Entrepreneurs guide

Thousands of profitable small companies need entrepreneurs

According to Suomen Yrittäjät, 34,000 entrepreneurs over 54 years old are willing to transfer their business outside the family in the next 10 years. About 15% of those companies could be suitable to be transferred to persons of foreign origin.

Are you thinking of engaging in business managing in Finland? If so, one option to consider is the possibility of acquiring an existing company.

The process may seem complicated and expensive, but buying an existing business also has advantages: it saves time and resources in bureaucratic procedures and allows the buyer to make several important checks in advance about the viability of the business and its accounting statement.

According to figures provided by the Federation of Finnish Entrepreneurs (Suomen Yrittäjät), each year there are about 2,000-3000 business transfers in the country.  However, foreign entrepreneurs hardly approach this market and normally prefer to start new businesses. The main business transfers broker in Finland (Suomen Yrityskaupat Oy) estimates that in less than 5% of all cases the buyer comes from abroad.

Those figures are likely to increase in the coming years, as the country has 73,000 entrepreneurs over 54 years of age. When asked which are their plans for their companies after retirement, 34,000 of them said they are interested in selling their businesses outside family; 13,500 would prefer a business transfer inside the family; 4,000 expect to find some other solutions and 21,500 said they will terminate their companies.

The idea of closing the business is even more extended among sole proprietors: at least 54% of them believe to terminate their companies within the next 10 years, remarks the Federation of Finnish Entrepreneurs.

Increase business transfers

The mere prospect of terminating tens of thousands of viable businesses (with all it entails in terms of job destruction and loss of tax collection) seems uneconomical in itself. But the real scenario can be even worse. According to Suomen Yrittäjät, only 50% of the business transfer wishes expressed above will come true. Given these numbers, the organization considers there is a lot of work to be done and the total amount of business transfers should be raised up to 5,000 per year.

Mika Haavisto, specialist in business transfers from the Federation of Finnish Entrepreneurs, estimates that up to 15% of those small businesses that will be for sale in the next 10 years could be suitable to be transferred to persons with foreign background. He also explains that the interest of foreigners in this self-employment option "is clearly growing," Chinese and Russians are particularly active.

So, is there a real opportunity for foreigners looking for jobs to make a living by acquiring profitable already existing businesses?

"It is of course always an important option. Statistics shows that Finland needs immigrants to survive. People are needed as employers, employees and solo entrepreneurs", says Haavisto.

Advantages and obstacles

Suomen Yrittäjät has identified a list of reasons to promote business transfers and the advantages they provide for the society: 

  • Allow the 'last salary' to entrepreneur.
  • Ensure continuity of companies.
  • Preserve or create jobs.
  • Ensure continuity of tax collection.
  • Maintain or improve regional vitality.
  • Create growth (internationalization).
  • Prevent wasting (material and immaterial equity).
  • Create competitive advance.

However, the Federation of Finnish Entrepreneurs also admits there are obstacles and challenges. Some of them are common to all entrepreneurs and others specific to those of foreign origin:

"Probably the biggest obstacle is the lack of information. Entrepreneurs are shy to show their selling intentions even among Finns. Other barriers might be the fact that Finnish companies are often very small size and buyers are often looking for bigger firms", explains Haavisto.

Source: Mika Haavisto, Suomen Yrittäjät.

For all entrepreneurs there is a lack of encounters between sellers and buyers and also valuation is challenging. Ultimately, there is reluctance to use professional's help in order to make sure that the acquisition is a good deal. In the specific case of foreigners, lack of trust among both parts is also an important discouraging factor:

"Trust is a premise for trading and trust is easier to create if buyers and sellers have a common language and culture. There are also companies which require fluent Finnish and awareness of the Finnish culture in everyday encounters with customers and partners. Work and residence permits can be a problem if the buyer is coming from outside the EU", added Haavisto.