14 steps to starting a business in China

Kristina Koehler-Coluccia, Head of Business Advisory, Woodburn Accountants & Advisors, gives us a step-by-step guide to how to launch your China business and avoid the most common mistakes most companies make

1. Don’t worry about what everyone else is doing
Some companies go in too fast and without planning and some get in planning paralysis and don’t get going. Everyone needs to go at a different pace, so develop a phased strategy plan.

2. Research your competitors and the market
Go to China, visit competitors, speak to potential partners and find out what’s going on.

3. Create a business plan that serves as a roadmap for your actions
Every business needs a plan, whether that is to understand your own phases, to raise investment or to convince senior management about a China strategy. Ensure that your plan has price benchmarking, market research and financial planning in place and get external validation if necessary.

4. Choose your business structure
Don’t set up a company if you don’t need a company. Work out what structure works for you. Consider the tax implications or what partner structure you might need. Understand how to start off without risking too much.

5. Get financial investment in order
Labour, raw materials and rent have all gone up in recent years and things in China are expensive. If you don’t have the financial means to go into China, then you are not ready. You don’t make money overnight in China; it takes time and investment.

6. Choose a location in China
China is big, and its different regions have different legal, tax and HR rules. Consider whether you are looking for a manufacturing base, to access a specific talent base or to tap into a target market. It is almost impossible to tackle the entire Chinese market from day one so pick a place to start and execute your strategy.

7. Ensure you register your trademarks, brand and patent registrations.
Woodburn offers a free nine-point legal consideration plan, but setting up China business takes time – don’t rush into things.

8. Funding your business
A business needs bank accounts set up, routes to get capital in and accounting and enterprise resource planning (ERP) systems set up. Most importantly, it’s important to know how to get money out China before you even start.

9. Insurance
Depending on your business, there are any number of employment, business, staff or liability insurances you might need.

10. Get the right business tools
ERP, CRM, Inventory, POS, Alipay, Wechat Pay, email hosting, VPN – the list of tools you’ll need goes on. Not to mention that most software systems from the West won’t work in Europe. Google and Gmail won’t work, and you can’t open online banking with a Mac computer. Ensure your policy on software such as WeChat is robust, as sending sensitive data via personal WeChat accounts could land everyone in hot water.

11. Create management systems
Make sure there are systems to explain who is in charge of what element of the business. Tax, HR, sales – all need clear guidelines.

12. Team building
You are only as good as your people. Ensure you know who to hire and how to hire them, how to retain your staff and how to compensate them fairly. Don’t forget Chinese bonuses and social welfare costs.

13. Market your brand
It is essential to spend money on telling new Chinese customers why they need to buy your products. Educate them, tell them why you and why not your competitor. If using a sales agent or distributor, then remember it is unlikely they are marketing experts – they are more likely salespeople and supply chain people, so you will need to create a separate strategy for promotion.

14. Scale the business
Review your business regularly and action change immediately. Consistency and momentum are key to moving your business forward.