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This guide covers…
This guide is about some of the common business issues and problems that can arise when doing business with or in Spain. It describes, in particular, business issues in the area of Andalusia/Andalucía – which contains the Costa del Sol. See a map here. Please note that certain aspects of the law in Spain vary from one “autonomous community” (comunidad autónoma) to another.
For details of how to set up a business in Spain, see our Guide to Starting a Business in Spain.
For details of how to start a company in Spain, see our Guide to Setting Up a Company in Spain.
For disputes and other legal problems see our guide Guide to Disputes & Court Cases in Spain.
Doing business in Spain is relatively straightforward. Its administrative and legal systems work well and offer legal security in terms of protecting your investment.
Add in the fact that the people are well-educated and hard-working and it’s easy to see why many companies choose to cover the Western Mediterranean from a base in Spain. However, this doesn’t mean that there are no problems when it comes to doing business in Spain. This guide covers some of them.
Spanish business culture is probably very different from that which you are used to ‘back home’.
Video guide to common business issues in Spain
You can get a quick overview of some business issues commonly found in Spain by watching this video interview (below) with Spanish legal expert Noelia Luque. Learn more by scrolling down and reading the detailed guide she has written with us.
Language issues in Spain
Probably the greatest barrier when it comes to doing business in Spain is, for most people, the fact that they don’t speak fluent Spanish and that relatively few Spanish speak excellent English or other languages. See our Guide to Learning Spanish.
Of course, almost all Spanish people under the age of about 40 will speak some English. In fact, many of them speak it surprisingly well. some extraordinarily well: they will probably have working in London or New York. But the level of English is often not what is required when dealing with complex legal and business issues, especially amongst more junior staff.
If relatively few Spanish people speak English, fewer still speak other major international languages. There is a huge demand for Spanish people proficient in Russian, Arabic, Chinese, French and German.
There are several ways in which you can try to tackle this language problem.
The first is to accept that you are unlikely to be able to find a person who has the language skills that you need and the knowledge about your particular area of business. If you do this, you may decide to recruit and train. This is a long-term commitment and can be a major cost but it seems, generally, to be the most successful of the strategies.
A second option is to move heaven and earth to find someone with the skills that you need. This will often involve poaching them from some other company. The cost of doing this is usually high and there is the ever-present risk that, just as you poached, somebody else will poach from you.
The third solution is to split the problem into several parts. Isolate the translation aspect from the management and product knowledge and employ really good translators – at considerable cost – and good, experienced managers and technicians without worrying too much about the depth of their language skills.
Whichever way you decide to play this, the decision about how you will deal with the language problem will be central to the way in which you set up and run a business in.
Whichever way you decide to proceed, learn some Spanish yourself. Even a little will make your life easier and gain you respect from your staff and customers.
Networking in Spain
Networking is incredibly important in Spain – more so than in most countries. Many local people will be wary of doing business with you until you are a ‘known face’.
There are a few ways to make yourself well known and therefore well trusted in Spain.
If you’ve got the money, there are ways to ‘fast track’ the process. You could hold events for the influential, become involved with local charities or even sponsor one of the local sports teams.
Less expensive, but still pricey, is the option of joining one or more of the ‘elite’ social clubs in Spain. You’re likely to bump into the higher echelons of Spanish business at a golf club, or one of the other private clubs in the area or at any of the many local marinas.
A slower, but eventually just as effective, approach is the ‘softly, softly’ method:
- Join the Chamber of Commerce and attend its networking events
- Make friends with other local business owners
- Use Spanish services for your day-to-day needs (shopping, haircuts, a quick beer after work), rather than relying only on businesses targeted towards expats. This is particularly important if your business is, itself, not aimed exclusively at expats.
- Consider doing joint promotions (such as a discounted drink at your beach bar after a customer has had a surfing lesson)
- Use local suppliers for your business and always pay on time
Above all, learn the language. Many Spanish speak very good English, but you will find that social barriers break down much more quickly if you speak a little Spanish. Luckily, all of the tips outlined above are great ways to brush up on your language skills.
The administrative system in Spain
Even Spanish people smile (or grit their teeth) when talking about their administrative system.
Probably everybody in every country thinks that the country’s administrative system is slow, cumbersome and tainted with the ridiculous. This is the same in Spain – although all of this has improved immensely in recent decades.
Viewed from the outside, the Spanish administrative system is actually considerably better than most. It does have its failings, though. Very often, they centre upon the fact that, for historical reasons, they have chosen to do things in Spain differently from the way in which those things were approached in many other countries.
More seriously, there is a generalised problem at the middle management level of Spanish bureaucracy. The laws and procedures are often perfectly adequate. The junior employees are often keen, well-educated and anxious to progress in their career. Unfortunately, many of the middle managers are of an age where, when they started work in the administration, it was grossly inefficient, horribly slow and involved very few civil servants doing any real work.
Spain has made several attempts to purge these people and has enjoyed some success but you will still come across many a bureaucrat who feels that actually dealing with a problem threatens his continued employment and so goes through an endless process of shuffling papers from one part of his desk to another.
The main solution to this problem is to have local employees or partners who are familiar with the system and know where to find the shortcuts that allow you to avoid these obstacles.
Getting things done in Spain
The Spanish, like most Mediterraneans, have a reputation for being laid-back and never putting off until tomorrow that which can be put off until the day – or the month – after. See our Guide to Cultural Differences in Spain.
This certainly used to be the case – but a lot has changed in the last 20 years. This labelling of the nation is now unkind and inaccurate. But it is still a fact that the culture of Spain does attach less importance to time than does the culture in many northern European countries, in the United States or in parts of South East Asia.
There are two real approaches to this problem. The first, which is likely to give you stomach ulcers, is to fight it. The second is to go along with it as far as you possibly can. You can initiate systems within your business which place the right amount of emphasis on delivery and timing whilst recognising that no one man or business can change an entire culture overnight. You might even come to accept that there is a lot to be said for some of the Spanish ways of doing things. Who knows, you might even adopt them ‘back home’!
Finding the right professional advisers in Spain
You will find a wide range of lawyers, accountants, consulting engineers etc in Spain and, in particular, in tourist areas such as the Costa del Sol.
In those areas with large expat communities, it is quite normal to find lawyers and accountants that speak your language, or count on interpreters and translators within their staff.
When you take into account differing areas of expertise and differing language skills, you may find that there are only three or four who will suit your requirement. One of them will probably be acting for the other party in your transaction!
The same applies for other professional advisors.
It is, therefore, quite important to identify the areas of advice that you’re likely to require – legal, tax, architectural etc – and to make contact with suitable advisers early on so that you form a client-adviser relationship with them.
As to how to find the right adviser, the secret – as in most countries – is personal recommendation from clients who have used and approved their service. Failing that then your consultate in Spain may well have a list on their website.
Finding the right employees in Spain
At one level, now (2018) is a good time to be opening a business in Spain. Because of the recession there is a pool of available workers, though that is rapidly diminishing.
Spanish workers are well-educated and most of the young seeking work are keen to prove themselves and do a good job. With youth unemployment at 46% in 2015 and still 34% in 2018, you have quite a lot of choice when it comes to employing people at the bottom end of your organisation. You will be helped by the fact that there is quite a lot of kudos attached to working for a foreign company and that many Spanish people see a few years working for an international business as a highly desirable item on their CV (resume).
Finding these younger people with suitable language skills is also not usually an issue.
However, when you go up the scale of age and experience, the problem becomes more acute. Until 1980 the first foreign language taught in schools in Spain was, almost always, French and so many employees in their 50s and above will have no formal training in English – although they will probably have picked up remarkably good English along the way.
In addition, with employees of that age, there is less of a cultural imperative to work and to work hard.
With overall unemployment at about 16% (2018), the pool of available employees is reasonable, but you may find that it takes some time to recruit employees at a higher level.
Leadership and initiative in Spain
Many foreign employers are surprised by the difference in culture between their own country and Spain when it comes to the related issues of leadership and initiative.
They expect their employees to jostle for opportunities to be given a leadership role. In fact, in Spain, many people are content to remain as part of the led rather than to develop into leaders. It is not obvious why this is so.
It is probably not helped by the fact that leadership styles vary a lot from country to country.
Richard Lewis has written extensively about this. After over 30 years working internationally, his analysis strikes a cord with me! In 2014 his thoughts – and some thought provoking maps of leadership styles – were summarised in Business Insider. Whether you agree with them or not, they are worth a read.
“German managers strive to create a perfect system. There is a clear chain of command in each department and information and instructions are passed down from the top. Nonetheless, considerable value is placed on consensus.”
“Spanish leaders, like French, are autocratic and charismatic. However, unlike the French, they work less from logic than intuition and pride themselves on their personal influence on all their staff members. Possessed often of great human force, they are able to persuade and inspire at all levels. Declamatory in style, Spanish managers often see their decisions as irreversible.”
“British managers are diplomatic, casual, helpful, willing to compromise, and seeking to be fair, though they can be ruthless when necessary. Unfortunately, their adherence to tradition can result in a failure to comprehend differing values in others.”
Also, see here for an interesting article about management in Spain.
Fortunately, this is a problem that is easily solved by a combination of choosing the right people, providing suitable training and a willingness to compromise. But it often catches out the unsuspecting new arrival in Spain.
Finding reliable sub-contractors in Spain
Many businesses in Spain do not complete a whole process from start to finish using their own in-house staff. There is a culture of buying in services or components from third parties.
Of course, if you’re going to do that, you need to make sure that the people providing the service or component are going to provide something of high quality – and provide it on time! Many newer small suppliers have fully embraced this concept. But there are still a lot of the medium-sized and well-established suppliers for whom both quality and delivery times seem unimportant.
When selecting suppliers, a significant amount of due diligence is recommended. Once you have selected a supplier, a short-term trial period is also recommended.
Working with the local culture in Spain
You will probably have already discovered that Spain has a very distinctive local culture.
You are likely to be more successful and suffer a great deal less strain if you learn not only to work with it but to value and cherish it.
There will probably be some areas of your business process where you will absolutely require people to comply with rules alien to their culture but, most of the time, you can adjust the process either to adapt to the local culture or – at least – to meet them half way.
For example, working hours. You may need some of your employees to be accessible at all times when your office in (say) London or Dubai is operating. This could mean working way outside the hours that are normal in Spain. However, just because you work a nine-to-five day in all of the other places where you operate does not mean that you cannot work the standard Spanish day (09:00-14:00 and 16:00-20:00) in your operation in Spain and only ask some of your staff to work outside that time.
Payment of debts
Spain does not have a bad record when it comes to businesses paying their debts on time but it is not perfect.
In theory, since 2013, the maximum term of payment of business debts is 60 days. Businesses are free to negotiate shorter periods but not longer ones. However, there are many cases where this obligation is not honoured.
Rather strangely, in order to take advantage of these rules, suppliers must send invoices or requests for payment to their clients 30 days before the date of receipt of goods or the provision of services.
Spain does have quite effective methods of collecting unpaid debts. See our Guide to Debt Collection in Spain. To take full advantage of these, make sure that your contracts and invoices are properly drafted. Your lawyer can help.
If you read our guides to business issues in other countries you will realise just how (comparatively) simple it is doing business in Spain. Besides, this is a country that is open to foreign investors, and therefore you will find everyone very helpful when approaching them.
Despite this, there are things that you need to think about when deciding whether – and how – to do business in Spain. Doing so is likely to make your business more successful and your life easier.