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Warning to think carefully before buying a business abroad

People thinking of setting up or taking over a business abroad are being urged to do their research before taking the plunge.

Overseas property and finance expert Simon Conn has been arranging foreign mortgages for more than 30 years. He says the one area of the industry he gets increasingly frustrated about is clients who wish to set up or take over an existing business abroad, with no thought or plan of how this is going to be achieved.

“Some of these requests and reasons can be bizarre, including an office manager going to Spain to take over an existing bed & breakfast, with no past experience, no accounts to hand and based on the seller stating that their website has many hits,” Simon said.

“There was also a cleaner purchasing a pizzeria in Portugal with her boyfriend, where his only past experience was running a bar in Greece during his gap year. I’ve also dealt with clients wanting to buy a hotel on the Mediterranean coast who have a business plan based on summer sales only, which does not allow for the winter or out of season business..

Simon has put together a basic guide below, showing the steps which should be taken when people create a business plan or feasibility report.

  • Unless you have long term experience in that profession or have lots of money you can afford to lose, never move to another country and start up a new business.
  • Ensure all parties are signed up to the new venture and are aware of the potential pluses and minuses.
  • Take independent legal advice before signing any documents or committing to a purchase.
  • Have all documents independently translated before signing.
  • Check with the local authorities that you are allowed to work in that country and whether any licences are required.
  • Check the tax implications. Are you going to take local residential status, or are you still continuing to hold assets and/or receiving income from your home country, which could affect where and how much tax you pay?
  • Visit the area where you are considering purchasing the existing business and research whether you can continue, expand or increase the turnover. This includes checking out any nearby competition.
  • Visit the area in all seasons (if required for the type of business you are purchasing) to see how their trade is affected.
  • Consider whether repairs or renovations will need to be carried out to the premises – for example, if it has become run down or you wish to create or add to existing amenities. Research a good local builder and take references.
  • Can you speak the local language? A basic understanding is paramount in dealing with local suppliers and authorities.
  • Obtain a copy of the existing accounts (preferably in your home language) and check these with your financial advisor or accountant.
  • Calculate at least the next two years’ cash flows and projections alongside your financial advisor or accountant. It may also be advisable at this point to also obtain the services of a local accountant (this may even be the existing business’s accountant) to help you plan forward.
  • Check out where all the supplies for the business will come from and identify any issues.
  • Decide if it is better to purchase in your own name, or a local company name, and check the advantages and tax implications.
  • Investigate the utilities and local taxes you will have to pay.
  • Allow extra cash for the first year, or longer, to cover trading from the outset and your own personal costs.
  • If you are purchasing jointly or with other parties, will someone be continuing to work either in their home country or while the business is developing, to provide further income and cash flow?
  • If you need additional finance, it may be worth speaking in the first instance to the local bank which currently looks after the business, because if it has been a good customer, they may not want to immediately lose the account. They may also offer more favourable lending terms and possibly overdraft facilities, if required.

Simon said: “Before making the final decision, I always recommend clients really think about what they could lose by moving to another country – for example, local comforts, family, familiarity with the local area, standard of living – and ensure you have a fall back situation if your overseas plans turn from a dream into a nightmare.”


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Details correct when this article was originally posted on August 4, 2015.