5 Things to Consider before Setting up a Business in Dubai

DUBAI, United Arab Emirates - You thought you conceived a great business idea with so much motivation that you want start your first ever business in Dubai immediately. Its seems no one can stop you. But wait, before you dive into the abyss of entrepreneurial world that a very few people dared – and succeeded, let me give you some 5 helpful tips that you won't easily hear business advisers and experts. Keep these things in mind and it might help you stay out of trouble during the lifespan of your dream business or at least within the first two years of its incubation.

1.       DON’T MESS WITH THE LAW – Not so long ago, residents of the United Arab Emirates were enjoying a Tax Free Lifestyle since time immemorial until the Value Added Tax (VAT) scheme was introduced in January 2018. Or let’s say before the Salik Toll gates were introduced more than 10 years ago. Or let's say before the "paid" parking slots were introduced on lord knows when. Well anyway, have you ever wondered from where the City of Dubai managed to earn their revenue without collecting taxes from business owners? Self subsidy from fossil oil? Hmm, maybe yes. I believe one of them is by collecting hefty fines. Yes! In this part of the world, once you violate any law or ordinance, you'll pay a fine. You violate a traffic rule, you'll pay a fine, your checque bounced, you'll pay a fine, you get in trouble with your employees, you'll pay a fine. Delayed VAT payment, you'll pay a fine. You jaywalk, you'll pay a fine. You missed to punch your Nol Card  in the bus or in the Metro train, you'll pay a fine (Nol Card is by the way what we call a prepaid card used by commuters to pay fare for travelling around the city). When you thought that Singapore is the most dreaded in imposing fines, think again. So once you get to start operating your business make sure to avoid violating any single law or ordinance at all. Unless you are a rich businessman and you can have spare cash allotted for paying hefty fines. Even them they want to avoid that. So read the fine prints of all authority regulations related to your business, consult with a business lawyer at least once before you start your venture - that will hurt your pocket a little bit, but it will surely help you avoid spending cash from this unnecessary fines in a long run. And you'll be fine. 
      Irony - "If you don't get fined, you'll be fine.

2.     CHOOSE YOUR SPONSOR VERY WELL – It is mandatory that you need a Local Sponsor before you can set up an LLC (Local Liability Company) license in this country, unless you'll set up inside the free zone areas. I’m sure you’ve already heard that its easy to find a local guy that you can drag into the Court and get him signed a Memorandum of Agreement (MOA) with you, have it notarized as you agree to pay him an annual Sponsorship fee and Wallah! Now you'll be in business. Also you’ve surely been told that paying the local sponsor an annual fee would be enough guarantee that they will never interfere with your business at all. Be careful, I say, as he is not to be called a “Partner” for nothing, given that he owns 51% of your business legally. Even when you get him to sign an internal agreement which will clearly mention that he cannot lay his fingers on any aspect of your business, you can never be safe. Don’t wait for your business to grow and become valuable before you realize you are trapped in that Agreement once he rightfully claims that he is the major owner of that business. What a nice gift it would be from you to him. Such cases are isolated, but try not to be a "one in ten" (I got this phrase from a UB40 song about being part of a statistics, hehe). Then again, better to consult a lawyer.

One option. In case you require a single business activity and have no plans to expand by adding a new business activity, it is highly recommended to apply for a Single Proprietorship Business License wherein only a Local Agent is required, not a business partner.  You own the company 100%. You can replace the Local Agent anytime you want without the need to inform him.

3.       ALWAYS REMEMBER, "LANDLORD IS KING" – Almost all businesses needs a physical address, but if your business model doesn’t require an office, a kiosk, or a shop, or a warehouse, then go for a Free Zone Business License that comes with a Free Virtual Office in the package. If you haven't got any choice but to rent out a space for your business, I would suggest that you try not getting into trouble with your Landlord. “Cash is King”, i'll bet you already heard this phrase somewhere which means cash is very important in running a business, but in the Dubai it is equally appropriate to say that “Landlord is King”, the government of the UAE didn't set up a separate Court for rental disputes for nothing. It is there to protect the Landlords. If you fail to pay them and got sued, you'll be civilly liable with automatic 30 days jail sentence until you pay them back, and once you serve your sentence you will not be allowed to travel until your debt is settled. So there is no escape. 

      By the way, in case you are starting to doubt your business idea, I would suggest that you set up Real Estate Agency Business.  Where there is no need to spend money for inventory, no need for an extensive business plan. You just get a virtual office and a certificate then try to rent out or sell other peoples' properties. No brainer.

4.       WELL OK, "CASH IS KING" – I mean this is important, the landlord thing is just a precaution that won't matter if you got enough cash. I beg you, if you are short of king cash please don’t take a risk. A good idea isn’t enough, make sure to consider at least three months of operating expenses in your capital. If you don’t have it, try to get it. Better think twice before you proceed without it, do not rely on the hope that enough revenue would come easily to support your operation. Don't wait until you to realize the pitfalls of not having to consider this part of the expenses. In any businesses in Dubai, you will find it hard to find a contract without at least 30 days payment terms which means you need 60 days to get back the cost of the service you rendered within the first 30 days of your venture with that company and so on and so forth. Don't do this unless you have guaranteed cash sales of above 70% of your target revenue. Otherwise, you will end up borrowing elsewhere while blindly ignoring high interest rates just to cover your expenses. It will be very bad for the business as borrowing cash is a red flag for investors, if you have any.

5.       MAKE SURE THAT YOUR BUSINESS MODEL SOLVES A PROBLEM OF AT LEAST 500 PAYING CUSTOMERS A DAY – If your business plan is aligned with this number, then it is a sound business plan. Try to get the average multiply it by 500. You do the math, come back at me if five hundred is not a feasible number. But make sure that 70% of those customers will pay cash. 

History tells us that great ideas that solve problems do strive and pay off, so if you think your business model will not solve any problems of the society then you better think of it twice. But if being an entrepreneur is your calling, you better get back to the drawing board and create a new business model that could solve a problem.

Forget about the fads or fame of having a business, those are temporary and has a high price to pay. Don't jump the bandwagon of those people trying to escape the rat race for just being fed up of their 9 to 5 job. Its ok to be motivated, but being in business requires resilience and it is not for the faint hearted. It is a 24/7 ordeal. Start a side business first without quitting your job. Try to get a feel of it without sacrificing your regular income which can be your fall back once you fail. 

You can choose take these tips seriously or you can tell me to go to hell. One thing I can tell you is that, "I've been there, done that... and failed". I honestly believe that it is equally important to take some advise from those who've failed with those who've succeeded. I'd love to be your "lessons learned" mentor when it comes to running a failed business, it'll be a pleasure to help someone succeed amidst my own failure.