You have a Big Idea and you want to set up your own business, be your own boss and bring this idea to life. You have a huge and seemingly overwhelming list of thoughts, considerations, tasks and next steps to reach your goal. Don’t be scared! Let’s go through the process from ideation to actually setting up a business in the UAE.
1.Validate your idea
We’ve all, at some point living in the UAE, thought, “This would be a great business idea”… but then never done anything about it. It probably WAS a great idea but perhaps you assumed someone else was doing it anyway? It’s time to validate…
- Are there other companies already providing this product or service? (And do a serious search, not just ask friends.)
- How big is the market for your product or service? This would depend, too, on your objective – you may only want a small business, where the market itself could be pretty small but you could still make a comfortable living out of it. If you are aiming higher, e.g. for regional business, it is important to put a figure on how much the market is worth.
- Do your business plan. It doesn’t have to be sophisticated but put your thoughts down on paper as to how the business should look in two years. From here, you’ll develop ideas about what revenues you expect.
2. Work on a proof of concept
There is no better way to test your idea in the market. I started Souqalmal.com two years ago but the real preparations started six months earlier. We did a proof of concept for six months at a low price, as initial investment is a sunk (retrospective, past) cost. We tested it with users online, spoke to the media and, once there was both traction and interest from media, users and investors alike, I quit my full-time job and dedicated myself to Souqalmal.com.
3. Register your business
Now it gets serious. Registering your business in the UAE can be a full-time in its own right, and the limited options available don’t make it any easier.
- Where to register? If you are selling to the local market – i.e taking payments from consumers – you’ll need an onshore license, which generally means you need a local UAE partner. On the other hand, if you sell to institutions, you can set up in any of the freezones available. The choice of freezones in the UAE can vary in terms of prices, restrictions and industry. Make sure you gather a full list of freezones and compare them based on three critical factors:
- What are the regular annual costs and what are the restrictions to licensing with this freezone, e.g. office space required per employee (in square feet), location of offices, number of visas etc.
- Does the freezone provide a registration without the need for you to set up an office, if you are to be a one-man show for the first few years?
- What is the average rent in each of the freezone areas?
4. Get a partner
If you’re the type of person who needs to share and bounce off ideas off someone else, a partner in your business is critical. From personal experience, starting up a business can be extremely lonely – having a partner makes it that much easier.
5. Get a lawyer
If you decide to go down the partner route, you need a lawyer. Too many start-ups I have met try to save money at the beginning. Of course that’s the right thing to do but legal matters like shareholder agreements are an area you do not want to go cheap on. These documents are critical, even if they only come out of the drawer when something is in dispute or when one of the partners decides to leave the business. It is very important to have the legalities of the business cleanly, properly set up right from the start. I find freelancer lawyers specialized in start-ups are cost-effective and friendlier to deal with than bigger law firms. If you’re a business that aspires to grow to a scalable company where funding is required, it is even more important to have a lawyer from the start who understands your business and understands start-ups.
6. Network. Network. Network
There is no better way to get your product tested and get your business visible. Go to different conferences such as Arabnet and put your ideas to different start-up competitions. Souqalmal.com was kicked off at Arabnet Beirut two years ago and has since become more visible due to our start-up pitch. It is through networking and talking about your idea to others that you will get genuine feedback – and even interested parties as partners or investors. Don’t be shy, don’t hide your idea. If someone whips the idea from you and implements it, that it was always going to happen anyway.
7. Raise your first round of funding
One of the first ways to look for funding is to approach your friends and family for seed funding. At this stage, having a proof of concept and even a minimal amount of revenue will bring your valuation a long way, rather than just having an idea with nothing tangible to show for it. To show that someone is ready to buy your product means there is both potential and a need in the market. Figure out the cost of running your business over the next year or so and, based on your plans to grow the business, put together a plan of how much money you need to raise and how much equity you are prepared to give away. Networking will introduce you to angel investors in the country.
Once you’ve completed your first round of funding, you can be proud of yourself! Now it’s time to show what you can achieve with those funds and target a second round. If you can show traction and progress with the first-round funds, your second round should be a breeze.