36. Expert tips on starting a business in Germany as an Expat
Expats: what you need to consider when starting a business in Germany
Even though I spoke German fluently and had been living in Germany for a while, establishing my business here was no straightforward task.
On the one hand it is the technicalities of actually registering the business, but also the business side of actually creating a business that is sustainable and profitable.
So, I wrote this two part article. Part 1 is about the Business side of creating and sustaining a business and I invited Nic Plischke from JustOrganised to contribute with Part 2 on the technical side of legally starting a business.
PART 1: THE BUSINESS SIDE
by Blanca Meléndez
Outsource the tasks that might take too much time away from your core competence. For me this has been key in developing my business. There are certain tasks that because you are in a different country require more time to do them yourself, especially in a different language. For me the perfect example is accounting, it would take too much time to stay on top of the German requirements and regulations, time which I could use to invest in marketing and working with more clients.
If you are planning to stay for a longer period of time, learn the language. Speaking German will open so many more doors. My clientele consists not only of expats who don’t speak German and feel comfortable working with me, but also I do work with many German clients who have an affinity to the international community. They often connect with me through my business offer in English, but we deepen the connection by conducting business in German language. They also appreciate the fact that you “integrate” in the country you live in and show respect by learning the language.
Understand the local culture, what is acceptable and what not and how cultural differences will affect the way you do business. When I first started my business, I wanted to focus exclusively on Family photography, with time I had to refocus my business to BRAND PHOTOGRAPHY, as I realized some differences. For example, homes here are much smaller and narrower with a lot less wall space. Therefore, people are unlikely to invest in large wall art. Another thing I found out was that Germans don’t particularly don’t like “exhibiting” family portraits in their living room, where guests might see them, they reserve family portraits for the more private areas of their home. I also realized that Germans family photography doesn’t have the same priority as in other countries. As I understood these cultural differences, I knew I had to adjust my offer accordingly. Speak to locals and do market research on how your product or service is used in Germany.
Network locally. This was a life saver for me when I first got here. I joined a local International’s women group which opened a series of contacts that have led over the years to generate valuable connections and long time clients. There are associations and different online and offline networking groups that can help with understanding the local market.
Use online marketing actively to create a broader reach quicker. Getting known in a place where you start from zero is hard, make sure to expand your reach from the beginning by using online marketing to reach your potential clients.
Invest in creating your brand from the start. This was one of my wins. I am not talking only about a logo, a website and brand colors, I am talking about your core brand offer, what makes you different in the market you are planning to approach, what are your weaknesses, understanding your niche market and crafting your brand message amongst others. This will help you craft an offer that really speaks to your ideal customer.
Over the years I have pivoted my business to the point in which I became a Brand photographer and Marketing Mentor for small entrepreneurs.
If you need some help clarifying those questions, this resource can help bring clarity to your business:
7. Research all the legal requirements to establish your business, make sure to request professional advice right from the get-go. The intricacies of starting a business are already enough, but having to start it in a country where maybe you don’t even understand the language is twice as hard. I would consider this to be one of the things I did right from the beginning. I have had since the beginning legal help to set-up my business correctly. And as I have gone through different transitions on what I do, going from a Photography business to Marketing Mentor and Online Course creator, I have always asked for professional advice to avoid any undesired and EXPENSIVE penalties.
For this reason, I have invited Nic Plischke from - JustOrganised to write the second part of this article with some practical advice on the steps necessary to set-up your business in Germany.
As a German citizen Nic understands the needs of the local authorities and having been an expat herself, while living in both the U.S. and the U.K., she wholeheartedly understands the challenges of starting a business in a foreign place.
PART 2: SETTING UP YOUR BUSINESS
by Nic Plischke
Starting a business is more than just following a passion, but passion is essential when starting up a new venture especially as an expat. Your passion is what keeps you motivated and focussed throughout the setting up, which is not always a straightforward process, and beyond. There are few questions you should ask yourself before you get started. Opening a small business in Germany is relatively easy and does not have to be expensive.
First things first. Let’s talk about the difference between being a freelancer and being self-employed in Germany.
Every freelancer is self-employed but not every self-employed person is a freelancer. As a freelancer you are practising a ‘free’ profession which is based on a very specialised professional qualification and/or artistic creation.
Here, in Germany this includes a select group of people like scientists (including architects, solicitors, medical doctors etc), artists, teaching professions or authors and quite a few more.
The German tax authority or your trusted tax accountant is your point of contact to find out whether your profession is classed as freelance. Or check here with the Federal Association for Freelancers (BFB) for more information: https://www.freie-berufe.de .
Freelancers and self-employed people can become external employees (freier Mitarbeiter) with another company here, which brings another set of legal and financial consequences with it... but this is for another time, let’s set up your business first.
As a freelancer you do not have to register a business. Once you determine that you are not a freelancer but still want to open a business your next step is registering your business at the Commercial/Trade office (Gewerbeamt) at your local town hall (Rathaus).
This registration will automatically register you with your local tax authority (Finanzamt) and trade or commerce chambers (Industrie- und Handelskammer, IHK or Handwerkskammer), where you will have to become a member.
Like Blanca mentioned, I would as well, always recommend you seek professional advice for the legal, financial & insurance and taxation & accounting set up of your business.
Here are some questions you should ask before you get started:
What type of legal entity is best for you and your business? Do you want to be a small business owner, a limited company (e.g. GmbH - Gesellschaft mit beschränkter Haftung) or indeed a publicly traded company (AG – Aktiengesellschaft), which are a few types of entities to consider in Germany?
What type of investment is required for the chosen business entity? Each of these entities attract a different amount of investment ranging from zero to tens of thousands of euros. Legal and financial advice is needed here to make the right choice.
If you want to set up with a business partner, do you have the contractual side covered? You are considering employing people? Check with your legal advisor to get these agreements in place correctly and in line with German legislation.
What costs and finances are involved with your initial set up? Take into account expenses for premises, supplies, marketing, insurances… Thinking about insurances…. it is complex and should cover amongst others health insurance, liability insurance and coverage, if you consider taking on employees. An insurance broker and/or a financial advisor are your go-to person.
What are the tax implications on your business but also on your personal finances? Depending on the type and size of your business you might be required to submit pre-tax registration (Vorsteueranmeldung) with the German tax authorities. Some types of business entities, especially a small business (Kleinunternehmen) may also have a direct impact on your personal finances and assets, so make sure you understand how. Your trusted tax accountant will be able to help.
For all of the above questions there are always experts available, but it may take time to find one that you enjoy working with. Trust is everything. But having someone that can validate the advice you have been given and can help you ask the right questions is one key advice when establishing your business and brand in a foreign country, especially if you are not yet familiar with the language. As for Germany, be prepared for the paperwork – make sure you always understand what you are signing.
Nic is one of those people who’s mind never stops spinning. And sorting through information, finding a new, more-efficient, or cost-saving way to accomplish a task makes her heart beat a little faster.
As a German citizen Nic has lived in both the U.S. and the U.K., which means she wholeheartedly understands the challenges of daily life, raising kids, and starting a new job position, or indeed establishing a business in a foreign place.
Nic’s website www.justorganised.com