Buying a bar / business in Thailand.

[PattayaPete 530]

Lots of people have asked about this over the years so I thought I'd write down my thoughts for the new Expat section.

 

Before worrying about work permits, visas, taxes and ownership the prospective business owner should consider the following.

 

Starting a business is a risky proposition. In the west over 75% of new businesses fail in the first year. Reasons for failure vary but I am sure the number 1 reason is under capitalization. New business owners generally under estimate how much money they will need to put in to the business to get through the first year. They commonly have detailed plans for everything that needs to be purchased and done, up to opening day and then nothing.

 

The new business owner thinks that once the business is operating it will be self sustaining and maybe pay them a wage as well. This rarely happens in any business. The first year is nearly always a struggle with major losses to be covered. If you don't have the capital to meet those losses then you are going down the tubes.

 

Even a small business can gobble cash at an alarming rate. A good business plan will include enough operating cash to see the venture through the toughest year possible. The new owner better be prepared to work long hours for no remuneration as well.

 

If you are still losing money after the first year then something is wrong. Fixing it will probably be expensive. Got any cash left? If you have then you can revise your plan and start again. If not then kiss goodbye to all the time and money you have invested to date.

 

The next big reason for failure is poor management skills. Management is a profession and people study it at Harvard and still end up being poor managers. A good manager makes a business. Without good management you are stuffed from day 1. Everyone thinks they have what it takes to be a manager but the plain truth is that many do not. I have seen many good workers promoted to management and then fail. The skills required are different from working a job and many people just do not have what it takes. Do you?

 

So starting a new business in your home country is risky at best and you have a 75% chance of failing. Now throw a new country into the mix, an unfriendly regulatory environment for foreigners, language problems and no chance of getting any help from a bank and believe me the odds of success plummet. Doing it in Thailand is tough. Very tough. Still want to give it a go? What about trying it at home first. If you have already run a successful business at home then your chances of success in Thailand are much greater.

 

So you still want to do it in Thailand. OK, what sort of business. For most it's a bar. Guess what? There are over 3,000 bars in Pattaya already. If that much competition doesn't scare you, it should! Why will you succeed where many have failed? Do you have an USP. A Unique Selling Point is what sets you apart from your 3,000 competitors. I hope you have some good ideas because you will need them.

 

Just about any business you can think of is already well covered in Pattaya, so whatever you want to do you can be sure it will be a competitive environment. One of the biggest problems here is too many businesses that are not making a decent profit but which the owner keeps going anyway for lifestyle reasons. All these unsuccessful businesses still have some custom and that is custom you are not going to get.

 

I'll confine the rest of my comments to operating a bar. Most of them are relevant to any other business as well.

 

PREMISES

You are probably going to be renting. It is possible to buy a building but you need to go through some legal shenanigans to do so and for most people it is not a viable idea. Rent prices are set by demand, not profit. The landowner cares little if the 20 beer bars in his complex are all losing money, as long as the rent is being paid. If the rent is not paid then he will kick you out and a new guy will take your place in a flash. Rents often do not make sense when compared to the earning potential of the business but in Thailand, nobody seems to care about that.

 

Key money is common here. It means you will make an upfront lump sum payment to the owner, which if you leave, even after one day, you lose. Good for landlords but lousy for you. Key money and rents vary wildly with no perceivable (to me anyway) justification for what is asked. Be prepared to look long and hard, get a good feeling for the market and don't get sucked into a losing proposition. If you pay a million baht in key money, that comes straight off you first million baht of profit. For many beer bars that's a year or more of profit, gone before you even start.

 

Rents and leases also vary considerably. Although there are some long term leases available generally the longest you will get is 3 years with perhaps a right to renew (and pay key money again) for a further three years. Consider this carefully if you are going to do a major renovation of the building. At the end of the lease the landlord gets it all. Is three or six years long enough to get a good return on your investment.

 

Location, location, location. The three golden rules of any retail business. There are lots of cheap bars in out of the way places. Cheap rent in a bad location is not going to help you make a profit.

 

Setting up a company.

If you do not have a company then your business will have no legal standing, which means no work permits. Generally foreigners can not own more than 49% of a Thai company so you are going to need some shareholders to own the other 51%. If it's going to be the girlfriend then be careful. With 51% she can fire you and refuse to pay a dividend. Basically it becomes her business to do with as she sees fit. If your relationship fails this could be big trouble for you.

 

Many lawyers will help you set this up with "professional shareholders" who hold the shares for a nominal fee. There shares will be non-voting and will not receive any dividend. You will also hold sale and purchase agreements signed by these shareholders selling their shares at a specified price (1 baht) to whoever you nominate. This works and is legal but in reality is getting around the intent of the law. Consider that before you throw millions at your new business.

 

Visas.

If you are going to have a business in Thailand you will presumably want to stay here. What Visa will you get. It is possible to own a business on a tourist visa but you will not be able to get a work permit if that's all you have. You can get by on this but make sure nobody sees you do any work in the bar or it could be off to immigration jail A real hell hole from all accounts. You can get a business visa but you will need to invest three million baht in your business or other approved investments in Thailand to get this. You can get a Non Immigrant B out of country which will enable your company to employ you but there are some major tax issues to be considered with this approach. Also your company will be limited in how many farangs it can employ. It's all do-able but you will need some competent legal advice to get this set up correctly and legally.

 

Work Permits.

If you are going to work in the bar then you will need a work permit. Working includes sitting at the bar drinking and talking with customers. People have been arrested and sent to jail for doing just that so once again be careful. To get a work permit you will probably have to work through a lawyer. Expect to pay some hefty fees.

 

Licenses.

You will need a liquor license, health department certificate and entertainment license. Expect big fees and long delays unless you can find the right person to bribe to hurry things along.

 

In my experience to get a liquor license you will need an entertainment license. Before you can get an entertainment license you will need a liquor license. Expect to run around in circles for a while sorting out this sort of nonsense.

 

Staff

This is where things get really tricky. Thais do not have the same work ethic as farangs. They are different and need to be managed differently. Remember that Pattaya is a workers paradise. Virtually every one of the three thousand bars in town is looking for more staff. Finding and retaining good staff is going to be your number one headache for as long as you are in business in Thailand.

 

If you start a new business then you will have no regular customers. Why should a girl work at your bar when the number one bar in town is employing every day. The only girls who can't easily get work are fat and ugly. How many fat and ugly girls do you want working in your bar? Be wary of friends and Mamasans who claim to be able to bring you staff. Often it won't work out. All your girlfriends or wifes friends may say they will come but when the time arrives they do not. Others may work for a week and decide the bar across the road that has twice as many customers as yours is a better proposition. Regardless of the salary you pay the real money for the girls is from customers who bar fine them. If you can not provide the customers she will work elsewhere. If you can not get girls you won't have any customers.

 

If your idea is to let your wife or girlfriend run the bar, be careful. What training does she have to be a manager? Does she really understand the hard work and long hours that will be required to make it work? Every bar girl I've ever met thinks she could run the bar better than the current management but most of them have no idea what is involved. Left to their own devices most bar girls can kill a good business in one week flat.

 

Lifestyle

Why do you want to run a bar? If you think it means unlimited free sex and booze, think again. Screwing the crew is a sure fired way to kill your business stone dead. Drinking the profits is easily done but it won't pay the rent.

 

Operating a business requires dedication, hard work, commitment, street smarts and a bit of luck. It is not going to be an easy lifestyle but it can be very rewarding. If you start with the right attitude you might succeed. If you start expecting an easy life then you are bound to fail.

 

Tax

The tax regime in Thailand is very laid back compared to the west. If you deal with it properly and get good advice you can pay minimal tax. If you do not have things set up right you can be in a load of crap when the tax inspector arrives, which he will one day. Remember Thailand also has GST (VAT) which requires you to make monthly returns and pay the difference between tax paid when you purchase stock and tax collected when you sell.

 

Tea money

Depending on what sort of bar you have and exactly what happens within, you will probably need a friendly policeman to take care of you. Claims are not exorbitant but once again be careful. If handled wrongly and the police have it in for you, you are screwed. If you are too generous then you may well end up with 20 cops sitting at your bar drinking on your tab. Get some advice from someone who is already dealing with this.

 

Mafia protection rackets..

This does not happen in Pattaya. If it does happen to you, call the cops and the problem will be severely dealt with.

 

 

Buying an Existing Business

If you buy an operation that is already set up you will save yourself a lot of grief but you will also pay much more than starting from scratch. Be very careful about due diligence (if you don't know what that means then you probably shouldn't be buying a business). Remember that a lot of creative accounting goes on here and virtually nobody does an audit. A standard price for a business in Thailand would be 2 -3 times yearly profit. The trick is in establishing what the profit really is.

 

Also, remember if you are successful and want to sell the business then you will only get 2 or 3 times your yearly profit. By international standards this is low but the reality is that Thailand is a high risk proposition so prices are discounted accordingly. If you sold the same business in the west you may well get 5 -10 times the yearly profit.

 

 

 

That's all I can think of for now. If I get some questions that seem relevant I'll add some new sections to this post covering them. Justtony has owned a bar is now working for a lawyer and regularly deals with this stuff so he may have quite a bit to add.

 

Just a final thought. I ran a bar here for seven years and I loved every minute of it. It's a crazy way to earn a living and I spent all my time bouncing from one problem to the next but I would not have missed the experience for the world. Everybody will rightly try and put you off but if you have what it takes, including sufficient capital and an iron will, then there is nothing in the world quite like it.

[Soi7 1]

The only girls who can’t easily get work are fat and ugly. How many fat and ugly girls do you want working in your bar?

 

Ain't you just the smooth talker

[justtony 1]

Wow great post Pete I think you have covered everything and basically it is as you have described.

 

I can add true story to anyone who wants to start a business. I recently sold a run down guesthouse with 11 rooms that really needed renovating and below there was a beer bar that had sold on average 500 baht per day in beer sales, the place was really run down. The guy had to leave Thailand and was asking 1.7 million for the "goodwill" and the lease. The lease was a good one 3 years left with an option to extend for a further 3 years and so on with no key money.

 

The people that brought it did so with no haggling about the price, once brought they closed everything down for 6 weeks and renovated everything, to the cost of nearly another 800,000 baht so that’s a total of 2.5 million baht spent on a place that had no ongoing customers sounds pretty bleak but the one thing these guys had was an experience in hotels and entertaining. 4 months after re-opening their beer bar is averaging over 600,000 per month and the rooms that used to be rented for 400 baht per night spasmodically are now nearly always full at over 1000 baht per night. Did these guys have luck, probably but what they had more importantly was experience. I take my hat off to them and it goes to show anyone can make a business successful provided they have experience of the business climate and a lot of common sense.

 

Before I opened my bar I went to work as a manager in a go go bar for 6 months working 14+ hours every day for 15,000 per month (in those days pattaya go go's closed at 3/4am) my rent for the room and electric was basically covered by my salary so in one sense I worked for 6 months for nothing but what I did learn was experience in running a bar and I made a lot of contacts. My main bar was in soi 2 and for the 5 years I had it I made a good profit each year but again I run the business adding the experience I had learned from the go go job.

 

Now as Pete says I am working with a lawyer friend and my eyes are being opened even more I knew there were a lot of stories going around about people being had over in business and losing everything to Thai girls, but boy you don’t get to hear the half of it.

 

I enjoyed my life in the bar business but I find my life being rewarded more and I don’t mean financially working in a lawyers office

[torrenova 644]

There is a great argument that cases as the one justtony mentions above are the way to go but as he said, they had the experience and cash.

 

I got into the bar business as I had done this years ago and wanted something that would provide income from day one (I bought an existing business). Now I have other things on the go and am looking at other ventures.

 

There can be compelling arguments in favour of having rooms to rent out but I see too many people who have rooms and do nothing with them. That seems strange to me, renting rooms and not selling them.

[davethailand 91]

Nothing to add! Great post Pete.

[SunnyValentine 173]

Very well said, Pete!

 

Sunny

[JohnnyK 28]

Absolutely required reading with great input from three veterans of the game.

Maybe reading it should be mandatory with membership sign-up!

[Soi7 1]

Well anybody thinking about this now should really give this some thought as there have been posts from a former Bar owner two Bar owners and a man that has a law office Advice does not get any better than that

[BigDUSA 71]

OK it's suck up time. The FLB could be used as a case study at Harvard B school on how to run a bar right. Pete made the right move when he hired Ben as the day to day manager. Ben has the right personality and charisma to keep customers coming back. The service staff are quick, efficient and theres no hassle with the bill. The staff in back of the bar look and act like they enjoy working at the FLB. Their well trained and it shows.

 

If I owned the FLB, I'd do the following. When a customer sets down, I would have the mamasan wait two minutes so the guy can get situated and have a couple of sips of his drink. I would have the mamasan greet him and ask if he would like some company. This gives the customer options and I like that. Second, I would lower the volume on the music so the customer can speak without having to raise is voice.

 

Pete ran a smooth customer centric bar and it showed. He sold it for a profit.

[lemons 0]

Pete,

 

Valuable advice indeed. As some know, I now operate a modest guesthouse in Sihanoukville Cambo. I am finding that my 12 years in hospitality in my 20's is coming in very handy. The point about adequate capitalisation and initial cash flow is particularly relevant.

One very quick example: We have 10 rooms. I wanted to install hot water in them. No probs - accepted a quote for $80 per unit + $100 for fitting = $900, all done in 2 days.

Ok, that was a known cost, and I elected to go ahead. Umm, now came the unexpected costs. The amperage of our supply had to be increased to cope with the load from the heaters, (add $300). A good percentage of the wiring had to be replaced to carry the increased amperage, (add $180). So a $900 2 day job ended up being nearly $1400, (that's over a 50% increase), and taking 10 days. Just one simple example of how reality can make a joke of your budget!

 

The thoughts that Pete raises are valid down here as well, with the exception of most of the beaurocracy. Thank goodness Cambo has a much more welcoming stance to western capital than LOS. I only hope it stays that way.

In my short time in business down here, I have seen examples of well run businesses that actually make a profit, and 'pie on the sky' operations that are predestined to fail.

 

lemons

[davethailand 91]

I would have the mamasan wait two minutes so the guy can get situated and have a couple of sips of his drink. I would have the mamasan greet him and ask if he would like some company. This gives the customer options and I like that.

Me too, If i want company i'll let you know.

I've got a big chip on my shoulder with service staff at the moment Every ****ing bar I go in its like having a ****ing shadow, checking my glass after every mouthful, then frowning when i don't want another one.

IF I WANT ANOTHER DRINK I"LL ASK FOR ONE!

[torrenova 644]

Me too, If i want company i'll let you know.

I've got a big chip on my shoulder with service staff at the moment Every ****ing bar I go in its like having a ****ing shadow, checking my glass after every mouthful, then frowning when i don't want another one.

IF I WANT ANOTHER DRINK I"LL ASK FOR ONE!

I agree about the constant "one more" or checking that goes on. It is difficult to create the right balance between attentive but not overpowering service and a continuing headache for the bosses.

 

On the "company" angle, in my opinion, it is inherent in the concept of a girl making money from customers through barfines. I have tried to eliminate this somewhat by not having quotas for barfines or drinks. To be honest though, larger, more open places, such as the FLB and Buffalo Bar will suffer from this more than the smaller beer bar places where the girls are largely seperated behind a counter until called outside. Some will be outside already but not to the same degree as those places mentioned previously.

 

Again, another one of the thousands of headaches for the management

[JohnnyK 28]

The hustling for drinks is all-too reminiscent of stupid bars in falang land.

You know, the ones where they shake your beer bottle when its still half full and say "Everything all right here?" with a shit-eating grin.

[DSbadger 0]

It's called training your service staff. Train them to read visual clues and how to respond.

 

If I am looking around to catch the eye of a service girl, it means I want something.

 

If I am happily talking with someone , it may mean I don't want to be interuped.

 

It mainly comes down to being on the job and observent of what is happening. You can be 10 meters away and still be available for service if the punter wants service when your watching for clues. You don't have to be a shadow as Dave pointed out. Some people are born with these basic skills and wonder why others have a hard time learning them. But I think you need to start with training them in this way. Because you would be amazed at how many people don't know them. When you have a employee that is off in dream land and a punter that wants something , then kiss your repeat business good by.

[Raylene 1]

I just read this post and went to World Wide A Go-Go on Beach Road near Soi 7.

 

I watched the staff.

I sat down, ordered a drink.

Watched the fugly ladies on stage

2 minutes later, I get the "You want company?" line from service staff.

I say YES.

I look to the flock of girls lazily sitting in the back. I didn't care which one.

I get the loudmothed, tatto'd, scraggly-toothed one with the short hair.

JOY!!!!

I convinced her I spoke thai and was listening to everything the girls were saying.

It was fun!

 

No pressures for another drink.

no pressures for a barfine.

 

I just had a nice trip at a go-go and away from the livein.

For only the cost of a Tiger Beer for me, and a LD for her.

Not bad!

 

A good way to run the business.

Now, if only the quality of girls improved....

 

 

So, I checkbinned and left, shaking thr hand of the bar girl that sat with me.

and getting a quick wai from the service staff and a "thank you, come again" from the hello men with the signs outside.

 

 

 

 

edit...

I just remembered, I did get the "You buy me drink" line from a service staff lady.

I quickly said, "I already have lady I buy drink for"

She retorted with "You have 1 lady, but 2 drinks"

I liked her response, but since I'm on a budget ... I declined her offer. Had I been on holiday, I'd have bought her a drink.

 

She smiled nonetheless, and scampered off.

Edited November 17, 2005 by Raylene

[cowboy 0]

Good post Pete,

maybe some people will listen. I have been an auditor for 30 years. I have seen a ton of businesses go under. You have covered almost all of the bases.

 

One thing I didn't see you mention. Bars are a cash based business. That reuqires careful control to ensure that employees are not making themselves partners. (1 for the boss 2 for me, 1 for the boss 2 for me)

 

The thing that has always impressed me about FLB was the girls, ahem, the cashiering girls. FLB has a very good accounting and cash system from what I have seen. Very important in a cah based business.

[torrenova 644]

You wouldn't believe how some guys run their "accounting " system. Basically they don't have one. No stock control, no order management, them just dipping into the till whenever they feel like it, never able to remember how much they have taken etc.

 

I knew one guy I tried to help but he wouldn't listen who, once he had sold say Bt5k for the day, used to take it from the till and wander out into the night to spend it ! The fact that all cash is not profits escaped him until he found himself broke.

[Brewmaster 28]

Great post Pete, maybe it should be copied to a wider audience in the FAQ or Members Forum as I do not usually read the Expat Issues and this should be kept "live" for any newby eager punter.

 

Agree 100% with you post - know the country / market; know the type of business and, as Cowboy mensioned; have your accounting / cash flow etc systems in place - most of all do not be under capitalized.

[Beach Boy 0]

Pete,

 

Your post is right on. I hope anyone who is considering starting a business here or anywhere else considers the points you have made.

 

I just opened a new Espresso/Gelato bar on Soi Buakaow and fortunately all is going very well.

 

As you pointed out in your post, being undercapitalizd is one of the main reasons for a business failing.

 

I entered this business with over 30 years of business experience and a sufficient amount of money to work with. But even with this I am fully aware that losing my money is a possibility. I look at it the same way I would look at gambling. I am not about to invest more money then I am willing to lose.

 

To my amazement, I made a very nifty profit my first month of operation and the second month is on pace to double the first. My customer's responses are very positive and a loyal local customer base is already forming.

 

We shall see what is in store for me in the months to come, but based on my first 39 days unless I make a very big and stupid mistake it should end up a sucess.

 

Beach Boy

[Angelo02 0]

Hello Beach Boy

Where is your location? I usually stay around the soi buakaow area and would like to pop in and taste your menu.

 

Thanx - Angelo02

[wacmedia 277]

We shall see what is in store for me in the months to come, but based on my first 39 days unless I make a very big and stupid mistake it should end up a sucess.

 

Hi seem photo of place on another topic. Seems a nice place and I think the area is on the up. Seems timing is as important as anything in business and your timing seems spot on for that area.

[JohnnyK 28]

Beach Boy, let us know where and post a pic if you can.

Think you are in a good spot for the longer term as action seems to be going that way, cheaper too than wanking street.

Chok dee

[Beach Boy 0]

Angelo02 and JohnnyK,

 

Thanks for your interest in my place.

 

It is located on Soi Buakow, as you already know. If you go up Soi Diana (Lolita's is located off this Soi) Go to Soi Buakow and turn left.

 

I am located just a couple blocks after the big purple hotel (Sawasdee Siam Hotel) and I am on the same side of the street.

 

You will come to a large vacant field. The row of shop houses just after this field is where the shop is.

 

You can't miss it. I have an outside sitting terrace surrounded by Roman columns. The Chaba Hut Resort is on the other side of the road and Enjoy internet is just next door to me.

 

If you go to The Expat section of this forum Joop posted some pictures on the post asking about Wireless Internet places in Pattaya.

 

Soi Buakow is a soi on the up and up. A new seafood restaurant just opened up a few doors from me and has good seafood dinners and Lobster. A lot cheaper then restaurants in the main tourist areas.

 

Soi Buakow also is getting a hotter night scene with lots of pretty ladies.

Hope to see you soon.

 

Sorry about any promos for my place Pete, I am just responding to questions from Board members.

 

But to keep things clean here, if you have any further questions about Caffe Pitini send me a personal message and I will respond to you that way.

 

Thanks,

 

Beach Boy

[drilldr 0]

Excellent thread and great post Pete,

 

I have been self employed for 24 years and I can tell you the anxiety of what and how to deal with your next situation just never goes away. I can only imagine that if a person was to go to a foreign country and try and buy a business like a bar they need to think long and hard. Especially if they have never been self employed. You will be so ill prepared and the learning curve has to be severe at best and very expensive. Be prepared for a lot of sleepless days ( I guess you'd be working at night) and just stress in general. The competition looks fierce. The other point is that you will have the biggest headache of all ... employees. What with the langauge and cultural differences. Most employees will be very young and poorly educated and you are going to pin your livleyhood on this group to do their job. Maybe with a partner to share the stress but if you don't have an ulcer now you will probaly have one when it is said and done. Maybe not for everyone. but it's probably a safe bet that the two most exciting days of being a bar owner in a situation like Pattaya, Thailand are the day you buy it and the day you sell it.

[alesypalsy 0]

Pete,

 

Valuable advice indeed. As some know, I now operate a modest guesthouse in Sihanoukville Cambo. I am finding that my 12 years in hospitality in my 20's is coming in very handy. The point about adequate capitalisation and initial cash flow is particularly relevant.

One very quick example: We have 10 rooms. I wanted to install hot water in them. No probs - accepted a quote for $80 per unit + $100 for fitting = $900, all done in 2 days.

Ok, that was a known cost, and I elected to go ahead. Umm, now came the unexpected costs. The amperage of our supply had to be increased to cope with the load from the heaters, (add $300). A good percentage of the wiring had to be replaced to carry the increased amperage, (add $180). So a $900 2 day job ended up being nearly $1400, (that's over a 50% increase), and taking 10 days. Just one simple example of how reality can make a joke of your budget!

 

The thoughts that Pete raises are valid down here as well, with the exception of most of the beaurocracy. Thank goodness Cambo has a much more welcoming stance to western capital than LOS. I only hope it stays that way.

In my short time in business down here, I have seen examples of well run businesses that actually make a profit, and 'pie on the sky' operations that are predestined to fail.

 

lemons

Hey lemons , what rates do you charge there? I am looking at having a break there soon. And how far fom the action are you?

Cheers