Top 3 challenges of doing business in Italy

challenges of doing business in italy

Doing business abroad is never an easy choice and, surprisingly often, enquiries are conducted and conclusions drawn that are based only partially on factual research and rely on cultural stereotyping more than anything else. This does not necessarily mean that no stereotypes are grounded in reality, it simply means that serious risk assessment requires taking an unbiased look at the Country we are hoping to do business with – or in. Doing business in Italy is no different: while our economy, being the 4th largest in Europe and 8th largest worldwide – is definitely attractive to foreign investors and entrepreneurs, many of them are deterred before they ever start their enterprise. While some of their misgivings appear to be based on outdated stereotypes that should be done away with, some of them are not entirely unjustified. After offering you a quick guide to starting your business in Italy and plenty of reasons to do so, we want to address the challenges and drawbacks connected with it and how to overcome them.

Top 3 challenges of doing business in Italy

1. Isn’t there a recession going on?

Yes. And no. The Italian economy has survived a triple-dip recession and it still managed to grow, albeit by slightly less than 1%, in 2015. If anything, the overall situation is improving, but if you discuss it with the average Italian entrepreneur, this is most definitely not the impression you will gain. This is due to the fact that a slow growth, within the context of a racing global economy, might still feel like a recession. It is not hard to trace the discrepancy between the cold hard figures and the individual points of view back to each individual perspective. Growth is not evenly spread and it is mostly due to the expansion of a few sectors, that currently offer the most opportunities, whereas others have stalled or actually shrunk – which would entirely justify those involved in such areas of business maintaining that they are going through a recession.

What to do about it

Research your field of interest thoroughly, analysing the market, being aware of the competition and acquiring reliable data on future prospects. As we write, the industries that are faring well and appear to be set to grow in the coming years include Luxury Consumer Products, Technology (although not consumer electronics), Healthcare, Beauty & Wellness, Aerospace, Textiles & Fashion, Automotive, Retail and Education.

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2. Am I going to be bound in endless red tape?

In a word, yes. In three words, yes you will. Despite recent attempts to simplify the bureaucracy around access to trade in Italy, the procedures are still remarkably more complex than in most European Countries and, depending on your former experience of cross-national entrepreneurship, they may appear byzantine and obscure. This is the one hurdle at which many an aspiring entrepreneur has fallen. If you have tried googling the requirements for your specific type of business and been presented with a frighteningly long and complex list of apparently conflicting rules and regulations, don’t let it get you down: you are in good company. In fact, most Italian entrepreneurs struggle to make sense of the intricate bureaucratic machine surrounding their own business. Recent governments have attempted to simplify procedures, but only partially succeeded. The path, however, is set: future administrations will have to continue along the same road in order to attract and facilitate both domestic and foreign investments.

What to do about it

Don’t try to do this on your own: you can’t and nobody expects you to. Hire a certified professional to take care of the bureaucratic side of things for you. From the moment you decide to start doing business in Italy, your commercialista will be your best friend. This is a professional figure that covers the kind of assistance that you would get from a tax advisor, a financial advisor and an accountant and you will need to find one that specialises in your field of business and preferably one that has an in-depth knowledge both of the Italian system and of your Country of origin’s system. The best way to find one that qualifies is to contact your embassy in Italy: in most cases, you will have access to a database of bilingual professionals that will have answers for your specific questions.

3. Is it more expensive to start and maintain a business in Italy than elsewhere?

Again, the answer is a very straightforward yes… and no. The sheer administrative costs, tax rates and cost of labour are comparatively higher in Italy than the European average, but, depending on where you have set your headquarters, you may be able to balance them against a lower cost of living in general and a high life quality standard. What you may not be prepared for, depending on where you come from, is the fact of having to front a large part of your administrative costs, social insurance and taxes, paying them forward, at the beginning of the business year rather than the end. This means you will have to factor them in as you calculate your startup capital, otherwise you might find yourself unable to fuel your newly started machine.

What to do

First of all, go back to points 1 and 2: be thorough in your market research, so as to be able to make accurate forecast, and hire a good commercialista. Once you have done that, however, don’t sit back and wait for the data to fall in your lap. There are several projects and funds made available at any given time by individual regions, by ministries or by the EU, aimed at promoting businesses that operate in certain fields or are managed by certain categories of entrepreneurs (e.g. women, foreign investors, entrepreneurs under 35 years of age). Gaining access to one of these funds might significantly ease the financial pressure on your enterprise and maximise your chances to succeed.

Need help starting your business in Italy? Call us today!

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Angela

She is a part-time digital nomad. She would go full-time, if only she could stay away from Berlin for long enough without pining for a Pretzel. She was born in Italy and she enjoys life as an expat, but visits home often enough and can still remember how to bake a perfect lasagna. She is passionate about writing, marketing, languages and the systematic demolition of cultural stereotypes.

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