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Why do businesses in Poland fail?


ZZTop
7 Mar 2017  #1
I have heard of Poles returning from the West who try to start businesses, only to lose of their savings. I've also heard of Westerners failing as well.

What are the reasons for these businesses failing?
Harry
7 Mar 2017  #2
A major problem is that Polish bureaucracy can be extremely rigid. People coming to Poland or returning to Poland having not done business here often find that the way they expect government offices to behave and how those offices actually behave are very different. You might think that reality is one thing but unless you have all of the papers to prove it, government offices may well assume the exact opposite.

The tax office is also less than helpful and the tax system is even worse. For example, when you're self-employed you have to pay ZUS at a flat rate even if the amount you earn is less than that payment. So if you want to take three weeks off, you might as well take the whole month off and suspend your company for a month so you have no ZUS to pay for that month.

And then there are staffing issues: a bad member of staff can do significant amounts of damage to a business and its reputation but can be very hard to fire. Personally I just don't employ staff; when I need work done I hire on a B-2-B basis (if the person I want to work with doesn't have a company, they can use an incubator and invoice me that way).
DominicB - | 2,675
7 Mar 2017  #3
The biggest problem is insufficient capital to start the business, keep it running for the years it takes to turn a profit, and support oneself and one's family in the meantime.

Another big problem is unrealistic expectations, especially with regard to local demand, profit margins and the time it takes to turn a profit.

This all is mostly due to poor market research and poor business knowledge,

Essentially the same reasons why many small businesses everywhere fail.

A factor at work with returning Poles is that they have lost touch with trends in Poland, both financial and cultural, as they have been out of the country for many years, and even decades.

For foreigners, lack of knowledge about the culture is a big factor, as is not speaking the local language. Vastly underestimating the effort and cost of living and doing business in Poland is also common, as is vastly overestimating the demand for their products or services.

Both returning Poles and foreigners fall for the delusion that starting a business in Poland is a cheap, fast and easy way to become rich (or to be with their Polish wives and girlfriends who want to go back home). Almost everyone who has ever posted on this site that they are thinking about opening a business in Poland fits that description. I can't recall anyone who had a realistic business plan and the capital and knowledge to back it up.
Harry
7 Mar 2017  #4
Essentially the same reasons why many small businesses everywhere fail.

Yes, but here businesses also face the Polish mentality. ZUS is an excellent example: the idea that even if you make no money at all you have to give the government fourteen thousand zloty per year for the privilege of trying to make any money is to western eyes utterly ridiculous!
DominicB - | 2,675
7 Mar 2017  #5
If you think that businesses elsewhere do not have to pay their fair share of taxes, you're delusional. If I had to apportion the responsibility of why businesses in Poland fail, I would assign 90% to incompetence and insolvency on the side of the businessperson, and only 10% to onerous governmental regulation and taxation. About the same as I would here in the US.
Harry
7 Mar 2017  #6
If you think that businesses elsewhere do not have to pay their fair share of taxes, you're delusional.

The key words there, Dom, are 'fair share'. In the US or the UK (and most other places in the EU too), if you don't make any money, you don't pay any tax (a loophole some companies very much exploit). Here in Poland you can work your socks off, be unlucky (or badly advised) and end up with a ZUS bill several times your income.

I remember reading an email to an email group I was in back when those existed from an American who'd come to Poland, set up a one-person company so he could work legally and then left Poland for a job in Korea before the set-up process was complete. But when he came back to Poland two years later, and tried to register again so he could work legally, ZUS hit him for a bill for tens of thousands of zloty in back payments (apparently he hadn't applied at ZUS for the reduced rate for the first two years). He ended up leaving the country, meaning that Poland got no tax payments at all from him.
DominicB - | 2,675
7 Mar 2017  #7
(apparently he hadn't applied at ZUS for the reduced rate for the first two years)

In other words, he was incompetent and failed to do his research. He was probably, as you put it, "badly advised", which makes his failure 100% his own responsibility.

A higher bar for starting small businesses is not necessarily a bad thing. It probably reduces the proportion of businesses that eventual fail by weeding out the weak links in advance, saving everybody money and grief in the long run, including the wannabe businesspeople. 14000 PLN a year is not going to deter anyone with sufficient capital and business knowledge, and a strong, realistic business plan. It will deter the bottom feeders, though.

Sorry, I've heard more than enough hard-luck stories by failed businessmen to take their excuses without a huge grain of salt. Why face up to reality and blame yourself when it's easier to blame the government?
Nathans
7 Mar 2017  #8
The most likely reason is their inability to compete in business (competition in Poland is tough despite it may not appear so at first).
Harry
7 Mar 2017  #9
In other words, he was incompetent and failed to do his research.

I suppose that what you say is harsh but fair. If people can't be bothered to check what they need to do before leaving a country to avoid having a massive ZUS (and possibly tax) bill presented to them when they go back to that country, that is their own fault really.

A higher bar for starting small businesses is not necessarily a bad thing.

A better method might be an IQ test for prospective business owners, otherwise there's nothing to stop other people's money (for example parents' money) being wasted by wannabee businessmen who really shouldn't be allowed to try to cross a busy street by themselves.

Sorry, I've heard more than enough hard-luck stories by failed businessmen to take their excuses without a huge grain of salt.

Yes, but you must admit that the system here is in many ways so badly set up it's not even funny. For example I have to pay about 40zl more property tax due to running my own business. Each year I need to either go to the post office to collect the registered letter or the gmina office (better choice, shorter queue) to find out exactly how much to pay. I asked this year if I could just add say 50% to this year's amount next year so I wouldn't need to waste my time going to the office. The lady said that I could and they would just send me a registered letter to tell me how much I'd over-paid by....
delphiandomine 83 | 17,673
7 Mar 2017  #10
to avoid having a massive ZUS (and possibly tax) bill presented to them when they go back to that country, that is their own fault really.

Well, when you think about it, ZUS is now 1200zł/month. That's 14400zł/year, or 72000zł/five years plus heavy amounts of interest.

Someone leaving Poland would be well advised to have confirmation of closing their business before heading to the hills (or the desert)
jon357 63 | 14,134
7 Mar 2017  #11
And they're becoming VERY aggressive about collecting money now.
delphiandomine 83 | 17,673
7 Mar 2017  #12
Yes, the government is making no qualms about the fact that they intend to aggressively go after those that owe taxes/ZUS. I wouldn't want to be hunted by Poland for such crimes, especially given the habit of Poland of keeping people in pre-trial detention for months at a time.
Harry
7 Mar 2017  #13
VERY aggressive about collecting money now.

Did you see that case where a European Arrest Warrant had been issued for some pensioner who'd moved to the UK at about the same time as his business went down the tubes? Even after his house had been seized and sold. From memory the English judge rejected the extradition request but that was after the poor sod had spent weeks in prison!
delphiandomine 83 | 17,673
7 Mar 2017  #14
That's the thing, with the rampant abuse by Poland of the EAW's, many countries are admitting that their hands are tied and that they have no option but to arrest/deport people wanted by Poland. Generally speaking, someone that's wanted for avoiding ZUS is essentially persona non grata in the EU.
jon357 63 | 14,134
7 Mar 2017  #15
the rampant abuse by Poland of the EAWs,

One British guy (on another forum) got a personal visit from the tax office here due to a ten pound premium bond win from several years before. The tax office is increasingly chasing people with incomes and assets abroad - hell, I even do translations for them sometimes; they're sharp about this and getting better about what they do.
Harry
7 Mar 2017  #16
The tax office is increasingly chasing people with incomes and assets abroad

Personally I just declare my foreign income in Poland and pay the taxes in Poland. I could try to claim that the work I do for English companies is done England and so therefore can be covered by my English personal tax allowance, but given that I have a company here it would be quite difficult to try to argue that my centre of vital interests is not here, which then means that I have tax liability here.
jon357 63 | 14,134
7 Mar 2017  #17
Each case is different. Anyone who has submitted residence or citizenship documents (or operated a business) that could potentially suggest their "centre of interest" is in Poland is potentially at risk from the tax office, from ZUS and not only.
delphiandomine 83 | 17,673
7 Mar 2017  #18
Yes, this is something that people often don't understand. It's not enough to say something, you need to have proof, which means a document with a stamp. If the official records (available online) indicate something, it's your job to fix that situation, not theirs.
peter_olsztyn 6 | 1,098
7 Mar 2017  #19
only to lose of their savings

Lack of customers.
jon357 63 | 14,134
8 Mar 2017  #20
I've seen too many businesses here set up on the basis of someone's dream of the type of business they'd like to run, rather than the type of product that theres a market for. There used to be a tv show on Sundays for budding entrepreneurs that gave coatings, had interviews etc. Great to watch, not so great when you've got an identical grocery store to ten others on the same street, none of them making money.


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