Foreigners such as Asians, Europeans, Americans and Africans account for less than 1% of Japan’s population. Yet last year, many of them established new businesses in Tokyo and are a visible presence in almost every field nationwide.
Michael Alfant should know. He has started 15 companies in Japan and is the current president of the American Chamber of Commerce in Japan. “Foreign entrepreneurs,” Alfant said, “are among the prime drivers of Japan’s economic and social prosperity.”
Terrie Lloyd, an Australian/Kiwi entrepreneur and the publisher of the Metropolis and ACCJ magazines who has started 17 companies of his own and over 20 others for clients, says the number of foreigners going into business for themselves has gone up because they are getting laid off from their jobs but still have families to look after.
“The biggest hurdle for a foreigner starting his or her own business in Japan is the lack of capital,” Lloyd says. “Given that Japan isn’t the easiest place to find risk capital, most foreigners start their ventures with their own money.”
Canadian Dave Mori, co-founder and president of the Entrepreneur Association of Tokyo NPO and director and co-founder of Piku Media Co., Ltd., which offers services similar to the popular deal-of the -day Web site Groupon, says the most common question foreigner entrepreneurs have is about how to obtain financing.
The most common method for financing, according to Mori, is the 3F’s (friends, family and fools) and some government debt financing such as the National Life Finance Corporation or local ward financing — providing start-up loans from two to ten years with low interest.
With six of his own start-ups plus three more with his business partner, Mori knows some of the barriers foreign entrepreneurs face. Other than financial concerns, he says, the language issue for sales was a slight hurdle, but it was an advantage as it differentiated him from other salesmen when they were starting out.
He overcame the trust issue that is inherent for many when dealing with start-ups by providing consistently high-quality service, which in Japan is a must for anyone who wants to succeed in business, entrepreneur or not.
French restaurant owner Nelson Surjon agrees that the financial burden of starting a business is the most difficult. “Getting the funding was difficult at first,” he says. “You are expected in Japan to have saved a lot of money to open your own business. The concept of angel investors does not sit too well when trying to borrow money from financial institutions.”
Opening a restaurant in Japan offers its own headaches. Surjon found this out when dealing with construction companies. If you want things to go smoothly you must be involved every step of the way or suffer the consequences.
Surjon says, “Future restaurant entrepreneurs should plan all aspects of the construction process thoroughly before, during, and after and be especially mindful of getting accurate estimates and watching out for hidden fees.”
Japan is often thought of as a male dominated society with women relegated to lower positions and pay in companies. This has led to more Japanese women starting their own companies.
However, female entrepreneurs are not just restricted to Japanese women. American Lauren Shannon, president of Sapphire Restaurant Management Group, says gender came into play when she was starting her business.
“As a woman, I had a very strong female support network helping me and cheering me on,” she says. “I also think women entrepreneurs are used to struggles in an uphill battle which prepares us for the struggles of owning your own business.”
What it takes to be a Successful Foreign Entrepreneur
Shannon suggests feeding and growing your network. “The people around you will be all the difference as you try to start your own company. Never be afraid to ask for help and advice.”
Lloyd adds that with the change in company laws in recent years entrepreneurs have a choice about which type of company to start up. However, Lloyd suggests starting with a Kabushiki Kaisha, a stock corporation, because this type of entity looks normal and substantial.
”GK’s (Godo Kaisha, which is similar to an LLC) are for people with no capital, but these raise the red flag of instability to larger companies,” he says. “There is no point, since they don’t allow tax pass-through like LLCs do in the USA. So if you’re going to be taxed, then you may as well set up a limited liability firm.”
Surjon adds that there should also be a well-built business plan. His plan took a year to develop, but it was the main factor in acquiring funds to open.
Mori told Majirox News not to be afraid to sell your services for what you believe they are worth since it is difficult to raise prices in Japan once they are set.
“Also, be careful who you take investment from and how much equity you give them,” he says. “Most entrepreneurs give up too much of their businesses during the early rounds of financing; bootstrap until you have a proven revenue-generating business that will warrant a higher valuation for any investment you may need to take in growing your business.”
Mori wraps up, “Don’t hesitate, start your business and adjust/pivot as needed.”
Joe Peters is a contributing writer for Majirox News who runs his own Tokyo-based executive search company.
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