Getting ready to start a business in Germany: What do I need to think about?

Contents

• Preparing mentally
• Planning and analysis
  • Takeover, franchise or starting from scratch
  • Information and advice
  • Permits and further training
  • Business plan
  • Starting capital
• More on getting started

1. The Ultimate Guide to Starting a Business in Germany

   Chapter 1: Business visas, residence & work permits
   Chapter 2: Business legal forms in Germany
   Chapter 3: Preparing to start a business<<<
   Chapter 4: Forming a business in Germany
   Chapter 5: Post formation

Preparing mentally

Before you do anything, first do some soul-searching about whether entrepreneurship is the path you should go down. Being an entrepreneur is not for the faint of heart. Entrepreneurs not only take on financial risk but also have to make sacrifices in their lives, especially at the start. And, once you employ staff in Germany, you’ve got to deal with a host of legal obligations. Whatever you do, don’t underestimate these responsibilities.

Thus, the first step is always to assess what you can bring to the table for your new business. That is, ask yourself the following questions and be brutally honest with your answers:

Am I even the entrepreneurial type?

• What knowledge, experience and skills do I have?
• What can I do myself, and what do I need help with?
• Do I have sufficient know-how in the areas of business administration, management and personnel management?
• Do I know the market well enough?

Use this self-analysis and consider who you can join forces with or what training would help close any skills gaps. (No matter what, continuous learning is an important part of entrepreneurship that should begin from the start.) Then, look for trusted advisers who can offer support in making important decisions.

And if things don’t work out, it takes a lot to shut down a business. So even if your time as an entrepreneur is cut short, you still have a way to go before you can really move on.

Planning, guidance and analysis

What comes first? And what do I need to think about? Sometimes the hardest thing is to figure out where to start. Let us help you calibrate your approach to starting a business in Germany.

Takeover, franchise, starting from scratch?

Are you planning to take over a business? Then you’ll need a meaningful business plan with a focus on the status of the business you want to take over.

You need a business plan even if you’re opening a franchise – one that is heavy on location analysis. Most other things don’t need analysis as most business decisions have been made by the franchisor. That is, usually, franchisers have mandatory rules on how to set and run one of their franchise businesses.

1. How to start a business in Germany:

   1. Develop a business idea
   2. Advice and preparation<<<
   3. Choose a legal form
   4. Name check by IHK
   5. Notarisation at the notary’s office
   6. Open a business bank account
   7. Commercial register entry
   8. Trade registration
   9. Registration with the tax office
   10. First steps as an entrepreneur

Information and advice

Before you do anything – even write your business plan – you should get some expert guidance.

There are countless advisers and consultants out there, both from the government and from the private sector. However, not all experts will be a good fit for you or your business.

What kind of consultant is right for your business depends on your circumstances. Are you an employee and would like to start a “side gig” alongside your job? Would you like to start your own business as a student? Or are you launching something while unemployed?

Take the time to vet an expert with industry experience that serves you best. Not only do you need appropriate advice depending on your circumstances, but you can also benefit from a wide range of financing offers. For example, if you don’t have a job then explore what the government can do to support your business.

Permits and further training

In some professions, you need to get permission from the government. For example, a Gewerbeerlaubnis (business licence) is a must in many trades. There are industry-specific requirements like a Gesundheitszeugnis (health certificate) if you’re in the hospitality industry. Then there are other permits such as:

• Compulsory master craftsman’s diploma (Meisterpflicht im Handwerk)
• Trade licences (Gewerbeerlaubnis) for specific industries
• Vocational training (Abgeschlossene Berufsausbildung)
• Professional experience (Berufserfahrung)
• Licences (Zulassungen)
• Permits (Konzessionen) such as a restaurant or tax permit
• Police clearance certificate (Polizeiliches Führungszeugnis)

Find out about the specific requirements for your sector and whether you have them. You may need a few more years of experience and/or vocational training to get the official permission you need to start your business.

Write a business plan

In Germany, the business plan is still part of the standard repertoire for founders (even though things like the Pitch Deck or Business Model Canvas are taking over this old-school way of doing things in other international startup hubs). That is, the business plan is more important than ever if you want to get funding inside of Germany – especially from a bank. If this is you, get advice on how to tailor your business plan to German sensibilities.

Market analysis

The crux of any business plan is market analysis. More specifically, which group do you want to target and why? Let’s break down how to structure such an analysis.

• How big is the market?
• What about market growth and dynamics?
• What is the market potential?

These points should form the basis of a three to five-year business forecast for your venture.

What the market analysis should reveal:

• How saturated is the market,
• if there is a demand, and
• the growth potential is there with your target market.

Here, also put your competitors under the microscope. This helps you to assess whether there is an attractive market:

• Who are your competitors
• Are there similar or substitute products already on the market?
• What are the barriers to market entry?

Location analysis

Before you decide on a location for your company, depending on your sector, a comprehensive location analysis may be on the cards. For example, the location of an establishment can make or break a business in the retail or hospitality sector. Factors that determine success or failure include the following:

• Sales-oriented location factors (competition, purchasing power, customer potential, transport connections, regional labour market).
• Tax-oriented location factors (trade tax rate)
• Procurement-oriented location factors (transport connections for delivery of goods)

Starting capital

Next, you should answer the question: How much capital do you need to implement your business idea? Because once you’ve crunched the numbers for your entrepreneurial ambitions, it’s time to think about financing. If bootstrapping isn’t enough to get things off the ground, don’t despair: There are many ways to get outside capital.

If you’re unemployed, look into getting a grant from the Agentur für Arbeit (German Federal Employment Agency). But, bear in mind the agency is very conservative and won’t give you money for a left-field business idea. If you’re doing something innovative, look elsewhere for funding.

Fortunately, there are suitable subsidies for every entrepreneurial situation. However, if you would like to implement a smaller project with no outside equity capital, you will also find options for financing here.

Leave no stone unturned when it comes to financing your business. And, when talking to any German financiers, presenting yourself confidently with a detailed business plan goes a long way.

While working on your business plan, also think about which legal form is right for your business idea. Many factors come into play with this decision – but we can help you if you want.

⬆️ Back to the how to start a business in Germany checklist

Want to learn more about getting started?

Starting a GmbH outside of Germany:

Forming a German company abroad
Forming a company from abroad: Legalisation
What is an Apostille? Procedure and application

Business banking:

The business bank account for GmbHs and UGs 
Opening a German Bank Account as a Non-German Citizen
Why entrepreneurs should have five bank accounts

Master list:

The Master list of all Company Formation articles

⬆️ Back to top