How to Start a Business in Latin America
Are you thinking about starting a new business in Latin America? Whether you’re based in the region or you’re an entrepreneur from the United States or further afield, expanding into the territory is a great way to grow your business and make more money. Thanks to the region’s growing economies — Paraguay and Bolivia are expected to grow their GDP by more than 4% in the next year alone — and swelling middle class, the territory has never been a better place for new businesses. Funds and accelerators are making entrepreneurship more accessible to locals, which means we’re seeing an influx of new business ventures and exciting startup companies coming from Latin America to dominate markets around the world.
Do your research
- Select the Market: Choose the right market for your business in Latin America. Economies in some countries are more established and lucrative than others, so make sure you do your research and understand the wants and needs of the population, and decide whether your product or service will fulfil this. Some countries like Colombia, for example, has a need for green energy creation, whereas Peru is centered around textiles, natural resources, and manufacturing. Find the right Latin American country for your niche before you get started.
- Confirm the Business Opportunity: Conduct market research and be sure you’re entering the right industry. You should seek out your competitors and see how well they’re performing, and speak with your target audience to see if there is room for your product in the market. Hire a Spanish translator who can help you communicate with your potential audience if you’re not native to the country, and remember that differences in cultures and tastes may affect sales.
- Develop the Business Plan: Write a business plan for your new Latin American venture, including a balance sheet, income statement, cash flow statement and budget. If you’re not experienced in planning, speak with a Latin American business advisor or find a business partner who can assist in planning and development.
- Select a Business Name: Decide on a name for your business. Getting this part right is critical, so make sure you take your time and decide on a name that is self-explanatory and allows for expansion and product and service spin-offs. Be creative, test your name with your customer base, and consider enlisting the help of a branding specialist if you’re struggling to come up with a unique idea. Remember that your name will need to make sense to Latin Americans — choose something Spanish, and check that it does not have any negative or embarrassing connotations.
Get the foundations in place
- Find a Good Lawyer and Accountant: Find a lawyer and an accountant that can assist in the formation and management of your business. Outsource small business tasks so that your new business will be fully compliant with local regulations, and give yourself more time to work on more important business responsibilities like sales. The laws can vary greatly from country to country, particularly in terms of employment laws where citizens may be entitled to particular holidays, so ensure you get to grips with local laws first.
- Choose the Right Business Structure: Decide on the right company structure for your business. You may decide to go self-employed and run a business on your own as a freelancer, or you might decide to invest in a business and employ a team of staff to help you generate sales and deliver your products and services. Different Latin American countries offer their own business structures; in Peru, for example, you can launch a Joint Stock company, Closely Held Corporation, Publicly Held Corporation, Limited Liability company or a Branch. In Mexico, on the other hand, Sociedad Anónima de Capital Variable is the most common company structure.
- Understand the Legal Requirements in Latin America: It is important to be aware that their are a number of specific legal requirements for establishing legal entities within Latin America. The first is that every legal entity must have an appointed Legal Representative, which is the legal face of the company. This person must either be a local national or a foreigner with the legal right to live and work within the country. Secondly every legal entity must have a fiscal address, which is a local office address for tax registration purposes. And thirdly the company must file taxes on both a monthly and annual basis. Although some countries have some further specific requirements, the above requirements are standard for all countries within the region.
- Incorporate the Company: Incorporate the company as soon as you have an idea in place and a business plan ready. You can start a new company on your own by contacting the local legal team or business department, or you can work with a back-end services provider who’ll incorporate a business on your behalf.
- Open the Bank Account: Open a bank account as a small business where customers can pay for their products and you can pay your suppliers and staff. Many countries in Latin America require entrepreneurs to set up corporate accounts, where they’ll be required to name a guarantor and have a minimum starting balance, so make sure that you read into the varying rules and regulations before getting started. By separating your business finances from your personal account, accounting will be easier, and you’ll be able to ensure invoicing is a straight-forward and professional process.
Launch your business
- Invest In or Fund the Company: Use your own savings to fund the company or find a startup accelerator or incubator scheme (such as WAYRA, Socialab, Rutan, NXTP Labs, and Startup Chile) to invest in your business and generate capital that you can use for your growth. Bootstrapping a successful business is possible, but it makes sense to start with some money to help you grow faster.
- Find the Work Location: Find the most suitable location for your business. You could rent an office in the city center where your employees are based, or you could work from home and choose freelancers and telecommuters, which will cut costs and help you to start a business without paying for rent and insurance. Although E-commerce has exploded in popularity in Latin America, research shows that consumers still prefer visiting physical stores to purchase items.
- Recruit and Retain a Good Team: Recruit staff for your business using Latin American job sites like The Network, Indeed and JobIsland. Alternatively, choose a recruitment agency that will find the best talent for your business and translate your job specification into Spanish and other local languages. If you’re not planning on living in Latin America once your company is active, then start by hiring a multilingual manager that you can trust, or consider relocating an employee from another country beforehand.
Grow your business
- Search for New Clients: Search for new clients online using LinkedIn and social media, and conduct cold calling to promote your products and services. Offline, you may choose to print leaflets and pay for traditional advertising in newspapers, on billboards and on television, if your budget permits. Remember that your marketing must be localized to suit Latin American consumers — hire a professional to ensure you’re promoting the right messages.
- Build Relationships and Partnerships: Attend Latin American networking events to build relationships and partnerships with local businesspeople and follow up conversations via email and on LinkedIn. Speak with local businesses to establish new partnerships, join networking groups and chambers, and consider allowing retailers to stock your products to increase sales.
- Good Luck: Starting a new business in Latin America is hard work, especially if you’re not originally from the territory, but the results will pay off. Be sure to follow these techniques, work hard and you’ll find success in one of the world’s most diverse and exciting regions.