The FARANG Speaks 2 Much

From time to time when we have discussions with people about wanting to move to Thailand the conversation inevitably revolves around going into business. Then the big question comes up - does one build a business or buy a business? Having done both we have a few things to say about this that may help people out a bit or at the very least give prospective entrepreneurs something to think about it.

Here goes it…

First off - buying is just easier for most people, especially if you are new to Thailand. Buying takes the fear out of getting up and running since one should be acquiring a running business that is licensed, has employees, customers and hopefully a decent stream of revenue. Sounds simple enough but the devil is always in the details.

• Why is the person selling the business?
• Are there some negative events looming forcing a sale?
• Are you inheriting anything that could cause problems down the road?

Buying a business can sometimes be harder than it looks since it can carry some baggage not seen when starting a new business. There may be some tax issues, problems with customers, problems with employees and so on. The best advice here is to not move too quickly. When I hear stories of people buying Thai business sight unseen I just cringe.

My advice is to only buy something you have seen, have been able to observe running and are not rushed into. The simple way to explain this may sound a little sarcastic but if the business is doing well then why is someone selling it? Granted - they could just be wanting to cash out and move on. Fair enough but keep in mind that means you will be paying for the person to cash out and move on which means that buying a business is generally more expensive than building a new business.

That is not to say that buying revenue or profits is a bad thing but just keep in mind that buying is generally more expensive than building. The other issue is what I call the Thailand effect. Many times people are selling businesses that are not doing well and view selling as a way out. One needs to be sure that if this is they case that the buyer is not overpaying for a bad business. There are other Thai issues that come up that can also force a sale and raise the potential of getting a good deal.

Husbands and wives divorcing and needing to divest of the business. Boyfriends and girlfriends breaking up with similar outcomes possible. Sometimes people just decide they cannot live in Thailand and want to sell. These fire sales as I call them happen all the time in Thailand but sometimes they are used to purport that the business is making money and the owner only wants to sell because he split with his Thai girlfriend/business partner. Although that is very likely many times you will find the revenues are not what they seem and the real reason is they want out of a bad business and are using the breakup as an excuse. Keep your eyes open.

Many times the businesses people are buying and selling in Thailand are cash businesses. We all know the merits of a cash business and I won’t be discussing those here but that means it is easy to cook the books. So make sure you understand how this works, get some real sense of the business and create your valuations on the potential of it all - not the cooked books. Here is why patience is important and why coming to Thailand to actually look at the business is equally important. Like any important transaction, it may be prudent to have your own lawyer or local business consultant not associated with the agency that is listing the business or working with the seller.

Building - I am a big fan of it because I believe the returns are greater but so is the risk. I am sure we would not have chosen to build the second bar had we not had the experience of buying the first bar. Meaning, for our first time out, I don’t think I would have tried to build a business but with our past experience I feel strongly that going forward I will build versus buy.

Building means getting licenses from scratch, negotiating your own lease, dealing with the police, branding, marketing, finding staff, managing construction and so on. All hard stuff with the potential of blowing up and forcing you to open later than expected or potentially destroying the whole project. I know stories of people never getting open due to running out of money or being unable to complete the project due to unforeseen circumstances. It can happen. Many times you also hear of people who run out of money after they open because they did not realize that they may have to run at a loss for some period of months and did not budget this in. Shit happens and in Thailand it happens when you least expect it. Remember it is their country - not yours.

Obviously this is my opinion based on our experiences in the bar and restaurant business. Other areas of business could be completely different and may carry circumstances that make evaluating buying or building as a decision totally different. Hard to say really but either way the Thai factor is present and may be one of the overriding reasons for buying or building.

Much more to talk about on this subject but hopefully this will kick off some comments and relevant discussion.