In the US, I’ve had more than my fair share of starting and running businesses in diverse settings, including selling electronic office equipment; taking a device that checked for the presence of weaponized bio agents and re-positioning it for pharmaceutical manufacturing; creating software for physicians, etc. I’ve also been a guest lecturer to MBA students and was on the screening panel for high net worth investors.
But I had never started or run a business outside the US.
Like most businesses, the idea for this one came from what the founder (in this example, me) experienced when trying to buy a product or service; in this case moving our family’s household goods from the US to Mexico. When my wife handed me the estimates from the two established moving companies in town, I was shocked—not only by the price (which I felt was outrageous) but even more by all the importation rules these moving companies wrote that we had to follow along with dire warnings that if we didn’t, it would be our fault and we would have to suffer the dire consequences.
Given that this looked like something that needed fixing and that I had experience with business in general, I decided to investigate further and if everything lined up, maybe even start a company here in Mexico.
I was aware that I had no knowledge whatsoever starting or running a company outside the US and that this lack of experience added a dimension of risk that wouldn’t exist in the US, but I was also aware and hopeful in some theoretical sense that starting a business outside the US also added another dimension of potential reward. The only thing I didn’t know was if the reality would contain more risk or more reward, and in what proportion. Now I can share with you what I found.
There Is A Huge Advantage To Having Lower Personal Living Expenses
One of the biggest risks of starting any business is running out of money prior to the business becoming profitable. This is one reason why it is easier to start a business when you are young, before you have financial and other obligations and can live on so little. For example, a college student can sleep in the office and eat beans for months while his or her business is growing, while it is much more difficult for a married adult with children and a mortgage to do the same thing.
In this regard, starting a business in Mexico as opposed to the US is a huge winner. Without any effort whatsoever and while giving up nothing, I had already naturally reduced our family’s living expenses to significantly less than half of what they were in the US, all while enjoying a better lifestyle. These lower personal expenses greatly increases your ability to think more strategically and invest more in your business. You can provide better service at the beginning of your venture, try out different variations and models, and not panic if things take longer than expected. This is a very nice luxury and results in a much greater likelihood of doing the right things for the right reasons for your business and your clients and being successful, all without eating cheap food for months and sleeping on the floor.
Your Operational Costs Are MUCH Lower
In Mexico, everything from legal help to accounting help to other labor is a mere fraction of what you would pay in the US. Consequently, you use it. In the US I was quite reluctant to contact my lawyer or accountant, knowing that the cost would be a minimum of $250+ an hour. In Mexico, it is about 1/10th that cost, so if I have a question here, I call.
Being a moving company, we do business in the US and in Mexico, so I can compare directly what services cost in each country. One good example is loading and packing. In the US, loading and packing could cost my clients $25 to $45 per hour per person or more, without my company getting involved in any way other than to suggest a provider and supervise the work. Here in Mexico, my company charges less than a third of that, with quality every bit as good, or even better. I’m always quite relieved when I know the portion of my clients’ move is in Mexico rather than the US because in Mexico we can provide better service for about a 70% discount and everyone is more relaxed and happy.
The Competition Can Be Less And Your Experience In The US May Give You An Advantage
In the example of starting my moving business, I would be competing against two entrenched competitors, both of which had been in business for 20 years or more and both of which hadn’t changed much of anything since they started their own businesses. One of the reasons they hadn’t changed is that they didn’t need to; the competition just wasn’t that intense like you would find it in most places in the US.
After examining how they did their moves, I was able to apply some new ways of looking at the procedure of moving to Mexico from the US and vice versa and found several inefficiencies that could be reduced or made better by applying advances in technology or just looking at the problem with the fresh eyes one gets from a more demanding business environment north of the border. In the much faster-paced, competitive and intense way of doing business in the US, I probably wouldn’t have been able to find these inefficiencies so easily or come up with better solutions so easily because my competitors would probably already have done the same thing, but earlier. It was not that hard to find a niche to give our clients much better service at a lower price; something that is not that easy to do in the US.
Here’s another example. Of course, I had to come up with a name for my company that was easy to remember, descriptive, would show well on Google searches, and that no one else already owned. Try that in an established industry in the US! Here, I just tried the first and best name that came to my head: Best Mexico Movers. To my shock, the URL was available, so I just took it, and now it comes up first on Google. That was easy.
Moving wrapped furniture into a home in Mexico
Getting a Work Permit and Starting a Mexican Company Are Not Difficult
The only way I would run a business in Mexico would be to have it be completely legal, which ours is. I had no difficulty at all getting a Mexican work permit for myself and establishing a Mexican company. As they say here in Mexico, “Adelante” (which means “forward” and which, in this context, I translate to “Great. Now that that’s done, I can get on with the business.”)
The US Tax Code Is Very Helpful
Unlike in the vast majority of other industrialized countries, if you are a US citizen, you must pay US income taxes regardless of where you’re located or where your income originates, and you must do so for the rest of your life. This makes it easy to understand, but not wonderful news.
Before I give you the good news, please allow me to issue a caveat. When dealing with the US tax code, you should always consult your qualified US adviser (even if doing so will set you back $250 an hour).
Now for the good news. When you talk to your US tax professional, ask him or her about the Foreign Earned Income Exclusion, which, in general, allows a US taxpayer filing singly to exclude over $100,000 per year (over $200,000 per year filing jointly) from his or her US income taxes if that taxpayer lives abroad. If you do the math comparing your after-tax income with and without the Foreign Earned Income Exclusion, you can see that excluding this very significant amount of income year after year can have a very salutary effect on your net worth, especially when compounded annually.
There are lots of Digital Nomads (people who work outside the US and even support or sell to US businesses with nothing more than a computer and an Internet connection) who happily use this exclusion.
A Balanced Perspective
Please don’t take this article to mean that starting a moving company in Mexico was easy; it definitely was not. Starting any business in any place is hard, as anyone who has done so will tell you. You’re still going to have many of the same issues you would have in the US and perhaps even more, depending on what business you’re in. You still have to do your due diligence, find an underserved niche, have a good business plan, finance your business properly, execute well, etc. It’s just that, if it works into your plans, you may want to consider starting a business broad. For many, it can turn out to be a wonderful experience, one in which both you and your clients win.
I created BestPlacesInTheWorldToRetire.com because I couldn’t find what I wanted—credible information from a diverse group of knowledgeable people about retiring abroad. Several years later, our site has more than 600 contributors, 10,000 answers, 300 stories, two eBooks and six research studies, all about life abroad.
In 2016, my wife and I decided to try life abroad ourselves; selling, giving away, or putting into storage anything that wouldn’t fit into a large, white van, in which we and our two dogs toured the best-known expat areas in Mexico, staying in vacation homes along the way, all while knowing very little Spanish. More recently, I created Best Mexico Movers.
It is from this background and perspective that I write for you about life and retirement abroad. I hope you enjoy it.
The Mazatlan Post