It’s business time
Why to start a business in Finland?
This is another question we have been answering on a daily basis. Having the opportunity to choose any location, why was our company started in Finland?
Starting a business is never a piece of cake. It requires determination, patience, inspiration, and resources. What if by choosing a certain location you could minimise the time needed for bureaucratic and administrative issues, pay only a reasonable amount of taxes and spend as little time as possible to enforce contracts?
You actually can.
Compare your options
Before deciding to locate our headquarters in Finland, our founders conducted heavy research and comparison with other possible locations. A very helpful tool with this was a website called doingbusiness.org It collects data and ranks countries based on their characteristics in different areas relevant for businesses.
The website lets you take a look at the ease of doing business and starting a business rankings for example.
Finland is number 11 worldwide and number 8 in OECD high income countries when it comes to ease of doing business. Starting a business ranks Finland number 17 within the OECD high income countries, leaving behind countries like Sweden, the Netherlands, Italy and Germany.
What’s more, you can also take a more detailed look at what it takes to start a business in a country. The website lets you see the number of needed procedures, the number of days required for the process, the costs, and the amount of paid-in minimal capital for example.
Analyse your choices.
When setting up your own company you want to minimise your risks. In practice this means you want to set up a limited liability company. Now this can be very tricky in some countries, like Italy, where our founders are from.
Alone the needed financial resources for setting up an LLC in Italy are around 20 000 euros – in Finland around 3 000 euros. Dealing with the Italian bureaucratic jungle is, then again, a whole different story.
Taxes & excess costs – entrepreneur’s nightmare
Another reason why our founders did not stay in Italy: taxes. In Finland the tax rate for your profit is 40.6% whereas in Italy is rises up to a staggering 68.3%
One more quite essential and annoying factor for businesses, excess costs. The cost for starting a business in Italy is 16 times more expensive than it is in Finland.
Right now you might be thinking a comparison with Italy isn’t really telling the whole story. So, let’s take a look at our next door neighbour, Sweden 🙂
Ease of doing business gives Sweden the ranking number 13 worldwide and number 9 in OECD high income countries. Starting a business, Sweden hits place 19 worldwide. Looking at the costs of starting a business, Sweden is a tad cheaper than Finland. Then again, you pay 13% more taxes in Sweden than in Finland.
Be thorough with your research – you might end up saving tons of money.
In addition to different rankings and factors, our founders considered everyday issues too. These included things like the quality and existence of public health care, the amount of skilled workforce, the support from the government and institutions, and the level of international affairs.
Finland picked points for having a good public health system, being known to have technically skilled workforce, and having a fairly young government and institutions like Tekes and Finnvera, which support new businesses and innovation. Being a part of the euro zone was also a supporting factor for choosing Finland.
Practical everyday issues are also the ones that eliminated Sweden from the competition. Alone the employee on-costs are 10 percentage points higher than in Finland. Also the fact that Sweden has its own currency, SEK, would pose more risks to the company. Looking at an example case, the currency rate fluctuations during 2012 could have cost us 3% of our turnover.
Life can be harder or easier – why not make it easier?
No place is perfect
Of course despite of extensive research you can’t prepare for everything.
Working with banks
This has proven to be one of the worst nightmares in Finland. No one can tell you beforehand what documents you need to bring with you and once at a bank without the needed pieces of paper nothing can be done. Things get even trickier if you happen to be from a country outside of the EU.
The cherry on top of the bank cake is when you need to connect your social identity to your bank account. Without it you can’t get online banking login information, which you only need for paying your bills online, using KELA’s services online, checking your online mailbox (netPosti), and a dozen other things.
Speaking from experience: do not leave the bank before you get your online banking info!
KELA – the love affair for life
KELA = is the organisation providing social security for all persons resident in Finland.
Everybody in Finland probably has an opinion about KELA. So do we. Things happen very s-l-o-w-l-y and sometimes only s-u-o-m-e-k-s-i (in Finnish). Be prepared to spend several afternoons at KELA offices waiting for your turn.
Plus side: once you get everything sorted out, future updating will be easier.
Kielitaidottomuus (lack of language skills)
Although Finnish people in general know several other languages and their English is often almost perfect, if and when someone only knows Finnish, you are in trouble. With this unique Finno-Ugric language your knowledge of English, Spanish, German, French, Swedish, or Russian won’t get you anywhere.
Our tip: get to know Finnish people who can help you with official stuff and you’ll save hours of time!
We still love Finland
To sum it up, despite of the aforementioned challenges, we are happy to be in Finland!
Did you also set up a business in a new country? How was it? And other companies in Finland, what are your experiences from starting a business here?
Read more about our story from our website.