Becoming an entrepreneur in Colombia, and Latin America in general, is growing in popularity and attractiveness. With a GDP of $331 billion, Colombia’s economy is the fourth largest in Latin America. This large economy, plus handfuls of free trade agreements, trade blocs, and government-funded “startup supporters,” make Colombia a very attractive market for entrepreneurs. Not only do the economy and government supply many resources to help startups, but the country also already has a high entrepreneurial success rate. Those thinking about pursuing entrepreneurship in Colombia have little to be unconvinced by.
Becoming an entrepreneur in Colombia is an exciting and rewarding process, and startups can be very lucrative. However, everyone’s playbook and strategy for the process oftentimes look very different. To help guide the entrepreneurs of tomorrow, The StartupVC gives ten business tips for entrepreneurs in Colombia.
1. How to start doing business in Colombia – Entrepreneurs research markets
Before starting the journey as an entrepreneur, one must first pinpoint exactly in which market they wish to form a startup. This process is one of the most important because oftentimes, there are right decisions, and wrong ones. Wrong decisions, for example, include electing a market for a startup which is already heavily saturated. In heavily saturated markets, all the players are fighting for a fraction of the market share. This fight is even harder for those companies that are just entering the market. With an unknown reputation and virtually no brand recognition, startups in saturated markets have a difficult time finding profits, and thus, finding success.
To avoid making a wrong decision, it is best to allot sufficient time to researching Colombia itself, its economy, the different markets, and those markets most feasible for entrepreneurs. Colombia is a great place for entrepreneurs to make their start because its economy is growing, changing, and it offers many different market opportunities. Industries like agriculture, mining, and technology are just a few of the lucrative B2B service industries in which entrepreneurs find great success.
2. Understand entrepreneurs’ visa requirements
Understanding visa requirements is an essential step, not only for your startup, but for yourself as well. Today, Colombia offers a range of different types of visas. Depending on an individual’s country of origin, marital status, traveling habits, residential status, and work status, the most appropriate visa will change. To best navigate this process and its nuances, its recommended to work with a local lawyer. They can help choose the best visa option for you and ensure that you are complying with all local, regional, and national laws and regulations.
Even after you have a visa, you are responsible for ensuring that your employees have visas, should they be foreigners as well. They must obtain a cedula as an employee and should have it with them at all times. The cedula is Colombia’s identification card for individuals. Cedulas for foreigners are different than those for natives, and the process of obtaining one varies as well.
3. Factor in bureaucracy when doing business in Colombia
Colombia’s systems are rather bureaucratic compared to those of North America and Europe. While this may slow down business plans for some, you need to expect it for all processes. Build in this “lag time” into your plans so that you have the most accurate estimation of when and where next steps can take place. Your local lawyer should be able to help you in forming these estimations.
4. Speak the language as an entrepreneur in Colombia
Colombia’s official language is Spanish. As an entrepreneur, you should definitely speak the native language if you can. If you can’t, make a genuine effort to learn and employ it in your day-to-day. In any context, speaking a country’s native language is a sign of respect, especially if you are residing and doing business there full-time. In Colombia, it is especially important because not as many people know other languages. While Bogotá has a high bilingual population, it is still a sign of respect to speak Spanish to locals and business partners, unless they elect to use English.
Not only will you gain the respect of the people around you, but your business will also benefit at the bottom-line. You’ll be better equipped to interview potential employees and find the best talent for your staff. Moreover, dealing with local officials, businesspeople, and authorities will be significantly easier, saving you time, money, and hassle.
5. Cash is king
Cash transactions serve as the most common forms of payment in Colombia. This is predominantly because having a line of credit for locals in the country is fairly difficult. Big banks, high interest rates, surmounting fees, and long, arduous approval processes make applying for credit quite unattractive. Since locals and their business don’t have lines of credit, cash transactions are used, and preferred, practically everywhere.
While the credit system is unappealing now, tech startups and entrepreneurs in FinTech are changing this. Colombia is one of the biggest growing markets for FinTech in Latin America. In the near future, “cash is king” could easily be replaced with “credit is king.”
6. Foreign is important
One very interesting aspect of Colombia’s culture is the affinity for foreign goods, services, and people. Typically, products with American labels have the highest regard throughout the country, followed by European brands. This appreciation for American and European brands and lifestyles is not just apparent in the value placed on products. It is also seen in the effect on Colombia’s pop culture and views. Music, fashion, and even popular lingo make their appearance in the average Colombian’s day-to-day quite often.
This appreciation for the US and Europe lends an advantage to these foreign entrepreneurs in Colombia. The trust and value placed on companies from the two regions is present even when dealing with startups in Colombia. While this trust and high valuation should not be exploited, the benefits they lend can be employed and help the entrepreneur appropriately.
7. Consumer market size – take advantage of it
Whatever market you may choose for your startup, take advantage of the high spending that goes on in Colombia. Consumer and business spending have increased substantially just over the past three years. As spending has increased, so have Colombian businesses, education systems, and its national population. This lends higher levels of revenue, larger talent pools, and larger markets to startups and businesses in the country.
8. Hire a lawyer
As mentioned in relation to acquiring a visa, hiring a local lawyer is highly recommended for entrepreneurs in Colombia. Even after visa requirements are satisfied, building a relationship with your local lawyers should still be near the top of the “To do” list. A local lawyer will help you and your business navigate any legal formalities, regulations, and/or problems that may come your way. Moreover, having that relationship means one more local in your corner. Should you need advice or guidance on anything, whether it be business related or related to culture, you have someone to turn to.
9. Grow your Colombian network
Like building a relationship with your local lawyer, you should also build professional relationships with people outside your immediate network. This entails expanding your Colombian network: individuals that are native to Colombia, work in business, and speak Spanish. This will not only help you feel more comfortable in the country, but it also supplies you with resources, connections, and knowledge you might not have had otherwise. Like a lawyer, this network can help answer any professional, cultural, or local questions you might have.
Growing your “Colombian network” doesn’t have to be confined to just interacting with native Colombians. While this is certainly beneficial, there are other options to growing your network to ease you into it. For example, there are many foreign entrepreneurs in Colombia, or what many call “expats.” This band of bold, business-minded individuals have their own little community. Connect with these entrepreneurs, and you’ll be exposed to ideas, practices, accents, and cultures from all over the world. The one common denominator among this group is the success and passion for doing business in Colombia as an expat.
10. Be understanding
Becoming an entrepreneur is no easy feat. Add adjusting to and building a new life in a foreign country on top of that? That makes it even more difficult. The process can be long and is hardly ever a straight path. To navigate the winding, and sometimes rocky, roads of entrepreneurship in Colombia, you have to be understanding of the process. Rules, regulations, requirements, practices, and expectations are all probably vastly different in Colombia than your home country. Know this before starting your journey as an entrepreneur. There will be many times that call for adjustments, changing of plans, and brainstorming an entirely new plan. Entrepreneurship is for those individuals that have an unrelenting, “can do” attitude. Any obstacles encountered will only make you and your startup stronger and more prepared in the long run.
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