KNOWLEDGE BASE Ways To Do Business In The Netherlands

 

Ways To Do Business in the Netherlands

 

Being aware of the business climate within the Netherlands will help you increase your chances for success. There are also many ways for a company to do business in the Netherlands. We’ve compiled information and resources for you with business options to save you time and money and help you understand what is available to you.

 

Ease of doing business in the Netherlands

In the World Bank’s Report, Doing Business 2016: Measuring Regulatory Quality and Efficiency, the World Bank Group ranks the Netherlands 28th out of 189 countries for ease of doing business within the country as a small or medium-sized company. Specifically, regulations applying to companies through their life cycle are considered. A high ranking indicates that the regulatory environment is relatively more conducive to starting and operating a company locally. The World Bank Group ranking takes into consideration the following parameters:

  • Starting a Business

  • Dealing with Construction Permits

  • Getting Electricity

  • Registering Property

  • Getting Credit

  • Protecting Minority Investors

  • Paying Taxes

  • Trading across Borders

  • Enforcing Contracts

  • Resolving Insolvency

The Netherlands has a strong and stable economy that is very attractive for foreign investment because of its open economic policies and stable government. The Dutch economy is heavily dependent on foreign trade and it is known as a European transportation hub. The Netherlands’ main trade partners are Germany, Belgium, the UK, France, Italy, China, the US, and Russia.

The Netherlands ranks 28th in ease of doing business. It has a high standard of living, a sophisticated business environment, and a strong startup community. As a member of the EU, the Netherlands also provides easy access to the rest of Europe for business expansion. The EU, as a combined economy, ranks among the largest in the world. All of these factors make the Netherlands attractive to a large number of businesses.

 


Globig Resources

World Bank’s Report, Doing Business 2016: Measuring Regulatory Quality and Efficiency

World Bank Group's Doing Business 2016  rankings

Specific World Bank Group ranking information on the Netherlands

 


 

Options for setting up a business in the Netherlands

 

Depending upon your business type, the speed you want to enter the market, your risk tolerance, and available funding, some options for doing business in the Netherlands will be more attractive to you than others.

Identify which of the following factors are drivers of your business:

  • Speed to market

  • Level of control

  • Proximity to end customers

  • Taxation considerations

  • Physical presence

  • Initial financial outlay

  • Level of risk

Following are some of the common ways that people from other countries can do business in the Netherlands. As you read through the options and learn more in other Netherlands sections, you can look for those options that align with your main drivers.

 


 

Globig Alert

 

We highly recommend that you speak with an attorney about the best way to start or bring your business to the Netherlands. Because the circumstances of each company are different, only an expert can give you the advice that is appropriate for your particular business.

 


 

Globig Tip

 

Are you a US business expanding internationally? In the Globig podcast, How Can The SBA and US Commerce Department Help Your Business Expand Globally?, representatives from the United States Small Business Association and the export assistance center from the US Commerce Department discuss some great resources available to US companies expanding abroad.

 


 

Representative or Liaison Office

A representative (or liaison) office is a way to enter another country for marketing or other non-transactional operational purposes. Do not let the word ‘office’ confuse you, under this arrangement you cannot have a physical presence (corporate address). A representative office is not a recognized form of business, and therefore, the company cannot carry out business activities. They can do things such as conduct research, gather information, or facilitate communications with customers and suppliers. It is generally appropriate for companies as an initial step into the new market (country) or companies that do not need to set up a branch or subsidiary.

Advantages

  • Representative offices are treated as a non-resident entity for tax purposes, and because they cannot sell in the Netherlands, they are not subject to VAT

  • Representative offices do not have the commitment and administrative requirements that apply to a branch office and there is minimal cost and time expended as compared to opening a branch or starting a Dutch business

Disadvantages

  • Representative offices cannot carry out any business activities, including the sale of goods or services

  • The office is not authorized to sign contracts or perform any function that could be interpreted as a commercial activity

  • If the company has employees in the Netherlands, it may be required to register with the Dutch tax authorities and withhold wage tax

 

Direct Exporting

Direct exporting to another country allows you to retain higher control over the export process, earn potentially higher profits, and develop a closer relationship with the buyers and marketplace in the foreign country. It will, however, require more corporate resources, time, and personnel since your company will be evaluating the market, handling the export process, developing the marketing plan, and finding foreign buyers.

 

E-commerce from your base location via web or mobile phone

Most of the major commerce platforms are prepared to sell in the Netherlands and integrate with a number of payment platforms that take payment in a number of currencies. The process of figuring out what the ‘landed price’ is, meaning that it includes the product cost, packaging, customs and any tariffs that may apply, shipping insurances, currency conversions, and handling fees is fairly straightforward. Understanding the landed price will help you determine what you will need to charge to make a profit as against what the market will bear.

In this business model, you are responsible for marketing, selling, exporting, and customer support when you sell internationally. Consumer e-commerce sites and mobile apps should have a country specific internationalized website which is localized for the language and culture for each country.  In the Netherlands, 90% of the population speaks Dutch and it is their official language. Plan to communicate with your customers in Dutch.  

B2B commerce businesses can decide if a country-specific web or mobile offering is necessary, depending upon the product category and market expectations. Even though English is the international language of business and near 90% of the people speak English, having a language localized B2B offering may increase your opportunities for doing business abroad. Country-specific SEO and marketing will be required to optimize your e-commerce business.

 

Import Distributor

Often the easiest, fastest, lowest cost and lowest risk options are working with distributors or sales agents. These may not be the ones with the highest return in the long-term but can help you to learn about the market before considering higher risk opportunities.   

Import distributors purchase your product so they can then resell it into their local markets to wholesalers, retailers, or both. One reason to consider using import distributors is when you need to store products in the export country and these distributors already have those services set up. Another is that the import distributor already has a network of buyers they can tap into and it’s faster to enter the market.

 

Sales Representative

Sales representatives represent a variety of products from different countries  in their local markets for an agreed-upon commission for each sale. They will not purchase your product or warehouse them. The reps can also advise on go-to-market ideas, local advertising, make local sales presentations, and assist with customs clearance.

 

Advantages to direct exporting: 

  • Quick market entry

  • Low cost approach

  • Low risk

  • Can learn about the market before making a bigger commitment

  • Can use a built-in customer base

  • Can possibly store product in 

  • Can get advice and assistance from people in the market

 

Disadvantages to direct exporting:

  • In some scenarios, you are still responsible for sales, marketing, exporting and customer support

  • If you use a distributor or sales rep, you lose direct contact with your end customers

  • Your product may be one of many they are selling, so it may get less attention than you would like

  • Someone else is representing your brand and may not do so in a way you would like them to

  • You may still have to find ways to warehouse your product in the Netherlands

 

Indirect Exporting

Indirect exporting allows a smaller company to enter a foreign market without the risks and complexities of direct exporting. Partnering with an established company is one of the quicker and more affordable ways to do business in new markets. If the partner has a complementary business to your own and the same target market, the efficiencies could be good for both partners.

On the other hand, you will have less control over the promotion and sale of your product and will have to share in the profits. You will also be relying on your partner to represent and support your product in the way you want, which they may not do.

 


 

Globig Tip

 

Choose your partners carefully. Make sure they are respected by your target customers and will have a positive impact on your brand. Understand what other brands they are working with to ensure your brand gets the attention you would like it to have, and be aware that if they apply for and own your brand’s trademark, they could also own your business in that market. And finally, know what your liabilities are if they run into legal or financial troubles.

 


 

Assigned agents

Assigned agents are paid a percentage of the sales they generate. According to sales conditions set by you, they offer your product to potential customers. They are not an employee of your company.

 

Trading Companies

As opposed to EMCs, trading companies find out what people want in foreign markets, then look for sources. They will often buy products in big orders and pay the suppliers, and are specialists in both import and export. They are involved in negotiating the terms of sale and product delivery, financing, and managing customs and barriers of international trade. They distribute product through their retail network.  They can also act as an intermediary between a buyer and seller, rather than being a buyer or seller themselves.

 

Remarketers

With this approach, you are essentially selling your product to be re-packaged and sold as someone else’s. They assume all of the risks and are responsible for sales and accounts. While this can lead to sales that might have otherwise taken too much effort for you to get on your own, it also means that you lose all control for marketing, pricing, promotion, and support.

 

Advantages of indirect exporting:

  • Low cost entry into a new market

  • Experience in market

  • Established customer network

  • Speed to entry

  • An opportunity to learn about a market from experts

  • Act as a department in your company that you aren’t ready to build

  • Depending on the relationship, you can still control the price and accept or decline prospective deals

 

Disadvantages of indirect exporting:

  • Possibly less control over how your product is marketed, sold, and managed

  • Less direct feedback from your customers

  • Since most of these companies also work with other brands, your brand may not get the attention you would like it to

  • If your business partner is not respected by your target customers it may have a negative impact on your brand

  • If in the long term you’d like to do business in that country without a partner it may be hard to establish yourself with a very powerful partner you’ve helped to build up

  • If your partner could become your competitor and they are just learning from your business before starting a competitive product

  • If the partner applied for and owns the trademark for your brand they could own your business in that market

  • If your partner runs into legal and financial troubles, understand what your liabilities are

 


 

Globig Tip

These parties are normally very risk averse, particularly with products or services that are new to their market. Be prepared to negotiate for return rights, stock refreshment policies, etc. that may be very different from those in your home market.

 


 

Contractual Strategies

 

Licensing Abroad

In this scenario, Company A (you) from one country will create an agreement with Company B from another country to transfer to Company B the right to manufacture or distribute Company A’s (your) product or service, in a foreign country for a set amount of time and money. Company A can also license to Company B the right to use their intellectual property (IP) including patents, trademarks, and other IP, give their company name, technology, and technological know-how, design and/or business methods.

 

Advantages of licensing abroad:

  • Quick, easy entry into foreign markets for both

  • Speed to market

  • Expertise in market

  • Lower cost

  • ROI could be significant

  • Lower risk to Company B with an established brand

  • Lowered financial risk for both companies since they are working together with each providing their expertise

 

Disadvantages of licensing abroad:

  • Company A that owns the product will have less control over Company B

  • The licensee Company B may become a competitor after learning about Company A’s business

  • Intellectual property may be lost

  • License has a limited time period

  • Company A’s brand and reputation could be at risk if not managed well by Company B

 

Licensing requirements vary around the world and it is essential that you find international legal experts who can help you draft your licensing agreement in order to comply with any country’s regulations and to ensure that your IP is protected. Globig provides a number of vetted vendors who can help you with your legal and accounting needs should you decide to pursue licensing abroad.

 


 

Globig Tip

 

Make sure you have all trademarking completed in each market being considered well in advance of going into that new market.

 


 

Franchising

Franchising is another type of licensing agreement that offers a highly standardized and tested model for creating a business. Franchising is often the choice for new entrepreneurs since they can license a well-known brand with a tested plan and more support from the brand that is licensing the franchise. A lot of restaurants and other service businesses use the franchise model because it allows both the original franchisor and franchisee to share costs for starting businesses.

Franchisees have some control over the operations but often the regulations are well established in advance and require compliance. Especially for famous brands, franchises can be revoked if franchisees don’t comply. In exchange for a paid franchise license, the franchisee will be provided product resources, designs, training, operations and marketing support.

If your product or service can be franchised and you are comfortable with this kind of arrangement, it is an option to consider.

 

Advantages of franchising:

  • Lower risk entering new markets for both licensor and licensees in regard to costs, legal ramifications and political risk

  • Economies of scale by ordering with owner and other franchisees

  • A proven business model that removes some of the unknowns in starting a new business

 

Disadvantages of franchising:

  • Both licensor and licensees have less control than if they created a new business

  • Franchisees are often inexperienced and can harm the original brand if they don’t do a good job

  • While a licensee has lower risks, they also have lower profits than if it they owned their own business since they pay the licensee for the license and also often a share of revenue

 

Equity strategies

 

Acquiring a company or establishing a joint venture

The Netherlands does allow mergers and acquisitions. Since these are complicated transactions, we highly recommend your working with your legal, banking, and tax resources to understand the impact on your business. If you are going into a country that has regulations around foreigners buying into companies, make sure you have an option to reverse your transaction if the government does not approve.

 

Acquiring an existing company

This is a big opportunity as well as a significant risk. Many mergers never achieve their projected financial and market goals for a variety of reasons. Acquiring a new company requires significant investment of financial, stock, and staffing resources. There are cultural challenges, language differences, redundancies, and synergy inefficiencies integrating not only different business types but also different countries. Your management may be distracted by all of the integration issues and actually fall down on their current responsibilities.

If you can reduce the total costs of running both companies and create more value for the new combined entity, you are taking advantage of a situation where the pieces you are putting together are worth more than they were on their own. Be very aware of what it will take to succeed so that you maximize your chances for success.

 

Advantages to acquiring an existing company: 

  • Having an established business entity and tax expectations

  • An existing market of customers

  • Current revenue stream

  • A skilled workforce

  • The removal of a competitor in the market

  • An understanding of the culture and business landscape

  • Existing contracts and more

 

Disadvantages to acquiring an existing company:

  • Cultural differences

  • Language differences

  • Challenging integrations

  • Drain on existing internal resources - financial and staffing

  • Possible tax and legal challenges

  • Inconsistent technology bases for sharing resources

  • Disconnect between brand personas and target markets

  • May take a long time to realize synergies

 


 

Globig Marketplace

Acquiring a company requires significant consideration before moving forward. It’s also important to understand the laws and regulations for foreign entities to buy an existing company in any country. The Globig Marketplace includes vetted Legal and Financial experts.

 


 

Joint venture

A joint venture is established when two or more separate companies agree to undertake a specific task or business enterprise for a finite time while retaining their own distinct identities.  They each share in the expenses and any profits.

Companies that are complementary to each other may offer significant strategic advantages by working together, and are good candidates for considering a joint venture. Joint ventures are most interesting when the two companies have similar long-term strategic goals, yet are not competitive in their markets. By combining forces, the companies are able to create one stronger company to compete against market leaders and leverage each other’s assets.

 

Advantages of joint ventures:

  • Stronger when combined

  • Shared risk

  • Opportunity to compete against market leaders

  • Complementary strategies

  • Speed to market

  • Lower costs

  • May reduce regulatory issues

 

Disadvantages of joint ventures:

  • Risk associated with sharing proprietary knowledge and resources

  • Hard to combine two cultures

  • Limited term relationship

  • Lack of clarity in business issues such as ownership rights, control, length of term, pricing, profit sharing etc. may result in legal battles

 

Wholly-owned subsidiary or setting up your own business

The most high-risk, high cost, and also high reward option is to truly build up your company in another country. When you invest directly into the Netherlands, your company will retain full ownership and sole responsibility for all aspects of the business.  

Each country has its own requirements for allowing foreign-owned companies to set up business within their borders. Be sure you understand the requirements for the Netherlands. Globig provides a list of vetted legal and financial experts, along with other areas of expertise, who can help you understand the subtleties for the Netherlands.

 

Advantages:

  • Highest level of control over your product and brand

  • Opportunity for highest ROI

  • Often the best long-term strategy

 

Disadvantages:

  • High investment required

  • Long-term approach necessary to see results

  • Taxing on the organization

  • Additional taxation

  • More regulatory compliance requirements

  • Slower entry into market

 


 

You have many options for doing business in the Netherlands and the startup climate is healthy and growing. There are plenty of resources to help you get started, to integrate into the community, and to set up your business.

 

 

KNOWLEDGE BASE Ways To Do Business In The Netherlands