Your Own Tenerife Business - buying one or starting one

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Your own Tenerife business. Whether you are buying an existing business or creating one from scratch, there are some important things you should consider, quite often overlooked by people who end up being unsuccessful.

Whichever path you chose, there are two things that are common to both:

Being Able To Speak Spanish

I've said this elsewhere, but it's worth repeating. To acheive a definite advantage over other ex-pats trying to get started in business in Tenerife, you can't beat being able to speak the language.

Okay, you don't have to be as fluent as a native. If you have sufficient command of the language to understand official documents and converse with officials, who, as a rule, don't speak English, then that's going to stand you in good stead. Just being able to say "una cerveza, por favor" isn't really enough.

Creating A Business Plan

The majority of ex-pats looking to start a business consider running a bar/restaurant - after all, it's the obvious thing to do, isn't it? Most don't even think of such things as a "business plan". Yet this is the most important thing to do before you commit.

Sticking with the bar/restaurant idea, you need to consider such things as the following:

Wholesale suppliers of goods and their prices.
How much is the trade price of beer, for example. At what price are you going to sell it? Is this price competitive?
What licences and permits are required?
Some bar/restaurants may require more than one - food, music, etc.
Preparation of accounts.
You have to pay tax, so you'll need the services of an asesoria fiscal.
Do you want to buy premises, or rent them?

As far as monthly outgoings are concerned, will you have considered all the following?

Rent (if leasehold or rental)
Licence fees
Insurance
Social Security (for both yourself and any employees)
Community charges
Utilities, such as
Electricity
Water
Rubbish collection
Telephone
Printing (for publicity)
Accountant's fee
Use of vehicle
Employees' wages
Your own wages!

After purchasing whatever you're selling at trade price, the price you sell on at should, on average, bring you a profit of around 60% and you need to match this against all the above outgoings and decide whether this business is, in fact, a viable proposition and that you can make a good living from it.

It is an extremely good idea to employ the services of an accountant very early on in your business planning, as he'll be able to offer invaluable help in this regard.

your own tenerife business

Buying an Existing Business

To buy your own Tenerife business, first and foremost, you'll need to employ the services of a gestor. This is a professional who specialises in obtaining official licences and permits. Okay, his fee may set you back something like 100 euros, but it'll be worth it in the long run.

Be aware also that, just because the business you've got your eye on is operating successfully, doesn't mean it is legal. Check it out properly (or get your gestor to do it).

An existing business may have outstanding debts, such as invoices from suppliers, licence fee and social security payments. This needs to be checked on, too, otherwise you'll have to pay them.

Any purchase of a business must be properly notarised by a notario, to ensure legal proof of ownership.

You also need to be aware of the ins and outs of your own Tenerife business licence. There may be future requirements that have to be considered.

If you want to browse Tenerife businesses currently for sale, try this website: http://businessfindertenerife.com/index

There are three ways to go in order to take over an existing business.

The Cesion

This is a business leasehold purchase and the cesion, since 1995, replaces the old traspaso, which, according to the Spanish Letting Law, tended to favour the landlord. The new system favours the tenant. This is manifested mainly by the stipulation that the tenant is free to sublet or sell the lease without prior consent of the landlord (although some landlords insert a clause in the contract forbidding this unless agreed by them).

The lease incurs a monthly rent and is, typically, of a term of between five and 10 years. During this time, the rent can only be increased based on the national rate of inflation. If the lease reaches the end of its term and the tenant renews, the landlord may then increase the rent by 20% if he wishes.

The purchase of the leasehold normally includes fixtures and fittings and the tenant has the right to alter the decor and furnishings - but not undertake any major structural changes to the building.

A typical arrangement on buying a lease is the payment of a two-month refundable deposit.

For any such leasehold purchases, you are strongly advised to employ the services of a professional, such as an abogado. (See my page on English speaking lawyers in Tenerife.)

Freehold Purchase

The difference here is that, in addition to all the above, you purchase the building as well.

You have to go through the same procedure as you would for buying a residential property (outlined on my Living in Tenerife page).

It's a considerably more expensive way of doing things, but the advantages are that you can do with the building what you wish, run your own Tenerife business yourself or lease it out to someone else and let them do all the work while you collect the rent, or even buy empty premises and create your own business.

One important point: always check with the local Town Hall that they will allow your premises to be used for your chosen activity.

Renting

As with everything, this option has its pros and cons.

It's a much cheaper option to just rent a property. All the fixtures, fittings and equipment are included, for a start. Or, it is possible to rent empty premises and kit them out yourself, but this, naturally, incurs extra cost, not to mention having to obtain all the necessary business licences.

Landlords renting out premises usually charge two to three months rent as a deposit, plus the first month's rent, in advance, although some can charge as much as six months.

Still, the rental option might be the cheapest way to get your business up and running.