How to Operate a Small Business in UAE – A 10-Point Guide for Beginners

Starting a small business is much easier in UAE as compared to other Gulf countries. Yet the new entrepreneurs often ask the question, “how to operate a small business in UAE?”;

Despite all odds faced by the Covid-19 pandemic, operating a small business in UAE has many merits. Over the last decade, the country has been at the forefront of all Gulf countries in terms of economic growth. Resilience, innovative economic policies of the Rulers, combined with a commitment to face the change, were a few reasons that made UAE an attractive destination of capital.

Since 2017 UAE has faced two back-to-back crippling blows to its economy. A persistent slump in oil prices combined with low domestic demand had flattened the economy of UAE in 2017. The downturn was effectively and quickly responded to by the UAE Government through a series of special economic packages and other stimuli to kick-start the slumping business situation.

The next wave of crisis hit the economy in 2020 due to the Covid-19 pandemic. The growth forecast started going south. On July 12, 2020, the Government announced a special stimulus package worth AED 1.5 billion in addition to an earlier incentive of AED 4.8 billion in March 2020 just before the country went into lockdown. The special additional package was extended to support the Small and Medium business segment, which the Government is committed to promoting.

In that dynamic and upwardly moving environment, the idea of operating a small business in the UAE looks exciting. But for entrepreneurs, particularly for new and small business owners, the place has its challenges.
Therefore, let’s look at some facts that most new, small business owners should be aware of when starting and operating a UAE business.

1. COMPANY OWNERSHIP IN THE UAE

To start an onshore or LLC (Limited Liability Company) in the UAE, you’ll need a local sponsor. This rule compels an individual to have a UAE national as a partner who shall own 51% ownership. That’s a mandatory requirement.

2. PROJECT FINANCING

It can be difficult to obtain finance from the UAE bank if your business is new. Because the provision requires at least three years of audited balance sheet with positive figures and growth indicators for business loan applications.

3. INTRODUCTION OF VAT

In January 2018, the UAE introduced a 5% value-added tax,. This tax is applied to almost all goods and services except essential education, and healthcare.

4. RELIGIOUS CULTURE

You should be well aware of the UAE’s Islamic culture before setting up a business there. It plays a crucial role in people’s everyday lives, in the office and outside. Islamic customs should be observed, and the effects of the Islamic religion on business interactions must be respected when doing business in the UAE.

5. GETTING KNOWN IN DUBAI

In the UAE, things move quite fast. That doesn’t necessarily mean you can expect to start generating business from day one. Of course, sometimes it’s possible. But UAE is a multicultural place teeming with networkers, and most likely, your first job would be making yourself known.

The business culture in the UAE is about personalities. People would want to know about you personally before doing business. This needn’t be a daunting challenge, though. Just put yourself out there and socialize; build rapport, friendship, and trust without being too salesy.

6. COMMUNICATION STYLE

While operating a business, whether small or large, in UAE, you must be aware of some of the niceties in communication people practice. Men and women are also communicated with different tones.

7. MANAGING THE MANIA

UAE is a high-energy place where you can easily get overwhelmed. An exciting work ethic runs through the place, and for new arrivals, it may take some time to gain some perspective. While some can quickly get a handle of things, others find the turbo-charged approach to everything quite challenging.
The key to ensuring you keep your sanity while adjusting to life in UAE is to find a work/life balance as soon as you can: set reasonable hours and take the time to switch off. If you don’t, you could find yourself burning out before you know it.

8. HIRING EMPLOYEES

The UAE has specific rules and procedures for hiring employees. That includes the obligation of a company to provide Visas to its employees; no employee is permitted to work in the company until they get their job visa. Once you get the basic ideas of the UAE’s regulations, you’ll have a handle on this procedure.

9. MANAGING REVENUE

Even though the UAE can provide many opportunities for widening your business, it can be equally risky. Recent surveys reported that 82% of the start-ups fail due to poor cash flow management. Therefore, the business setup cost and your initial capital requirements need to be managed and applied well. Without ensuring strict financial management and discipline, you may go out of business sooner than you
can guess.

10. PEOPLE MANAGEMENT

Like anywhere in the world, managing people will significantly impact one’s success in UAE. The most notable aspect in the UAE is perhaps the level of diversity present in workforces. As you will be working with people from different diversities, people management can take some learning to be carried out well.
Finding a local sponsor, tuning into the culture, managing your finances, and getting a clear idea about the various rules and regulations can appear to be a daunting task.

Also, many a time, business requirements that you come across can be misleading and incomplete. Yet, doing proper due diligence, patiently studying and following the rules, and asking for help from other experienced business associates can make your business operation relatively smooth in UAE. And once you’re settled well, you’ll find that the sky is the limit for your growth and opportunities in this wonderful country.

One Comment

  1. Well written blog and gives awareness to new entrepreneurs who have ambitions to open up a new business. Thanks to Team Leap for this blog at the right time in this current situation

    Reply

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