Why Do Farang Businesses Need More Money Than Thai Business?

[STEVE G]

Steve,.... you would be bored silly in 3 months.

Don't worry HH, I've still got two kids to get through university before I get that irresponsible!

[MrPlum]

For every one Heinecke there are probably a thousand that fail as ste860 says.

Heinecke's success is due to the very highest connections. When you have that kind of alliance, unlimited bank loans become available and bureaucracy is eased. With money and patronage backing you up you can cherry-pick the best businesses and obtain the best locations.

There is obviously a lesson there. It isn't easy to make money. Business owners, when they do their business plans, should factor in the various handouts they might be expected to pay. If they haven't, that is poor planning.

Many businesses are doomed from the start. The farang sponsors are persuaded by delusional girlfriends or wives who don't seem to understand that when a street already has 8 massage shops, none of which are making money, a 9th isn't going to be any different. Location, location, location. I watched a new ice cream shop open on soi 55 3 days ago. It doesn't stand a chance. Wrong location.

Restaurateurs open up to cater to a market that doesn't really exist. I have yet to see a customer in the new French restaurant in the grand Market. Then there are seasonal factors. This low season is the quietest I have known it.

Look at many of the shops in Venezia. The rents are too high, the product is wrong, the customers aren't there. These people invest their life savings on a wish and a prayer and are given a hard lesson.

75% of America's millionaires became so through property. If you got in early here, you have probably done well. If you can find any buyers for your portfolio.

I have started two small kiosks and my idea was very simple. Look at who is making money and copy them. It needed to be unique (not in HH already), have a low cost of entry, with high margins. I waited for the right locations to become available and turned down any that weren't just right. I don't need to sell much to make a profit and all profits are (or were) kept in the family. Others are now copying me. Failing though, for reasons which I won't disclose.

Another problem is saturation. I went to find a space on Cha-am beach, which is just jumping with potential customers who are all desperate to buy my product. The reality was that all good locations have been taken and you can't get on the beach itself for hawkers.

The Kebab shop in MV is a success. But it failed at 2 or 3 previous locations. Copycats are also failing for the same reason. The Thais don't know what a Kebab is and you absolutely need the footfall for it to work. Look at Dairy Queen in MV. Located right next to a major junction with lots of footfall. Ice cream costs nothing to make. They sell for as low as 12 baht and take 20,000 thb per day.

Want to make money? Find a country that has been economically ravaged by the likes of GoldInMySacks and War, Inc., then go in like the vulture capitalists do and buy land, property or businesses.

[Terry]

As an owner (Yes 48% me – 51% Mrs.T and 1% A.N.Other for legality) I can attest after nearly 10 years as to just how difficult it is to make a living.

As for Buksi’s list, he’s virtually spot on:

Work permit costs
Usually higher rent (Thais often own their premises) – we own HHFL outright but it has been a large investment.
Income tax is higher
National insurance costs
Employing four staff – we employ 7
Company costs (accounting etc)
Company taxes
Licenses and permits (Thais seldom bother with, farangs have no choice) – we have 8 in total
General overpricing of goods when purchased by farang – fortunately Mrs.T buys most things
Additional costs (pool table police, music police, tourist police, labour dept, immigration, inspectors, anyone else that strolls in and wants a bung to leave you alone) – several of these

The irony for us is that it is certainly more expensive to be legal than illegal.

So – when I review our costs every six months or so, it sometimes amazes me just how expensive it is to run a business. All of the above costs are there, whether high or low season and these costs have to be borne for most if not all of the year.

When I planned HHFL, I did a lot of ‘market research’ for our product and whether it would fit in to Hua Hin’s lifestyle. I did not want it to be like the average locally run fishing park with fishing cheek by cheek, lots of noise and what I would call ‘rustic untidiness’. I also wanted to cater for families, having two young sons at the time, there were few family oriented businesses in Hua Hin and I felt that this needed correcting.

Despite the arrival of several more expensive rivals in the area (I won’t call them competitors as we are not in the same market), we still survive. This is simply because it is a question of marketing – the ‘sport’, ‘hobby’, ‘pastime’ of angling is extremely popular worldwide, so it’s not a lack of customers that worries me – it’s a lack of their awareness that we are here. So if your product is right and your price is right, customers should arrive and hopefully return. I’m happy to say that we do get a lot of repeat customers, which means one or both of the fact that we are either doing it right or we are too cheap

Having said that, this current low season has been very quiet and we have had to dig deep.

So – when a customer requests a discount, my answer is sorry – no can do – we already operate on low margins and the place costs us around THB 5-6,000 a day to run it which includes all of Buksi’s annotated costs above plus

Maintenance costs (Locals generally don’t do maintenance)
Utility bills
Fish re stocking costs
Gardening and general upkeep costs.
Vehicle maintenance and running costs
Marketing costs

So folks – the next time any of you venture up to the Lodge, just remember the fairies didn’t build it or maintain it and yes it does cost……………………….But I hope you enjoy it