07 July Investment

Things to Consider When Establishing a Company in Europe

Mehmet Akif Özmen | Sworn-in CPA | Founder, CEO

For more than five years, I have been working on establishing and investing companies in the European market for entrepreneurs in Turkey. We also established our own company in Germany. As the Board of MHR & Partners Chairman, I have coordinated the establishment of dozens of companies in Europe, especially in Germany, the Netherlands, Belgium, Montenegro, Romania, Bulgaria, the UK, and our business partners for the last three years. I have met with countless business people, financial advisors, and business partners in Europe. I have been on numerous business trips. I share my warm experiences from all these contacts and businesses in a summary form by bringing together my professional experience of more than 25 years. I want to contribute to our entrepreneurs who wish to open up to the European market and grow their businesses to make the right decisions and take risks.

Today, with the impact of globalization, many entrepreneurs and business people seek to establish companies abroad. However, this process does not only mean opening up to a new market but also requires considering many strategic and operational factors. It is essential to consider both your entrepreneurial skills and the organizational dynamics of your company when deciding to establish a company abroad. In this article, I will focus on the primary individual and organizational dynamics you should pay attention to when setting up a company in Europe and share tips to manage this process successfully.

Internal Dynamics Related to Your Entrepreneurial Skills

1. Your Experience in the Sector

The experiences you have gained while operating in your sector equip you for the problems you may encounter. If you are entering a new industry, make preliminary preparations, create a business plan, and support it with a strategic plan.

2. Identifying Risks in Advance with Project Logic

The project logic provides a more predictable management model by distributing the risks in the process to alternative areas. Preparing preventive services in advance offers essential, systematic, and sustainable support within the company against possible risks.

3. Confidence in the Target Plan and Unity of Implementation

Unity of practice, in other words, organizational alignment, enables you to be more resilient in challenging times and ensures business continuity for your company. Teams and managers can become demoralized without unity in practice and lose motivation.

4. Flexibility and Availability of Alternative Plans

Flexibility is the most critical success criterion of long-term plans. Quantum logic, or “Uncertainty of Uncertainty” or partial flexibility, should be at least 30% within the Pareto Optimal.

5. Avoiding Small Costs

Exact costs are often uncertain in business. It’s advisable to anticipate a risk premium of at least 40-50%. Flexibility is crucial in this regard. Incorrect planning or inadequate consideration of external factors can lead to higher cost increases. Properly assessing these risks helps prevent recurring issues.

6. Providing Full Support to Those Responsible

When you set off, surprise problems will arise, and success will take time. The first year will be incredibly challenging. You should show patience and perseverance for at least 3-4 years. Your trust and support of your authorized colleagues will contribute to transferring the information into the right channel.

7. Process Management and Spreading the Subject Over Time

You should implement process and result-oriented structures together. Focusing solely on the result can lead to disintegration if there’s a failure, while focusing exclusively on the process may delay success. Establish measurement metrics and conduct evaluations at 6-month, annual, and 3-year intervals.

8. Trust in Your Consultant and Mutual Agreement

Consultancy services are highly valued abroad, especially in Europe. A counselor who provides you with the right channel of experience and draws a road map tailored to your goals protects you from all risks and helps you to achieve success. It is also essential to have a unity of practice together.

9. Sometimes, your closest people can be your biggest obstacle

It may be suitable to get opinions from your friends in a commercial area, but this may only sometimes yield the right results in the decision-making process. I suggest you act professionally in this matter. I can recommend you look for some criteria in your consultant or partner that we will work with when making decisions:

– How many years of experience do they have in this field?

– How many reference companies do they have in Turkey or abroad?

– Do they have a corporate team and system?

– Can they support you when problems arise?

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Corporate Dynamics of Your Company

1. Warehousing and Employee Recruitment

Warehousing and staffing decisions impact your costs, marketing, and turnover performance. Being close to the industry and having a high customer density help you make these decisions. The most crucial factor in determining your speed is accurately analyzing costs and risks.

2. Turnover and Net Profitability

Although not one of the first objectives, turnover, and target profitability should be known and calculated. It is the primary metric showing how much of the target you have achieved. Your connections, customer density, and sectoral proximity affect this situation.

3. Address and Billing

You must have a specific address, and this must stay the same. You must also be close to the customer and the industry. Whether you will invoice from a single center or the actual country depends on the size of your business and your target strategy. In our experience, a staff member who will manage the entire process here at the end of the second year will significantly contribute to any growth. Investments in these matters will give you positive returns to maintain motivation in long-term processes.

4. International Manageability

Significant changes in the company’s vision and mission can sometimes be painful and take time to digest. You need to have your team ready, and you need to prepare your structure. Differences of opinion between partners or managers can cause serious trouble for the process. Strife will tire the company as if it has lost its compass in a storm.

5. Evaluating the Withdrawal of Net Profit Share to the Source Country

You must accurately calculate and manage the dividends you bring back and the earnings you invest. You must also effectively manage profitability, tax advantages, and invoicing within or in different countries.

6. Subject of the Resident Employee or Director

The number of employees you will employ in the country where you will establish a company is vital to seize some opportunities. You can increase credibility and trust in your company by communicating directly with customers. In addition, you will open your bank accounts quickly, process your official documents rapidly, and ensure transactions run smoothly and on time. Thus, you will save time.

7. Preparation of your Strategic Plan

Knowing which steps to take helps you protect yourself from risks and work in a more agile structure. Scenario analyses strengthen you, reduce mental fatigue and internal opposition, and make reacting instantly easier.

8. Systemic Presence and Readiness of Your Team

You must have a team that will communicate directly with the customer and keep you strong in the field. You should establish your technological infrastructure and organizational structure accordingly.

9. Your Capital Structure

Your capital amount indicates that you will take decisive, continuous, and willing steps. It shows the strength of your company. It is also a desirable situation for the regulatory authorities of the countries in which you will invest. A strong capital structure also facilitates access to cheaper and more abundant financial resources.

Medium and large companies investing in another country should allocate an investment budget of approximately 50.000 Euros for office, personnel, and establishment expenses at the beginning and an additional 50.000 Euros on average in 2 or 3 years. The time it takes to exceed the break-even point and achieve operational profitability may differ on a sector and country basis.

10. Your Decision-Making Mechanism

Having specific decision-making mechanisms will help you move forward quickly. Consensus among partners is critical to avoid divergences.

As MHR & Partners, we have strong partners and considerable European experience, especially in Germany, the Netherlands, Belgium, Romania, Montenegro and Bulgaria. We can advise you on company establishment, residence, and work permits, accounting and consultancy procedures, company acquisitions, adapting to country working conditions, building teams, and accelerating your sales structure.

What Can We Do For You?

As MHR & Partners, we are directly and indirectly active in more than 20 countries worldwide. We aim to operate with 10 branches in 100 countries in 10 years. We offer you end-to-end consultancy and support services in establishing a company, obtaining a residence permit, and in all operational processes abroad, primarily financial issues.

Our priority is to provide consultancy services to companies with a growth vision and business strategy abroad. We attach particular importance to the uninterrupted continuation of our services with the assurance of MHR & Partners (Mühür YMM AŞ) after the company establishment stages. Our core mission is to be a safe harbor and provide sustainable services.

We want to be a bridge to our customers’ business plans for growth and development, even in the most remote parts of the world.

To establish a business in Turkey or Europe (Germany, The Netherlands, Belgium, UK, Romania, Bulgaria, Montenegro), you can contact Sworn-in Certified Public Accountant Mehmet Akif Özmen directly (+90 542 830 3408 or akif.ozmen@mhrpartner.com).

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