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Information and Pitfalls of Starting a Business in Costa Rica

Costa Rica News – If you can start and make a business profitable in Costa Rica you can do it anywhere.  It is one of the most difficult countries in which to do business.  This is not just my point of view it is the view of a majority of entrepreneurs that have tired to try to give Costa Rica business ventures a shot.

I was once told by a friend of mine in Costa Rica that in order to make $1,000,000 in Costa Rica, bring $2,000,000.  I always laughed at this but it is not too much of an overstatement.  When putting together your budget and business costs get all your numbers sorted and then in most cases double it.  There are several topics I wanted to address when you are thinking about setting up shop in Costa Rica.

 1. Do Your Market Research – Many great ideas have tried and failed in the business world of Pura Vida land.  Although the idea might have been great in Canada, the USA, or whatever your home country is, that does not mean it will work in Costa Rica.  It is a hugely different market that you are pitching to.  You will be either be trying to do business with the expats currently living in CR, tourists visiting Costa Rica, clients outside the country, or the Costa Rican locals.  Know your market and understand that expats, tourists and locals all have to be approached extremely different.

2. Limited Motivated Labor Pool – If you find a motivated, trust worthy, hard working, and intelligent employee do what ever you need to in order to keep them working for you in Costa Rica.  These are very few and far between in CR. This is for the fact that mot employees in Costa Rica are not self motivated and in fact very lazy.  You will go through in most cases 15 to 20 employees and $1500 to $2000 to find 1 good one.   This although in my opinion is just the culture here can also be because of the following factors:

  • Most People are on Permanent Vacation in Costa Rica and Really Do Not Want to Work
  • Wages Being Offered to Employees is Usually Quite Low Even Though the Cost of Living in CR is Quite High
  • If You Hire Employees And They are Not Contract Workers it is Very Hard to Fire Them without Huge Penalties
3. Supervising Protocols – In most businesses around the world getting your employees to do something is a relatively straight task. You tell them to do something, you give them instructions, and they do the task. If they do not know how to do it they ask fro help or to be trained to do it usually once.  You do not have to watch over them like a hawk to make sure they are working, they just do it. Throw that out the window in Costa Rica.  Here are some how to’s when it comes to supervising workers in Costa Rica.
  • You need to be there most of the time and be hands on with employees in Costa Rica, consider yourself a warden watching prisoners to make sure they are doing what they are supposed to.  (I had a boss that blocked all fun sites on the internet and it always pissed me off but I understand why he did it now. You have to in most cases to get any productivity out of employees here)
  • Give direct and simple instructions to employees and watch over them until you see that they understand them and are doing the task properly.
  • Treat the employee like a 2nd grader, they will not ask for help if they do not understand something they will just sit there until you ask them if they have done the task and they will then say they do not understand.
  • Although you want to teach an employees self reliability in CR many times you will end up doing the task yourself as it is quicker and easier than trying to get your employee to do it
  • Expect to have to retrain or show your employee how to do things several times as they want to do it their way and are very resistant to change
This is not true in all cases but it is more the rule not the exception. I have a couple of pieces of advice for those people that are thinking about being an entrepreneur in Costa Rica.
  1. Buy an established profitable business and do research on it for a couple of months before buying, a lot of the time there is a reason why they are selling other then they just want to sell.
  2. If you can limit the number of employees you have to hire to between 1 and 4, it will be hard enough to find this many good employees
  3. Limit the area you have to run, try to keep everything in one office until you are able to expand

 

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2 Comments

  1. dwayne said:

    Remember the Mexican based Domino’s pizza. They were here a couple years ago. They set up for the Christmas season and Bonus time. Marketed heavily. A week after new years guess what. They packed up in middle of the night moved all their equipment and fled the country. The next day the workers went to work Ha! The company understood they marketed and knew they could and would make money for the 3 months. They also understood IF they stayed longer it would be problems. One smart company not to get trapped in the government red tape.

  2. Tilaran said:

    It’s far easier and more profitable to scam and burglarize. Neither are punished by the “law”. God forbid your bathrooms aren’t in order……only the gov’t need not be concerned with the likes of handicap access etc.
    Only a fool would set up shop here.

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