Expanding To The UAE And Launching A Business In Dubai
If you’re a new business or an existing one looking to expand to a new country then UAE might just be the right choice for you!
The country is preferred by a lot of companies due to its strategic location that connects the west to the east.
Upon much research and through lengthy lists of pros and cons, you’re likely to narrow down to the UAE and subsequently pick Dubai.
Let’s dive into the 5 major W’s of expanding to or establishing a business in Dubai:
1. Why choose Dubai?
2. What costs to expect
3. Who to approach as clientele
4. When to expect returns
5. Where to expect challenges
The 1st W-
Why choose Dubai?
There are several reasons for choosing Dubai. But here are a few that’ll swing your vote in its favor:
It’s a wonderful life | Politically and Economically –
The government of Dubai is keen on nurturing the business ecosphere and is providing enough political stability for companies to thrive. The centre has a long-term vision for business growth in the Emirate, which attracts more investors in the country. Additionally, it provides excellent infrastructure, education resources and health care – making it easy on both ends when you’re looking at starting your own company!
Also a quick business insight for those who deal with U.S clients. The country offers a fixed forex rate between US and UAE as the currency here is pegged to the US dollar.
Great infrastructure | The Dark Knight of Dubai –
UAE has an excellent infrastructure with the public transport system being the pulse of Dubai. It’s home to the world-famous Dubai Metro, which connects nearly every part of the region and makes traveling around easy! Taxis are also available whenever you need them but we recommend using buses or water taxis if possible because they’re fairly reasonable and offer reliable service.
Additionally, the Leadership in the region is taking all the steps required to protect your interests whether you’re an emerging organization or an established one. And so, Safety- both personal and business are assured.
Trade free zones | Braveheart for Expats –
Free trade zones are a great place for expats who want to invest. Here expats who don’t have the Emirati Partner status can easily establish their business. These areas provide investors with complete freedom, including running their own businesses in Dubai!
No income tax | No need to catch me, even if you can –
Dubai is a tax-free economy. This means that individuals do not have to pay any taxes on their income. This makes it one of the most popular destinations among investors. However, the government is planning to introduce a corporate tax of 9% on selected products and services. But more on that later.
Now is the best time to expand into the UAE as the country is coming up with interesting initiatives to bring new businesses to the area. The United Global Emirates is one such initiative that aims to attract more talent and companies to the UAE.
“Other than the opportunity I saw here, Dubai was also closest to home for me, it was a central point for our clients from Saudi, Lebanon, and the rest of the middle east. So, it served to be geographically convenient, both personally and professionally.”
Listen to the entire conversation in our latest episode of Pulse of Dubai.
The 2nd W-
What costs should you expect while setting up your business in Dubai?
To simplify this, let’s divide the cost factor into two parts. Business costs and personal costs.
Let’s start with Business costs –
Your business costs are further segmented into one-time costs and recurring costs. The one-time cost includes expenses for business registration, your license, visas, banking, insurance. These costs vary depending on whether you set up in the Mainland or a Free zone.
Recurring costs include expenses to scale such as hiring and training candidates for your business and various other overheads that are a constant part of your business.
Moving on to personal costs –
Your personal cost should primarily comprise your cost of living. One needs to account for different factors such as convenience and cash flow to budget for this. Rent is a major factor as it dictates your investment in multiple resources.
Your Rent also determines the money you’ll be spending on your commute. Things like how far you stay from your clients, from the people you interact with play a major role in your cost planning.
Another set of important costs to consider is that most of us miss out on our “Hidden costs.”
An example of this hidden or unseen cost would be “Opportunity costs” and “Time”
“ Opportunity costs aren’t really quantifiable, and so they can be easily overlooked. Simply put, it is the cost you either sacrifice or earns when you choose one option over another. For me it was starting up in a new city, versus one where I was established, testing the waters here, finding the right network and leaving the comfort of familiarity behind.”
We’d like to highlight that we have covered all these topics in detail on our business podcast called The Pulse of Dubai. Tune in for a deeper insight!
The 3rd W-
Who should you approach for clientele in Dubai?
Here are a few practices that have shown effective results:
Networking platforms and events –
Dubai has several networking events going on throughout the year. Attending any of these events can help you get closer to your first client. There are a number of networking platforms that notify you about these events.
Speaking from personal experience, communities like Dubai Business Women Council and networking events like BNI provide a great platform to start off. These have helped us narrow down our options and given us clarity on which sectors to focus on.
A good app recommendation for budding entrepreneurs would be Meetup. You can find a lot of great recommendations and it is where we first found out about this brilliant networking event called NUTS (Networking under the stars). It’s a great event where you can meet some brilliant individuals who can eventually become not just one time but recurring businesses.
Mentorship Programs –
UAE also has some incredible mentorship programs where you can enrol yourself either as a mentee or a mentor. A mentor points you in the right direction. As a mentee at Dubai Chambers, you can get to learn first-hand from more established players in the market about what to do while setting up a business and how to get things done. Plus, you also get to learn about new market opportunities.
Mastermind communities –
There are a couple of Mastermind groups and communities where founders and business owners come together, work together and help each other in solving problems. This platform really helps you understand other business owners’ journeys, and should definitely be in your top 5 sources for knowledge and exposure. These business owners can become a part of your network and that facilitates their network to become a part of yours.
Word of mouth –
Focus on delivering your best from your very first client and ensure that it’s followed by consistency. Because nothing works and sells better than Word of Mouth. If you do your part right, you can leverage your existing clients to generate more clients for you. Referrals are the fastest and most reliable way to grow when you’re starting off, especially in the service industry.
“Referral modules are a great way to get new clients. You basically provide a referral fee or a percentage of the contract value to anyone who refers a client to you. Consider this as a cost you would incur on Business development but with a higher chance of conversion because it’s been referred or vouched for.
This is something that can really help smaller businesses with expanding especially in a short span of time and cost-effectively because this way you’re increasing your inbounds and effectively decreasing your need to generate outbounds so overall you’re reducing your cost for sales.”
The 4th W-
When can you expect returns?
Every business is unique. So there’s no specific timeframe that is applicable to everyone given how different everyone’s circumstances, resources, and clientele are. But to give you a general overview, despite investment costs in UAE being higher, you can witness returns at a higher pace too. A major reason for this is strict adherence to contractual obligations, payment schedules, communication, and respect for timelines.
It depends on your Industry –
If you’re in the service industry, a well-planned strategy will start paying dividends within the first two to three months itself and is likely to gain revenue as a result in 6- 12 months.
ROI in the service industry is continuous. As long as you keep investing in talent, scaling, expanding your offerings, you can keep seeing returns.
It depends on your Investment –
If you’re self-funded or bootstrapped, you reach your break-even and see returns quicker but your growth and scaling cycles are much longer.
Whereas If you’re a start-up your projected returns are higher but at a higher risk and over a much longer duration.
Although to combat that, Åsa Ferreira says:
“There’s a bunch of government initiatives through funds, incubators, and accelerators, that support start-up for this reason.”
The 5th W-
5. Where can you expect challenges while expanding to the UAE?
Every country has their fair share of challenges to deal with, right?
Previous Challenges –
One major challenge that was previously faced by many business owners was the different working days in the UAE. The country followed the Sunday to Thursday workweek, which was different from the general Monday to Friday workweek.
It was tough for global teams or businesses whose clients were set up in foreign countries to adapt to this schedule.
Thankfully, at the start of 2022, the government decided to discontinue this work routine and adopt a universal Monday to Friday workweek.
Current Challenges –
Tackling employment laws and payroll administration :
Payroll administration and ensuring compliance with employment laws is easier said than done here.
When you look at talent acquisition in UAE, you need to consider multiple things apart from just hiring. There’s a 30-day annual leave policy apart from the general sick leaves and public holidays. That along with yearly bonuses essentially means you need to account for paying for 13 months of salaries for 10 months of services.
This is excluding visa and insurance costs.
These benefits are brilliant from the perspective of employees but it takes some getting used to for employers and definitely requires better planning on an employer’s part in terms of cash flows to ensure business doesn’t take a hit.
Compliances & Regulations –
When we talk about UAE specifically, despite the seamless systems in place, the dynamic regulations, laws, and compliances can be challenging.
The Economy is extremely dynamic and there are ever-changing regulations and compliances like ESR and UBC that are introduced from time to time and need to be adhered to, and so the scrutiny for new companies registering here can be quite a handful.
Future Challenges –
Introduction of corporate tax :
The recent 9% corporate tax announced by the UAE Ministry of Finance could dampen the ROI projections of some businesses. Scheduled to be implemented from June 2023, the 9% tax, as of now, doesn’t sit well when compared against other countries where factors like overheads, cost of living, investment, and set-up costs are much lower.
Nonetheless and given the government’s supportive outlook towards businesses and startups, the returns from this tax would be put into the betterment of businesses in the country.
The conclusion? Every country has its pros and cons. But when you compare the pros of expanding your business into the UAE, it certainly outweighs the cons by a significant margin. All in all, Dubai is an exciting place that is brimming with new ideas and opportunities. It is certainly a place to be, given its striding growth in the “ease of doing business” list.
Miscellaneous choices you need to make while expanding your business to UAE
While starting a business in a new country there are a few decisions you need to make and choices you need to consider that aren’t directly related to your company’s growth but play a vital role in the long run.
Let’s take a look at 3 important ones:
1. Should you hire agents or manage on your own?
Working with agents is not a bad idea, especially when time is of the essence for you. Hiring agents allows you to focus on more productive work that requires your specific skills and undivided attention.
All the agents in the UAE are mandated by law to have licenses in place to be able to help you. So all of the information you require is available at your fingertips. You can always ask the agents to give you their license number and check whether they are authorized to work or not so there’s less risk of fraud.
You have the option to work with helpful and professional agencies that provide you with the guidance and all the necessary help in order to understand to get through with the processes. They only charge a basic service fee over the direct government fees involved, so it ends up being worth it.
The only downside of relying on agents is that it can cut into the entire experience of handling things yourself and understanding every process of setting up a business in a new country.
2. Should you opt for short-term or long-term rentals?
Initially, your best case would be to start off with short-term rentals and then eventually go for the long term.
When you’re just starting off, you need to get familiar with the city. Short-term rentals will give you the opportunity to explore different parts of Dubai, and different communities in Dubai to see where most of your business and networking is frequently happening.
The decision to go with short-term rentals is also influenced by your overall budget and whether you’re going to be using public transport or driving here since the cost of your stay and commute is dictated by the distance from the heart of the city and how accessible it is to the Metros and to other commercial hubs.
Choosing short-term rentals initially enables you to travel back and forth between different business geographies or homes as well and doesn’t pin you down until you’re ready.
Once you set your base and build your network, it makes sense to opt for a long-term rental which usually requires significant investment. By this point, you’ll also have more cash flow and you can focus on the convenience that comes with long-term rentals.
3. Should you Network by yourself or hire a Sales team?
The answer to this question is- Definitely start off by networking yourself. When you put in the hours yourself, you get to go out to position your company and Tell your story vs someone else translating your vision and brand promise for you.
However, once you’ve established a solid foundation and personal relationships, your network will have more trust in you, your brand, your offerings and they are more positive to refer you.
It then makes sense to hire a sales team. This leaves you to focus on aspects like growing your business, expanding, adding new verticals, etc.
Have any more questions? Write to us on email@example.com and we’d be happy to help! If you’re looking to launch your business in Dubai, we’ve discussed this topic in length on our latest podcast on The Pulse of Dubai. Now available on Spotify, Google Podcast, Apple Podcast, and Stitcher. Tune in!