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Starting “Doing Business” in Turkey

In this article I would like to share some real useful information about establishing business in Turkey and the points one should pay attention to which I hope will help interested parties in making their road maps, when need be.

Phase 1- Market research and cost analysis

No matter in which sector you are or what your product/service is, a market research and feasibility study are necessary before entering a foreign market – regardless of type of business.

You need to know what the initial investment and the monthly costs will be and scan the business environment in Turkey. Getting access to necessary and compulsory information you need, while making a strategic plan is important. This can be about your rivalry within the industry or the incentive you can make use of when you invest in Turkey.

In case you have already had a market research or business plan performed by others or your own staff and are ready to enter the Turkish Market, we can move to the next stage of deciding about your business model.

Phase-2 Business Models

Local business partners For some business it is suitable to start with local business partners, agents of representatives that can facilitate the access of your products or services to your Turkish clients. Here, it is important that your partners are able to work dedicated on your project. If they have other business as well, it is obvious that they will not be able to focus on yours. In such a situation success is not an option and this model will be a waste of time and money.

Setting up an entity

When the outcomes of your pre-investment stage are positive and you are convinced that you should consider setting up a Turkish entity you need to decide on the kind that matches best with your business. Every type of entity established in Turkey by a foreign investor is regarded as a Turkish entity and has the same rights as a company established by Turkish citizens.

There are several kinds of entities  Incorporated entities such as a: • Joint-stock company (A.Ş.)• Limited liability company (Ltd. Şti.)• Commandite company / limited partnership (komandit)• Collective company (kollektif)• Cooperative company (Kooperatif)• Liaison Office (no commercial transactions allowed) Unincorporated entities such as a: • Joint-venture• Business association• Consortium

In case the best option for your business is an incorporated entity you need to decide upon the most suitable option for your business. Turkey’s regulatory environment is extremely business-friendly. You can establish a business in Turkey irrespective of nationality or place of residence. It is possible to establish a company in a couple of days by applying to the relevant trade registry office with the required documents. The company receives its “legal entity” status upon registration with the trade registry. The real issues start after the registration.

Phase 3- Starting a business in Turkey

Starting a business in Turkey means,

paying taxes, enforcing contracts, recruiting people, employees and social security, getting electricity & IT, registering property, office or factory rental, getting credit/finance, marketing, branding,

if applicable; getting necessary licenses, regulations on trading across borders (for import of raw material or export of end product), dealing with construction permits and applying for investment incentives. Taking relevant laws and regulations into consideration like labor law, FDI legislations, advantages of special investment zones like the Turkish Free Zones and its legislation, general rules and procedures on technical regulations and standards.

Most of these practices have their own bottlenecks reflected in large number of procedures, long delays or high costs. Especially, if you do not know where to find the right practitioner and their current market value or institutions and their procedures needed to proceed further for each topic, it may take much time and effort to search for the right alternative.

It would be another concern to make sure you have found the right person or service for each practice. These may all have to do with extra costs on top of efforts.

Although Istanbul is a marvelous city with lots of opportunities it has a very tough traffic issue which can sometimes turn into a nightmare. For this reason it is also important that in any case you keep the distances in consideration to avoid excessive waste of time, effort and expenses.

Phase 4-Mergers and Acquisitions

It is also possible to grow your business by means of a Mergers & Acquisition in Turkey.

Mergers and acquisitions are an important option for larger businesses that wish to grow rapidly.

There are lots of Turkish companies in several sectors that are open for Mergers and Acquisition to generate cost efficiency through economies of scale, enhance revenue by gaining market share, spread risks if products are different, reduce competition if a rival is taken over. Other businesses can bring new skills and technology to the business.The M&A process takes an extended period of time, during which the buyers and seller are constantly learning more about each other. Maintaining an environment of trust and integrity helps greatly in dealing with numerous issues. Should trust or integrity be called into question, the entire transaction could be placed in jeopardy, even though the surface all the operational and financial pieces seem to fit. To overcome this startup phase and make use of the extensive opportunities for your undertakings in Turkey, it is recommended that you find a local partner who can ease this process for you.

It is important that such a partner has resided in Turkey for a long time and has gained knowledge of the Turkish business environment, is reliable, experienced and has a vast network to be able to get access to Turkish governmental and private institutions. Finally, you need a partner that can get your point and meet your needs to ensure you have a successful start and after care for an organic growth in the Turkish market.

BST has a rigorous methodology and qualified process for conducting this investigation tailored to meet the specific needs of each client.

What BST can do for you

If mergers and/or acquisitions are one of your strategic objectives, BST will identify the organization that is most in alignment with your strategy.

In order to match you with your target company, BSTperforms company analyses, financial and business due diligence.

BSTworks together with the owners, top management and shareholders of large and medium sized companies, private equity funds, financial institutions, along with audit, legal and corporate finance, advisory firms.

Semiha Ünal, MBA
Business Consultant
Founding Director Business Support Turkey

This article was originally written on 09.08.2012 for www.businessturkeytoday.com

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