95 percent of new companies go bankrupt within three years

franco1111

Bronze
May 29, 2013
1,247
227
63
Gringo
Here's something to think about as you plan your next business venture in the DR. Although, there is lots to question about the reporting.


Santo Domingo.- The elimination of the severance pay, a simpler tax reporting process and the exclusion of the tax payment in advance, are some of the proposals which the Dominican Merchants Federation (FDC) seeks this year as part of the country’s labor and fiscal reforms.

FDC president, Iván García, said the points pose a problem for MSMEs, which in many cases have to borrow to meet those commitments.

During a luncheon Tues. at the Santo Domingo Country Club, Garcia, accompanied by other FDC directors, said 95% of the companies created in the Dominican Republic go bankrupt within three years, due to tax and social security burdens.

“We understand that this country cannot continue charging taxes to a new small business just as it is charged to a large company that has been established for several years,” the business leader said.

https://dominicantoday.com/dr/econo...s-also-want-to-nix-severance-pay-advance-tax/
 

KateP

Silver
May 28, 2004
2,845
6
38
More like lack of planning ahead. The laws are there, people just don't budget and program themselves to have enough $$ to cover everything during the first few years until a business actually starts coming out in the black.
 

dv8

Gold
Sep 27, 2006
31,266
363
0
lack of planning certainly plays the part and i am sure many starting businesses are not legal anyways and therefore do not bear social costs but it is also true that just one bad worker can bring a small business down. and so can a surprise inspection from DGII. existing labour law does favour the employer and no wonder so many of them try to screw the system before the system screws them...
 

Conchman

Silver
Jul 3, 2002
4,586
160
63
57
www.oceanworld.net
lack of planning certainly plays the part and i am sure many starting businesses are not legal anyways and therefore do not bear social costs but it is also true that just one bad worker can bring a small business down. and so can a surprise inspection from DGII. existing labour law does favour the employer and no wonder so many of them try to screw the system before the system screws them...

you mean it favors the employee right? The severance pay law is bad on so many levels....for both employees and employers
 

Garyexpat

Bronze
Sep 7, 2012
2,105
739
113
Failing to plan and being under capitalized are the biggest reasons by far in my experience. I have dealt with many small businesses here (call centers and a few others) that do not have a business plan and no idea how do make a business plan. I have a template i give them showing them how to forecast but most can not be bothered.
Being undercapitalized is not unique to the D.R.
 

melphis

Living my Dream
Apr 18, 2013
3,486
1,675
113
I agree that the severance scams and taxes certainly play a part but from my experience the main reason for business failures is a complete lack of planning. How many times have we seen a successful business go down because 4 or 5 other lazy clowns open the exact same business within spitting distance of the first one and then they all shut down.
After 10 years here I can't count how many times I have seen this.
You would think this type of stupidity would eventually cure itself.
 

bob saunders

Platinum
Jan 1, 2002
32,471
5,902
113
dr1.com
Failing to plan and being under capitalized are the biggest reasons by far in my experience. I have dealt with many small businesses here (call centers and a few others) that do not have a business plan and no idea how do make a business plan. I have a template i give them showing them how to forecast but most can not be bothered.
Being undercapitalized is not unique to the D.R.

My brother spent two years in Cuba doing micro-loans and part of his job was to teach Cubans how to form a business plan, a budget....etc. No business plan, no loan. The challenge here in the Dominican Republic is having to set aside , depending on the size of your business 500,000 to a million pesos for 13th salary, plus paying your income tax ahead....etc. Then trying to collect from delinquent clients is no easy feat either.
 

TropicalPaul

Bronze
Sep 3, 2013
1,366
614
113
As someone who runs a small business here, I think the biggest problem is that all the TSS and DGII rules are so complicated and there is nobody who can tell you how to do things. Nobody gives you training, no manuals. I'm from the UK and when you set up a company here, the tax authorities invite you to training sessions, also available online, and they really push you to go so that you understand how to calculate the taxes, what you can claim and not claim. And then you have a named person to call if you have questions. In Dom Rep it's 200 times more complicated and zero help. The approach is designed to help you make mistakes and when you do make a mistake you are treated like a criminal.

One example is Christmas pay. It took me 5 years before I realised that you can declare the amount you pay in Christmas pay to the TSS, and you get a credit against your profit tax for this. It's buried in a help screen, you can only do this in December, not afterwards, and when you do enter the amounts of Christmas pay, you have to take a screenshot as there is no way of checking what you entered in the TSS system afterwards. Just to do basic accounts and pay tax I've had to pay a programmer to write specialist software for us.
 

Russell

Well-known member
Jun 17, 2017
1,056
337
83
There are so many variables that take a company down.
Yes the system of Taxes in DR are complicated in the least wise.
But the numbers are not out of wack with other Developed Countries.
Canada for instance as a comparative analysis has some interesting Small Business statistics.
Small Business 5 to 100 employees.
5.1 million people work in Small Business. that's 41% of workforce in the Country.
Small Businesses contribute 30% to GDP.
But look at these statistics : 85% survive the first 12 months.
70 % survive the first 2 years

The point is that the DR with 95% business failure is not too out of line with Developing Countries.
If DR had Micro-Credit facilities, Small Business Training , Better access to Government systems ; simplified tax facilities ; they could very well be right up there with the rest of the gang.
In the past I was privileged to live and work in a Cree Native community in Northern Canada.
It was much the same when it came to small business ventures.
Most times the business ventures failed right around Hunting and Fishing season.
That was due to culture.
The concept of ''Profit'' was new to their culture ; they blew the surplus funds on frivolous things....
Same here in DR!
Being a F.CIM,, C.Mgr. (Fellow of the Canadian Institute of Management and Chartered Manager ,, with 90% of my work in small business over the past 35 years I have a pretty good outlook on the subject.

Ie, One business starts and a dozen more under capitalized initiatives duplicate the initiative.... every one looses.
One of the 5% that makes it to 5th year is far too profitable so the Bigger companies who serve the same clients ''force them out of business''. Either in friendly or hostile takeovers .

It's a crap shoot , and the DR is of no exception to the rule.
I wish I had the stats on Small Businesses in USA. Would ne interesting.

Russell
 

Russell

Well-known member
Jun 17, 2017
1,056
337
83
Look for an obvious need , analyze the pros and cons, determine if the business can be easily cloned, then look at the 3M's

Management
Market
Money

Plan to spend about 12 hours a day on the project
Trust no one you hire to be loyal and in your best interests.
For a micro-enterprise (up to 4 employees) expect to earn, after expenses, about 40 pesos an hour.

Really!
Is that called retirement?
 

sayanora

Silver
Feb 22, 2012
1,621
36
48
The biggest problem I've found runnning businesses in the DR is the fact that most of your competition doesn't play by the same rules.. If I have a furniture factory and pay all corresponding taxes/liquidation/etc and my competition doesn't pay any of that and makes their furniture in their "patio", none of their employees have insurance, nobody gets liquidated, they don't pay income taxes, it means that my competition can sell the same product for 40% lower than I can using the same materials.. Playing by the rules here is definitely an uphill battle but if you can persevere over time you can come out on top!
 

sayanora

Silver
Feb 22, 2012
1,621
36
48
Also, a consumer is NOT willing to pay a premium because a business is registered/legal.. they just want the best price..
 

sayanora

Silver
Feb 22, 2012
1,621
36
48
As someone who runs a small business here, I think the biggest problem is that all the TSS and DGII rules are so complicated and there is nobody who can tell you how to do things. Nobody gives you training, no manuals. I'm from the UK and when you set up a company here, the tax authorities invite you to training sessions, also available online, and they really push you to go so that you understand how to calculate the taxes, what you can claim and not claim. And then you have a named person to call if you have questions. In Dom Rep it's 200 times more complicated and zero help. The approach is designed to help you make mistakes and when you do make a mistake you are treated like a criminal.

One example is Christmas pay. It took me 5 years before I realised that you can declare the amount you pay in Christmas pay to the TSS, and you get a credit against your profit tax for this. It's buried in a help screen, you can only do this in December, not afterwards, and when you do enter the amounts of Christmas pay, you have to take a screenshot as there is no way of checking what you entered in the TSS system afterwards. Just to do basic accounts and pay tax I've had to pay a programmer to write specialist software for us.

I would highly suggest hiring an accountant on iguala (monthly stipend) if you haven't done so already.. you could do everything PERFECTLY on your end and if you don't have an accountant that's registered they will find problems with what you've done.
 

melphis

Living my Dream
Apr 18, 2013
3,486
1,675
113
i cant even imgine what business to start here

Buy a fleet of used Hyundai's, fill the trunks with pharmaceutical products and cruise the streets that have the busiest bars. Guaranteed to make buckets of cash.
Keep a few pesos handy for the local cops and your on your way to untold wealth.
 

Russell

Well-known member
Jun 17, 2017
1,056
337
83
Buy a fleet of used Hyundai's, fill the trunks with pharmaceutical products and cruise the streets that have the busiest bars. Guaranteed to make buckets of cash.
Keep a few pesos handy for the local cops and your on your way to untold wealth.

This is not a joke!
Some of the most successful micro-enterprises with the highest profit margins are run out of trucks and converted vans. This phenomena is world wide,by the way.
Russell
 

bob saunders

Platinum
Jan 1, 2002
32,471
5,902
113
dr1.com
I would highly suggest hiring an accountant on iguala (monthly stipend) if you haven't done so already.. you could do everything PERFECTLY on your end and if you don't have an accountant that's registered they will find problems with what you've done.

that's exactly what we do. We have an accountant/administrator who prepares everything for the accountant and he figures out the income tax....etc. Our person does the TSS.....etc. Our competition for the most part doesn't pay income tax at all so that puts us at a slight disadvantage but we try to provide a better product and so far it has been successful.