When you are starting a small business, there is a lot to think about. There’s what most entrepreneurs would consider to be the fun stuff – sales, product creation, branding and marketing – and there’s the boring stuff.
Company formation, assessment of legal risk, things like that. All essential, all (in my mind) boring.
I’d also throw “finding office space” into the Boring category, but what if you were finding office space halfway across the world, in a world-class city like Bangkok or a fast-emerging tech hub like Shenzhen? Well that, that could be pretty exciting.
In this article, I’ll be taking a look at the pros and cons of forming a company in each of these countries. By the end, I hope you’ll understand which one might be a better choice for you as a base for your business.
Bangkok - and Thailand in general - offers a lot of opportunities to startups. Its government certainly isn’t Singapore-level startup friendly, but the city fares very well as a base for new companies. Here’s why…
First, let’s start off with the good. What can Bangkok offer you? Here you will find some of the best parts of starting your small business in Thailand’s capital.
Not only is Bangkok the capital of Thailand, it also serves as the home to nearly 8.3 million people. Most business owners opt to tap into the local labor market and sell their services overseas rather than market directly to Thais, as gaining the market knowledge to succeed in Thailand can take decades of hard-won experience. However, Thailand does have a non-trivial market size and a large expat community eager for new goods and services. I see big opportunities in F&B and e-comm here.
When you first move into Thailand, you will find that it is rather easy to get adjusted. Locals are generally very welcoming to newcomers – it is the Land of Smiles after all. Furthermore, many Thais speak English, making it easier for English-speaking people to live and work there. Even those without a lick of Thai will find it easy to get around the city and complete basic day-to-day functions.
If you are planning on settling your business there, though, you might want to consider learning Thai more in-depth so that you can communicate easier when it comes to the more complex aspects of your business.
Diverse Potential Staff and Colleagues
If there is one thing that is true, it’s that you are not the only expat in Thailand. With the high influx of other ambitious entrepreneurs, executives, and college graduates, you are looking at a wide talent pool. This gives you the chance to work and innovate with a variety of other people, many of whom who are in Thailand for the same reason as you - to start a new and unique business. There is a reason that companies like GCGme have found success here.
Now that you know what Bangkok can offer you, let’s get realistic and look at what the cost of working in Bangkok is. This way, we can compare the benefits to the cost and get a realistic picture of your small business functioning in Bangkok.
The paperwork in Thailand is far from streamlined and for those new to the system, it can be overwhelming to say the least. This leads many newcomers to either suffer through and get confused or force them to spend money and hire someone to help them through the process.
In most cases, I recommend shelling out the cash for a company formation expert rather than navigating bureaucracy yourself.
In addition to difficult paperwork, you will have to get used to some specific legislation when you are building your business in Bangkok. For example, for every one expat you hire, you have to hire 4 Thai employees. You will have to be careful to be aware of idiosyncrasies like these so you don’t run into trouble
The second option we are considering today is the fourth largest city in China - Shenzhen. Much like Bangkok, basing your business in this city has both its pros and its cons.
Once again, let’s take a look at what Shenzhen has to offer you as a home base for your small business first.
Shenzhen is WAY more expensive now than it was when I first came there in the mid-2000s. If I compare the cost of living there now vs then, I see something like a 100-200% price increase. So it isn’t the bargain that it once was.
That said, Shenzhen is a reasonably priced city to start a business in, and you’ll be paying way less than you would to live in a city of comparable size.
Remember how Bangkok’s high population was a plus? Well, Shenzhen’s population is even higher - by nearly 2 million people! With a population of 10.22 million people, you have an even wider audience right outside your door.
Low Corporate Taxes
There are certain areas of China that offer low corporate taxes. Luckily, one of these areas is QianHai in Shenzhen
Now, let’s look at the other side of setting up shop in Shenzhen, China. These are just some of the drawbacks of business in Shenzhen.
China - much like Bangkok - is known for having some legal idiosyncrasies that can be hard to follow if you aren’t familiar with the law. For this reason, many expats who start businesses in Shenzhen are forced to hire legal aid.
One of the downsides to starting a business in China is that you will need to declare the receipts of your company every month. This means that you will have to hire an accountant to your payroll which will cost around 500 to 2,000 Yuan each month.
Conclusion: Bangkok or Shenzhen?
Now that we have gone over the pros and cons of working in Bangkok and Shenzhen; which one is better?
In the end, they both have rather strict business laws but there is a big difference. In Shenzhen, you are going to save money on not only the physical property that you need to buy but the taxes you pay as well.
Michael Michelini is host of the GlobalFromAsia.com podcast, an online radio show to help business owners grow their companies in Asia and around the world.
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