have things more or less started and under control, is fun. The advantages of cheap labor, low startup cost, the many opportunities, the variety of people, it's fun working here and see your company grow.

Yep I'd agree with this.

And also with your other comment about being loyal. My team works hard and stays late when needed. But the office also has a nice snook feel. I really like working with Thai, it suits me just fine.

Good idea about sending the staff to the bank and calling me when things are ready! I'll use that next time.

[tgw]

very interesting thread, thank you.

more, please !!!