Turbulent times require an international solution

Global Access of Service and Technology Solutions System
Nationalism is resurgent. Brexit continues to be the known unknown, but is looming. The pound has fallen and shows no sign of recovering much. Inflation has started to rise. So have business insolvencies. We’re heading into the unknown of Brexit. We’re in the throes of an election that is at best diversionary.
All the indicators are scary, but despite them, much of British Business is doing what it does best. Keeping calm and carrying on. Waiting for “clarity” before taking any new action or making any investments or changes. Which is, of course, courting disaster.
As you’d expect me to say, the current uncertainties make internationalisation a top priority for businesses, especially those in the services sector. However, I’m coming from a different angle here.
The Brexit priority seems to be cutting immigration. Potential European immigrants, however, aren’t waiting for a change of policy – they’re already going somewhere else – and many who are already in the UK are looking for opportunities to leave. This is a problem for almost all businesses, even those that don’t currently employ any (and it’s not just the health service that’s dependent on foreign labour).
Fewer immigrants means it will be more difficult to hire. Some politicians seem to think that there is a vast pool of domestic labour that is being neglected by employers who would rather hire foreigners. Any business person could tell them that there is no prejudice against nationals in any company here – the vast majority of that pool of unemployed Britons either can’t work, won’t work or are unemployable. To solve the problem, we welcome and hire young, talented and hard working people from Europe and the wider world.
Following basic economic rules, a reduction in the supply of such people will increase the cost of all labour, as employers are forced to offer higher salaries to attract the staff they need from a scarcer offering. Deliberate cuts to profitability are limited, so, coupled with the higher prices now seeping through from exchange rate changes in 2016, we are bound to see an accelerating inflationary spiral.
One solution is to hire abroad, in countries where the skills you need are more plentiful and costs are lower. I’m not advising outsourcing – that takes away your control and generally increases costs – but setting up a subsidiary operation.
Entrepreneurs in the services sectors tend to shy away from this idea, or limit their interest to offshoring back office jobs. But why? The businesses that they serve, especially the younger and more dynamic ones, don’t expect local friendly face-to-face chats with their solicitor or accountant. In the modern world, everyone’s used to online access and video conference calls, and is happy if it means the service costs less or has other advantages such as 24/7 service.
Moving a lot of the work offshore to your very own subsidiary, retaining the core skills and entrepreneurship here, can ensure sustainability for the business and increase profitability.
Making new sales to an international market from that base can also guard against currency fluctuations. Companies already exporting services can, by moving the centre of delivery away from their home country, avoid any new trade barriers and guard against negative and nationalistic sentiments that may arise in their existing markets (think “America First”). Similar benefits can be had by manufacturers moving final assembly abroad.
Done the right way, creating a new overseas subsidiary can be quick and cheap to set up. In most cases, it could be trading within 6 months and be self-financing in the first year. Come on, small UK businesses, what are you waiting for?

Setting up a business in Brazil

 The ultimate guide – Part II

Is it complicated? Can I have an idea of the different steps?

Brazil has a high level of bureaucracy. We will explain bellow the step by step timeline to the creation of two companies in Brazil. These case studies are based on real companies that set up operations in Brazil.

 

Case Study 1 – Joint Venture

Multi-function business

  • Sell UK-created SaaS to Brazilian companies
  • Provide customer support to existing and growing customer base across Latin America

Why a JV?

  • Customer pressure forcing urgent establishment
  • Had to have branding and country presence
  • Only justified 3 staff initially
  • UK owner could only dedicate minimum resources due to other commitments

 

Case Study 1:

  • UK business determined Sao Paulo as an ideal base                                        [Day 1]
  • 15 possible partners found through remote library research                         [Day 15]
  • Prospectus sent and telephone call with CEO of each of 15                            [Day 18]
  • 3 were not interested, reducing list to 12                                                            [Day 30]
  • 6 of those eliminated by local representative visit                                            [Day 40]
  • Shortlist of 6 – half day visit by UK team (with local support) to each        [Days 55-57]
    • 4 in Sao Paulo metro area
    • 1 in Campinas
    • 1 in Sorocaba
  • First choice – one in Sao Paulo                                                                              [Day 60]
    • Fell through on business negotiation on terms within 3 days

Second choice (in Sorocaba) selected                                                                              [Day 63]

 

Remaining steps:

  • Legal agreements reviewed and refined by both parties                                   [Day 75]
  • Employee hiring process started                                                                             [Day 76]
  • UK Power of Attorney signed and sent for legalisation                                      [Day 76]
  • Company registered as 50/50 JV – Contrato Social signed                              [Day 85]
  • Candidates interviewed, and 3 selected                                                                 [Days 86-87]
  • 3 employees start work and training                                                                       [Day 90]
  • All other necessary business setup arrangements in place                                 [Day 95]

Official launch of Brazil company and announcement to world                                  [Day 100]

 

Case Study 2: Wholly-Owned

Provide communications and hospitality support to broadcasters and sponsors of major events – initially World Cup 2014 then Olympics 2016

  • Branded local presence essential for contracts with certain Brazilian suppliers and partners
  • Paramount need for total control over product quality
  • Urgency dictated by event timings

 

In case study 2:

  • Business requirements and deadlines dictated                                                                    [Day 1]
  • Decision made to pursue Turnkey Solution                                                                          [Day 2]
  • Detailed proposal and company definition drafted                                                            [Day 12]
  • Proposal and Definitions refined and agreed with UK management                             [Day 20]
  • UK contract for ownership handover signed                                                                       [Day 20]
  • Hiring process for Manager and Sales person commenced                                              [Day 21]
  • Contrato Social signed and legalised, interim Administrator appointed                       [Day 30]
  • Serviced offices contracted, initial staff interviewed and hired                                        [Day 44]
  • Banking, Accountants, Lawyers appointed                                                                           [Day 50]
  • Business launched and trading                                                                                                [Day 60]
  • UK Power of Attorney signed and sent for legalisation                                                      [Day 61]
  • Revised Contrato Social signed and legalised                                                                       [Day 70]

Company now fully owned by original UK parent                                                                          [Day 70]

 

Nice… Can I do the same for my company?

Contact us for a free consultation on: +44 (0)20 7278 9210.

 

by Oliver Dowson, CEO – ICC – International Corporate Creations

These case studies were presented at the UKTI Exporting is Great – Opportunities in Latin America Roadshow

Setting up a business in Brazil

 The ultimate guide – Part I

Why would I set up a business operation in Brazil?

There are many advantages to having your own company compared to relying on distributors and agents:

  • Local Branding and Identity
  • Control
  • Confidence that business and legal objectives are met
  • Add local content to unfinished products (or manage OEMs)
  • Ability to develop insourcing capabilities to support other operations
  • Act as a regional base to take advantage of MERCOSUR

 

Sounds good, I am convinced? But, what type of the company?

There are several legal types of companies, but on this article we are only considering:

  • Joint Venture
    • Local partner brings management skills for HR, legal and financial matters, and possibly premises or other things
    • You bring brand name, product/service, know-how
  • Wholly-Owned

 

Brazil a quite big. Where should I set up in Brazil?

Location is important!

  • Different state regulations and taxes
  • Physical distribution – infrastructure varies, and distances can be huge
  • Education, skills and experience of potential employees
  • Communications infrastructure
  • Access from the UK

 

(please read more on the “Part II” entrance for this topic.)

 

by Oliver Dowson, CEO – ICC – International Corporate Creations

These case studies were presented at the UKTI Exporting is Great – Opportunities in Latin America Roadshow

It’s business as normal in Brazil

… and a good time to grasp opportunities

Reading the press and watching TV news covering the current impeachment process of Dilma Roussef, you might think that Brazil is descending into chaos.  But for Brazilian companies, and for 99% of the population, it’s very much business as usual.   And for international companies, now is a great time to grasp the nettle and exploit this market.

I’ve just returned from meetings with several recent start-ups in Brazil, and can vouch for the continuing high level of enthusiastic confidence that they will achieve great economic success.   Nobody is fazed by the political situation – almost everyone in business is looking forward to Dilma going, even if so many other untrustworthy politicians will remain in office, as it’s a first and big step towards improving the country.

It’s true that the economy has nose-dived in the last year, but this is more down to the depressed mining sector, that has become increasingly reliant on the Chinese market, which has largely dried up.   The spark that came with the discovery of huge oil reserves under the sea off Rio has dampened more because of the fall in oil prices than the “car wash” corruption scandal at Petrobras.

Unfortunately, the corruption scandals have further discouraged foreign direct investment and business expansion in Brazil.  The reality is that corruption is largely off the map for most businesses.  I’ve set up, managed and grown several companies there since 2006, and have never in that time even seen suggestions of bribery or false accounting. That’s not to say it doesn’t exist – when it comes to government or very large corporate contracts, clearly it does.   I can see how some Brazilian accounting practices, such as allowing small businesses to work on “Lucro Presumido” (presumed profit) could support it.  However, I believe that international businesses starting up in Brazil can be confident that they won’t get involved in any way.

Confidence in Brazil has picked up a great deal in the last few months, as evidenced by the improvement both in the exchange rate and the stock exchange (see charts).  The exchange rate is still around half that of 3 years ago, and looks to have stabilised.

Whilst this – in addition to tariff barriers – can make the Brazilian market unattractive for most exporters, it’s very good value now for setting up in-country operations such as Shared Service Centres, in/out-sourcing, and local manufacturing for the MERCOSUR countries.

The overwhelmingly young workforce is increasingly well-educated, and it’s easy to hire professionals in most sectors who have very good English.  In my experience, productivity levels can be impressive.   There are some interesting barriers to overcome.   Brazilian employment laws are archaic and byzantine, all staff are “unionised” (but not in the sense understood in other countries), annual salary increases are mandated, the paperwork can be formidable.  However, all these can be addressed in a straightforward way, with some professional help, and the advantages of having 3 or 4 professionals for the price of one definitely outweigh the disadvantages.

It’s also one of the most pleasant countries to live, work and do business.   If the weather alone doesn’t lift one’s spirits, the enthusiasm and “can do” attitude of the Brazilian people will.

 

Brazil Stock Exchange Index

Brazil Stock Exchange Index

 

Brazilian Real Exchange Rate

Brazil Exchange Rate

 

 

by Oliver Dowson, CEO, ICC – International Corporate Creations

(Graphic Brazil Stock Exchange Index – courtesy Google)
(Graphic Real Exchange Rate – courtesy Yahoo)

 

10 questions to ask when locating your overseas SSC or insourcing operation

by Oliver Dowson, CEO, ICC – International Corporate Creations

Great, so you’ve decided that you can both save money and improve business efficiency by setting up a Shared Services Centre or “Insourcing” (wholly-owned Outsourcing) operation abroad.  Excellent.  Now where?   There are hundreds of possible destinations.  You’ll naturally be putting cost evaluation at the top of your checklist, but there are lots of other considerations.  Leaving aside the financial, legal and technical matters that everyone thinks about, there are some others that frequently get neglected or overlooked:

  1. Does the time zone work?

How much real-time communication is needed with your other offices?  Whilst it’s usually possible to hire staff who work nights or non-standard shifts, it’s much more difficult to retain them, and it’s especially difficult to get good management.  If it’s data processing work, then work on the other side of the planet where the time difference will help (they work while you sleep), if it’s high-contact, think North-South.

  1. Will the team have the right language skills?

While you may assume the staff you’ll hire will speak and write English, it’ll be their second language in almost all countries, and there are many kinds of English, not just British and American!  Think carefully about what communications you will need, written and spoken.

  1. How easy will it be to hire and retain staff in the future?

Even if it looks easy to hire the staff you need now, think ahead.  If you’ve picked a location which other multinationals are planning to set up in, it’s likely that the competition for skilled staff will drive wage inflation and increase employee turnover.

  1. Will applicants be right for the job?

There’s probably nothing that gets lost in translation more than a job description!  Straight translations hardly ever work, even for defined qualifications – advertising needs to be drafted in consultation with local HR specialists to ensure the right cultural angles are considered.

  1. What other skill sets are readily available?

You’ll know exactly what operations you want performed now, and the skill sets you need for those, but again, think ahead.  Most businesses setting up abroad only think about moving specific tasks.  However, once it’s successful, you should want your SSC to take on a wider scope and responsibility – and remember that the higher-skilled the job, the bigger the saving by doing it overseas instead of back home.

  1. How fast are wages likely to rise?

Salaries in developing countries almost always rise faster than back home – annual rates of 8-15% are common.  In some countries, wage rises are government mandated.  And, of course, any merit increases go on top!  You need to plan costs for 5 years ahead and plan to stay on top of achieving productivity improvements year after year.

  1. How easy is it to get to?

With good local management, you won’t need to rely on expats located there – but to be fully successful, you will need a lot of regular visits from the mother ship, both by those who can give training and support and by some of the top CXO team.  Enthusiasm for travel quickly wears thin if it’s a horrible journey – you and your colleagues will need to travel there year after year.  Also, when things go wrong, you may need to get people there in a hurry.  So don’t only look for locations with daily direct flights, but consider the door-to-door journey time and the jetlag effect.

  1. Is it a nice place to visit?

OK, you’ll only ever be going on business – but let’s face it, you and your colleagues are much more likely to visit frequently (and thereby help develop the operation) if you enjoy going there – so this really is a critical consideration.  Good weather, tourist attractions, food that you like and a happy culture all help.

  1. How will your staff commute to and from work?

Understanding this can be critical to staff retention and operational management.  If the only way home is by bus, and the last one leaves at 18:30, they won’t ever stay late.  If they have a 2-hour commute each way by train, any new job offer that comes along with a shorter commute could be very tempting!  These aren’t exaggerations, but true examples applying to many staff in two common outsourcing locations.

  1. How useful will it be as a base to develop new regional business?

You might only be interested in setting up a SSC today, but, depending on your Company’s business, it’s well worth thinking about how the operation could serve as a future sales and marketing hub for the country or region where you are setting up.  Setting up the initial operation can be costly, but adding functionality later is usually straightforward and cheap.