Five Lessons About Starting a Business in a Developing Country

02/06/2016 10:08 | Updated 02 June 2016

There is no doubt about it; social enterprise is a hot topic right now. Balancing making profit with having a positive impact on the world is something that many entrepreneurs are striving for, and increasingly leading them to focus on some of the world's developing nations.

Many entrepreneurs are heading to these underserved markets, with the added purpose of making a positive change in society in fields as diverse as energy, health and technology. There are also more in-country entrepreneurs with improved business skills looking to take advantage of the huge opportunities available.

I had a chance to experience this first hand in the past three months working for energy start-up Vitalite in Zambia. After consulting with senior members of charities and companies operating in the country with decades of accumulated experience in business development, these five key themes were highlighted as being vital to entrepreneur success in developing countries.

Understand the culture
Top of the list of everyone's requirements is a deep and nuanced understanding of a country's culture. The most common source of failure is when an entrepreneur from a developed nation arrives with the right intentions, but their lack of understanding of the culture leads to fundamental flaws in the business plan.

Vitalite Directors John Fay and Samuel Bell spent ten years in Zambia before beginning their solar energy start-up. They both believe that this experience was crucial in gathering knowledge to develop a sustainable business. Director John Fay offers "What I would advise anyone starting a business in a developing country is to be prepared for it to take much longer than their most conservative expectations. Be persistent and apply lean start up principles as much as possible."

The cultural circumstances differ greatly between countries, and assumptions about the way in which consumers behave should be kept to a minimum. A combination of research and experimentation through an iterative testing process should instead inform the entrepreneur about the culture.

Prepare for regulatory complications
In developing countries the government is often less stable and the regulatory environment is more susceptible to change. Therefore, the industry within which a business operates can change quickly in terms of the parameters of tax laws, quality controls and required permits.

Risk management of these potential issues is crucial to ensuring that they do not become a significant problem for the business. Operating in a proactive manner to stay abreast of current and potential changes to the legislative framework will help to ensure few hidden surprises.

Conquer cross-cultural working
This point is more pertinent for entrepreneurs who head out to developing nations to build their start up. Often when setting up a business, the internal workplace culture is not something that is considered as an immediate concern, but it is one that quickly rises to the top of the list. Everything from working pace to style of writing can bring frustrations, difficulties and inconsistencies due to backgrounds leading to significant gaps which need to be bridged, particularly between developed and developing country citizens.

Country Manager of Challenges Worldwide Joe Tang often has to face these critical issues. "Cross cultural working could be one of the most challenging things we'll come across working in developing countries. The first thing to know is that different doesn't equal wrong. It takes humility and maturity to accept the differences and identify the common goal to work through it."

I learnt many new ways of looking at problems, particularly in the realm of marketing and communications, through working with Zambian partners who had a completely different worldview driven by their upbringing and education. Seeing the opportunity in cross-cultural working rather than the problems is vital.

Network, network, network
Many developing countries have a less formal structure to business, transactions and contracts in general. Business is often conducted through connections and relationships, and this single cultural factor can have a huge impact on the way in which the business operates.

It means that informal networks of friendships and partners become even more important to smooth operation of the business. Therefore, networking is a crucial skill that is even more vital to entrepreneurs in developing countries, particularly if they are going to survive with limited resources. Developing a network of support and partners should be a key focus of initial efforts.

Be patient but purposeful
I quickly found working at Vitalite that the pace of business was considerably slower. In a less developed economy, everything seemed to take longer than expected; there was slower access to capital; less business support; permits from government took longer; and the list goes on.

Therefore, entrepreneurs who do find themselves in this environment need to strike a fine line between remaining tenacious and purposeful, whilst maintaining the patience to understand that certain aspects of the business will move slowly. Keeping momentum in the early stages, through all the frustrations, is likely to be particularly important.

Although there are pitfalls to setting up a business in a developing country, the potential upside is huge. In the field of social enterprise, heading to a developing country to set up a business offers an almost unprecedented potential impact. With the right understanding of a country and its culture, the possibilities are extremely exciting for entrepreneurs.