Moving A Small Manufacturing Company To Thailand

[maybemoving]

Hi everyone! New to the forum...been lurking a bit.

Was wondering if anyone on here could answer some questions regarding moving my business. I've been considering moving out of the US for a while, narrowed it down to Costa Rica and Thailand. CR's laws are friendlier to foreign owned businesses, but there's an energy to Bangkok and Thailand in general that draws me.

My business has been running successfully in the US for 5 years now, and is a very small and stable niche. Half my customers are in the US and half international. All product is sold online, and directly shipped to the customer. 95% of business is repeat. While I do OK here, relocating to a country with lower labor overhead would allow me to double or triple my volume and provide a very nice living for myself and my employees.

I've read that manufacturing for export is one of the few exceptions for which the government will allow a majority foreign ownership. I do legitimately fall under that category. However, I'm uncertain of start-up costs and whether or not a business that produces 15-20k $US in monthly revenue is viable (too small?). Any input appreciated!

[raro]

you should talk to the Board of Investment (BoI). Depending on your business and other conditions, you can have tax holidays, easy processing of work permits and yes, 100% foreign ownership!

Minimum investment is 1 Mio Baht.

[carlosacao]

I would suggest that you check very carefully the feasibility of manufacturing in Thailand; I've found the productivity of Thai workers to be very low and their work ethic it's just plain abysmal, they are not serious about work. You might need 3 or 4 to get the work done by 1 US worker, it really depends on what type of work you need done. I would think twice, better yet, five times before moving the business here. Good luck.

[bifftastic]

There was a legal firm in Bangkok that was involved with this forum, can't remember the name, I think it might have been 'Siam Legal' anyway, they ran a program wherein you ran your business as a division of their company until you were able to go it alone, they took care of all the work permits and registrations etc. They can (or could) only operate the scheme in the Bangkok area.

Even if that's not what you're ultimately looking to do, it might be helpful in the first instance to be teamed up with people who know the ropes as it were. That way you can feel it out as you go along and then, once you're comfortable, make the break and set up by yourself. Gives you a chance to run your business and do some networking, get to know the local regulations and meet the officials you might have to deal with. Rather than just turning up on your own and trying to get it all done.

[MrE]

I agree that contacting the BOI is the best way to start. There are some good incentives to bring a business here.

I would disagree that the Thai work ethic is abysmal. After ten years here and in several businesses, I found that like anywhere, people who are properly motivated and managed, treated with respect and allowed to feel part of a team are productive. As a management consultant, I have had this discussion over a hundred times with foreigners who can't understand why their employees prefer to sleep on the job than to work hard. It almost always comes down to the management not being able to understand and fulfill the needs of their workers. Paying employees minimum wage (around THB 200 per day) and then requiring them to work more than the legally mandated hours per day and per week; ignoring labor the laws concerning overtime, sick leave and holiday pay; and blaming bad communication on employees not being able to speak English are all common obstacles to successful business operations here. If you go into almost any of the fast food franchises or high end retail shops, you will find their employees for the most part are well trained and offer excellent service. Yes, for a lot of workers, "western style" employment is difficult but when they are given the opportunity to advance and succeed, they respond just like anyone in any country.

We have several diverse divisions in our parent company so it is possible to merge with an existing corporation to save yourself the immediate expenses of set up costs, maintaining offices, etc. Once you have proven to yourself that the business is fiscally sound in Thailand, you can then split off and form your own corporation. Just be sure that you have a good lawyer to protect your interests so when you want to break away from the company, you can do so without any hassles. Be very careful. Trust no one. Seriously. There are a lot of very dishonest foreigners here. I got cheated twice in my first few years here, and then had my major business killed by an Aussie after the tsunami.

Edited July 21, 2010 by MrE

[raro]

I agree that contacting the BOI is the best way to start. There are some good incentives to bring a business here.

I would disagree that the Thai work ethic is abysmal. After ten years here and in several businesses, I found that like anywhere, people who are properly motivated and managed, treated with respect and allowed to feel part of a team are productive. As a management consultant, I have had this discussion over a hundred times with foreigners who can't understand why their employees prefer to sleep on the job than to work hard. It almost always comes down to the management not being able to understand and fulfill the needs of their workers. Paying employees minimum wage (around THB 200 per day) and then requiring them to work more than the legally mandated hours per day and per week; ignoring labor the laws concerning overtime, sick leave and holiday pay; and blaming bad communication on employees not being able to speak English are all common obstacles to successful business operations here. If you go into almost any of the fast food franchises or high end retail shops, you will find their employees for the most part are well trained and offer excellent service.

:clap2:I 100% agree! The fish strts stinking from the head. If your workers are not doing what you expect them to do, your management is doing something wrong!

[NaChampain]

By your numbers you are doing 180-240K in revenue p.a. You are looking at cutting costs, which is a good thing if you can maintain the quality. You may also want to look at growing sales. This could be done from your existing base of operation or you may consider whether Costa Rica or Thailand's presumed lower cost base would enable you to grow revenue too by passing on your cost savings to your customers.

That way you would not only lower your cost base, but also increase your revenues.

Having lived here 15+ yrs. I would urge you to think hard before moving from the US to here based on a revenue of 180-240K. If you were in a wonderful business (Oracle, Google or the likes) your profits might be 30% of that, but I would assume that you max clear 15% of your revenue. Hence, perhaps 60k.

That is a nice enough income here year by year, but perhaps you want to try it out by finding a partner here before plunging into the deep end?

Hedge your bets is my advice. Keep your manufacturing in the US. Come visit here 2-4 times a year and try to find a manufacturing partner. Then give that partner 1-2 orders as a test. If it works out, then you can expand. If not, well not too much is lost.

Take it step by step is my advice based on my own businesses here and in other countries.

[WarpSpeed]

As an American you don't need a partner, you are allowed to own 100% of your business under the Amity Treaty look into it.. And start with the BOI...Not knowing what type of business it is exactly, you may want to consider establishing yourself in a trade and duty free zone such as is located in Chonburi..

[maybemoving]

Wow, glad I checked back in...thank you for your thoughtful and informative replies.

I tend to agree that the fish starts stinking from the head. As a small businessman, I feel good when my company is able to provide income for employees. Makes me feel proud to contribute and make the world just a little better. The type of work I do requires a healthy training investment, so I have a good incentive to keep workers happy and on board. In short, I treat employees very well because my success is tied to theirs.

NaChamp, profits are higher than that because a. material cost is negligable and b. I sell directly to my end customers and am able to charge premium prices. Not to bang my own drum but I have a fairly large and devoted customer following, and demand outstrips supply by 3-5x my current capability. That said I could easily double output and keep prices the same.

Due to very high quality requirements, outsourcing won't work, period. I've tried it already, and spent a lot of time and money coming to the conclusion that the only way I am going to increase output is by retaining day to day operational control over production. Ideally I could find a manager down the road who could take my place, but we're talking several years of training the right person.

What it boils down to is that only about 15% of what I do is tricky / difficult. The other 85% is pushing something through a saw or gluing it up. With training and physical constraints (clever jigs) I'm fairly certain I can get local labor to do the grunt work for me. It's really just a matter of attention to detail.

I'm considering flying out there and picking up an ESL teaching gig. I figure that would allow me to stay in the country for a year at minimal expense, which would give me time to learn some Thai, find out if I really like it there long term and complete a detailed business plan. The business plan would hopefully answer most of the questions I have, and make me feel more confident about committing my capital. Just flying in and immediately trying to set up a company seems like a great way to lose my ass.

[NaChampain]

Wow, glad I checked back in...thank you for your thoughtful and informative replies.

I tend to agree that the fish starts stinking from the head. As a small businessman, I feel good when my company is able to provide income for employees. Makes me feel proud to contribute and make the world just a little better. The type of work I do requires a healthy training investment, so I have a good incentive to keep workers happy and on board. In short, I treat employees very well because my success is tied to theirs.

NaChamp, profits are higher than that because a. material cost is negligable and b. I sell directly to my end customers and am able to charge premium prices. Not to bang my own drum but I have a fairly large and devoted customer following, and demand outstrips supply by 3-5x my current capability. That said I could easily double output and keep prices the same.

Due to very high quality requirements, outsourcing won't work, period. I've tried it already, and spent a lot of time and money coming to the conclusion that the only way I am going to increase output is by retaining day to day operational control over production. Ideally I could find a manager down the road who could take my place, but we're talking several years of training the right person.

What it boils down to is that only about 15% of what I do is tricky / difficult. The other 85% is pushing something through a saw or gluing it up. With training and physical constraints (clever jigs) I'm fairly certain I can get local labor to do the grunt work for me. It's really just a matter of attention to detail.

I'm considering flying out there and picking up an ESL teaching gig. I figure that would allow me to stay in the country for a year at minimal expense, which would give me time to learn some Thai, find out if I really like it there long term and complete a detailed business plan. The business plan would hopefully answer most of the questions I have, and make me feel more confident about committing my capital. Just flying in and immediately trying to set up a company seems like a great way to lose my ass.

I am surprised about your answer. You say that you make more than 30% net on your revenue and still you want to take a teaching job here! Sounds misguided to say the least. I would suggest that you come here on 3 months tourist visas and get a lay of the land. Not difficult in three months filled with meetings with lawyers, manufactures, potential logistics suppliers etc. What are you going to learn from being a teacher? You sound in some ways more like an university student looking for an adventure. I may be wrong. In that case please feel free to PM me and I will gladly put you in touch with manufacturers of export quality factories.

[BDP]

...and here is my first post as official sponsor...as for bringing entire factories into Thailand (or out of Thailand for that matter...) drop me a PM

[NaChampain]

...and here is my first post as official sponsor...as for bringing entire factories into Thailand (or out of Thailand for that matter...) drop me a PM

Great global customer focus. Perhaps a 180-240K revenue a year manufacturing business needs your services - I wouldn't suggest it become your target market, but hey it's your business to run.

[BDP]

...and here is my first post as official sponsor...as for bringing entire factories into Thailand (or out of Thailand for that matter...) drop me a PM

Great global customer focus. Perhaps a 180-240K revenue a year manufacturing business needs your services - I wouldn't suggest it become your target market, but hey it's your business to run.

Our target customers produce this kind of revenue within a month.

But no worries, we also serve smaller companies

[NaChampain]

...and here is my first post as official sponsor...as for bringing entire factories into Thailand (or out of Thailand for that matter...) drop me a PM

Great global customer focus. Perhaps a 180-240K revenue a year manufacturing business needs your services - I wouldn't suggest it become your target market, but hey it's your business to run.

Our target customers produce this kind of revenue within a month.

But no worries, we also serve smaller companies

That's what I thought. I am not the OP, but if you read the posts from the beginning you will realize that 180-240K revenue/YR was the person you advertized your services to - unless of course your post was a general advertizement for your services. Your company looks interesting and I am sure you will do fine, but probably shouldn't focus on the OP size of businesses IMHO