Incubator for Farang Start-Up Businesses in BKK

[Guest]

This is a “trial balloon”, seeking feedback from all board members with any serious thoughts about establishing a business in Bangkok.

I am in the process of registering my own Private Company Limited (PCL) in Bangkok, and trying to get it up and off the ground. I have been mildly frustrated by the difficulty of doing things “right” with respect to Thai requirements, and seriously frustrated by the practical issues of establishing a legal office location in Bangkok.

As a farang, the “path of least resistance” for initially establishing a routine PCL, to include getting a work permit for one farang, includes the following requirements (and to everyone who “knows better” and knows how to skirt these issues – I concede that many can be “virtualized”, but the thrust of this message is: Why not just do it right in the first place, and apply your primary mental energy toward the theme of your business, instead of diverting your attention toward “background noise”?):

1. Register the company

2. Capitalize the business at 2,000,000 baht

3. Establish an office in a building rated as office space.

4. Hire a minimum of four Thai employees

5. Have a licensed Thai accountant maintain your books, including monthly submissions to government.

So, anyway, I’ve been looking for office space, and have been working up a budget for required services and “artifacts”. This should not be so tough, but it has been a pain in the ass. So, in a defiant mood, I started thinking about what was missing, and designing in my mind a mythical entity to fill the void.

 

Well, I now have my mental picture nearly complete . I have described my vision (the “Bangkok Business Incubator” (BBI)) below. Now I am interested in a straw poll of interested board members:

1. How many people would be interested in investing 500,000 baht to own a share of the Bangkok Business Incubator company (30 shares available). Don’t all throw money at once!!!!!!!

2. For people not interested in investing, how many would consider themselves serious candidates to establish a business at the BBI, at the lease rates indicated.

Here is the concept of the Bangkok Business Incubator:

1. Located in a decent, upmarket building near a Sukhumvit BTS station. BBI would occupy one entire floor.

2. Complex would consist of 22 individual business spaces/units, in addition to the BBI management office space. Leaseable units would be broken down by size as follows:

4 meter x 4 meter = 10 units (16 square meters)

4 meter x 8 meter = 6 units (32 square meters)

8 meter x 8 meter = 4 units (64 square meters)

8 meter x 12 meter = 2 units (96 square meters)

 

3. Monthly lease rates would be 600 baht/square meter. So, rates as follows:

16 square meter unit = 9,600 baht per month

32 square meter unit = 19,200 baht per month

64 square meter unit = 38,400 baht per month

96 square meter unit = 57,600 baht per month

If all units were rented (800 square meters rented out), monthly rental income would be 480,000 baht. For renting an entire floor, I expect the lease rate for BBI to its landlord, for 1,000 square meters total, would be about 300-320,000 baht.

4. Each lease unit would have a window, a lockable door, and the following furnishings per each 16 square meter increment:

1 desk with chair

2 additional chairs

1 two meter tall bookshelf

1 three-drawer filing cabinet, with lock

1 two-line phone

1 small refrigerator

1 trash can

1 600 Mhz. computer with CPU, display screen, keyboard, and mouse. Office 2000 professional edition installed. Tie-in to DSL line

5. The central BBI management office within the complex would provide the following additional services:

Color and B&W printers, selectable off each office unit workstation

Digital scanner

FAX machine

Color and B&W photocopier

Digital camera(s) available for daily rental

Hand-phone(s) with pre-paid card available for daily rental

Conference rooms (two)

Two additional internet computer workstations, with DSL access.

Reference library (BKK and Thailand maps, phone books, industrial directories)

Small canteen selling hot and cold drinks, and snacks

Small store selling offices supplies, including blank CD’s and 3.5”diskettes

Immaculate toilet area

Shower area with lockers and towels offered at nominal rate.

Street-level warehouse with (limited) receiving, secure storage and forklift capability.

ATM machine (possibly?)

Umbrellas during rainy season

Relaxation room – with pool table, cable TV with UBC, magazine library, etc.

“Concierge service” with the following capabilities (on a fee basis):

Commercial printing services (including business cards)

Currency exchange

Film/photo processing

Key duplication

Discounted travel agency arrangements

Laundry/dry cleaning/shoe paick-up and repair

Auto with driver

Motorcycle courier / taxi

FEDEX/UPS/DHL courier pick-up and delivery

6. BBI management would be able to provide following part-time “employees” to satisfy legal requirement to hire Thais:

Receptionist

Admin assistant

Cleaning staffer

Security guard

Warehouse manager

Licensed accountant

Translator

7. Accountancy services, warehouse services, and translation services would be provided on a serious basis under arrangements individually tailored (and priced) to meet business requirements of tenant.

 

8. BBI would arrange special discount/VIP arrangements with restaurants, hotels, massage places, etc. (BBI will not be a brothel or pimp service).

9. BBI will have capable individuals available to support or perform following services:

Register a bank account

Obtain a Thai drivers license

Arrange visa extension, and/or express visa service

Register a hand-phone in Thailand

Obtain or renew work permit

Arrange company registration

Web site development

Domain name registration

Web site hosting at ISP

The whole concept of this enterprise will be to allow business owners to concentrate on the main thrust of their businesses, not the minutia of everyday “housekeeping”. As a whole, the BBI will be able to achieve economies of scale, to develop an institutional memory, and to systematize and reduce to simplest format those frequent transactions that are a big challenge when confronting them for the first time.

OK – there is the strawman. I’m interested in ideas of other board members concerning enhancements that I haven’t thought of, comments on pricing, comparisons with any existing known services that I have not considered, etc.

I figure that if enterprise could be funded, promoting availability of the service would be easy – via paid advertising on leading web-boards, education of citizen services staffs at leading farang embassies in BKK, notice to leading law firms in BKK, etc.

I have not yet run a full-up financial analysis using detailed spread-sheet modeling. I would not expect operation to break even until late in second year, although some individual “for fee” services might turn a profit much earlier. I might have to adjust pricing upwards, or reduce scope of “common services,” at least initially.

For the sake or argument, assume dividend payout per 500,000 baht share at 4% at end of first year, 6% at end of second year, and 8% at end of third year. To some extent, this plan may be affected by pending changes in Thai corporate tax laws. I also need to better capture the cost of depreciation expenses.

I would seek grants (or tax concessions, fee waivers, etc) from Thai government, under its program to attract more overseas business investment. I would also seek to establish BBI in a property whose landlord might be willing to offer reduced wholesale lease rate, in hopes that successful companies “graduating” from the incubator (as they outgrow their space) might become full-scale tenants elsewhere in the building.

One last point – for anyone who laughs at the idea of putting 500,000 baht into a program such as I have outlined. Think of it like this. If you are a small start-up business that has to bring in 2,000,000 baht in capital anyway, why not immediately park 500,000 of this into a share in BBI. Then go ahead and lease one of the 16 square meter units as a tenant. You pay 9,600 per month rent. That’s 115,200 baht per year. After a year, you get 20,000 baht back as a dividend (= more than two months rent). Compare that to the 2% interest you would get from a Thai savings account. Not such a bad idea after all.

[ January 25, 2002: Message edited by: peesooahbkk ]

[Pom Michael]

Good concept.

I know of at least one company that is doing this exact thing, with two locations in Bangkok. There must be others here too, maybe not all offering the full services that you mention.

Servcorp

I believe that they are an Australian company.

This was really good business over the last few years. Where do you think the "boiler rooms" had their offices?

Good Luck.

[Guest]

First impression is Interesting!

But I have to read it a little better and compare the advantages and costs.

[Bembaman]

Overall an interesting idea. However, this bit worries me:

If all units were rented (800 square meters rented out), monthly rental income would be 480,000 baht. For renting an entire floor, I expect the lease rate for BBI to its landlord, for 1,000 square meters total, would be about 300-320,000 baht.

If the information i have is correct, occupation rates for office space are no more than 75% currently. I did not read the whole proposal but if you did not factor that in then perhaps you should.

[Hardy641]

Hi,

I have friend, who is doing exactly the same thing. His major problem is that there are no or only very few foreign companies willing to invest here in Thailand under the current political situation. Further more the global economy looks rather gloomy and thus companies are pretty reluctant in doing investments.

He started in May 2001 and had a couple of Singaporan customers, who were renting two units in our office. However, due to the bad economic situation in Singapore they decided to stop the project. So far there aren't any new propects

[Guest]

 

1. Register the company

2. Capitalize the business at 2,000,000 baht

3. Establish an office in a building rated as office space.

4. Hire a minimum of four Thai employees

5. Have a licensed Thai accountant maintain your books, including monthly submissions to government.

QUOTE]

Just a small question, maybe knows the answer. I know following the above rules will allow your a work permit, possibly residence etc. However is it not possible to just set up and register a company in Thailand as a foreigner for much less money than that (I mean not with the dual purpose of using it to get permits etc.) When browsing the www.thairegistration.com site, prices quoted for various things are usually in the a few thousand baht range. I am thinking to establish a small webhosting business and register it as a company, anyone knows of actual costs involved(approximate)

[Guest]

Replies -

I was not aware of Servcorp, but I had visited the offices of Your Office - which operates out of One Pacific Place (which is the same complex where some of the boilier-rooms were based).

Your Office appeared to have occupancy at significantly better than 50%. Their basic prices are more than 100% higher than what I have proposed. They appear mainly geared to representatives of overseas firms establishing operations for 1-3 months, for project work. They would be competition - but they appear beatable.

Concerning start-up costs, if you are not trying to get a farang work permit, required capitalization is at much lower level. Effectively, whatever it takes to minimally survive. I'm paying about 55,000 for company registration and work permit - this can probably be done for about half that rate, if you are bargain-hunting.

[Guest]

My best price 36,000 baht including WP.

I presume the original poster means Co.,Ltd. not PCL as that would take at least a billion baht.

You may also be interested in "incubator" units at Software Park out at Chaeng Wattana, you have to be in software or related field but the prices are way lower than the scheme suggested here.

I too agree that 60-70% is the best occupancy you would manage and that with loads of advertising. Sorry to be a damp suib but look to Sing. if this is what you want to do.

[Bembaman]

Choop,

Some observations. Firstly, do not set up a 'farang company' unless you really need to. There are a lot of issues right now. It is an admin nightmare with a lot of bollocks that goes with it. My company was raided at Xmas and i am starting to hear many such stories. Many farangs leap to the conclusion that only a Co with work permit will suffice. WP's are getting quite difficult and there is a crackdown on small farang businesses going on right now. My friend was visited by the authorities today and told he had to get more money, either by sales or investment.

An option you have if you want to consider it is this:

Set up a Thai company-you can be an investor no problem, up to 49%. The articles can state that a 60% majority is needed to do anything 'serious' as protection. Your other protection is that as an internet business the website is the business and I presume you will develop this, control the databases, passwords etc. Effectively there is little risk of the Thais kicking you out. If they do, walk and set up nextdoor. Get the site registered in YOUR name and the company can lease/rent it from you. A lot of this may depend on whether you have a stable Thai GF or not.

The advantages:

Thais do not have to have officially designated 'office space'

You do not have to employ 4 Thais

 

The problem is that you will not get a work permit but you may not get one anyway for such a business.

Also, you cannot be seen to be active in the business-ideal internet scenario!

Pricing from www.visathai.com but around B30,000 if no work permits involved.

just an idea-hope this helps. I looked into this extensively recently and this is what i was advised. I would be interested tyo hear other peoples views on this as you hear so many different bits of advice floating around.

[Guest]

Just another question.

What is the legal status regarding doing some business on the internet and being located in Thailand while doing so? Is there any regulation that would make it illegal do to so?