How to Operate a Small Business in UAE – A 10-Point Guide for Beginners

Starting a small business is much easier in UAE as compared to other Gulf countries. Yet the new
entrepreneurs often ask the question, "how to operate a small business in UAE?"

Despite all odds faced by the Covid-19 pandemic, operating a small business in UAE has many merits.
Over the last decade, the country has been at the forefront of all Gulf countries in terms of economic
growth. Resilience, innovative economic policies of the Rulers, combined with a commitment to face
the change, were a few reasons that made UAE an attractive destination of capital.

Since 2017 UAE has faced two back-to-back crippling blows to its economy. A persistent slump in oil
prices combined with low domestic demand had flattened the economy of UAE in 2017. The
downturn was effectively and quickly responded to by the UAE Government through a series of
special economic packages and other stimuli to kick-start the slumping business situation.

The next wave of crisis hit the economy in 2020 due to the Covid-19 pandemic. The growth forecast
started going south. On July 12, 2020, the Government announced a special stimulus package worth
AED 1.5 billion in addition to an earlier incentive of AED 4.8 billion in March 2020 just before the
country went into lockdown. The special additional package was extended to support the Small and
Medium business segment, which the Government is committed to promoting.

In that dynamic and upwardly moving environment, the idea of operating a small business in the
UAE looks exciting. But for entrepreneurs, particularly for new and small business owners, the place
has its challenges.

Therefore, let's look at some facts that most new, small business owners should be aware of when
starting and operating a UAE business.

1. COMPANY OWNERSHIP IN THE UAE

To start an onshore or LLC (Limited Liability Company) in the UAE, you'll need a local sponsor. This
rule compels an individual to have a UAE national as a partner who shall own 51% ownership. That's
a mandatory requirement.

2. PROJECT FINANCING

It can be difficult to obtain finance from the UAE bank if your business is new. Because the provision
requires at least three years of audited balance sheet with positive figures and growth indicators for
business loan applications.

3. INTRODUCTION OF VAT

In January 2018, the UAE introduced a 5% value-added tax,. This tax is applied to almost all goods
and services except essential education, and healthcare.

4. RELIGIOUS CULTURE
You should be well aware of the UAE’s Islamic culture before setting up a business there. It plays a
crucial role in people's everyday lives, in the office and outside. Islamic customs should be observed,
and the effects of the Islamic religion on business interactions must be respected when doing
business in the UAE.

5. GETTING KNOWN IN DUBAI

In the UAE, things move quite fast. That doesn't necessarily mean you can expect to start generating
business from day one. Of course, sometimes it's possible. But UAE is a multicultural place teeming
with networkers, and most likely, your first job would be making yourself known.

The business culture in the UAE is about personalities. People would want to know about you
personally before doing business. This needn't be a daunting challenge, though. Just put yourself out
there and socialize; build rapport, friendship, and trust without being too salesy.

6. COMMUNICATION STYLE

While operating a business, whether small or large, in UAE, you must be aware of some of the
niceties in communication people practice. Men and women are also communicated with different
tones.

7. MANAGING THE MANIA

UAE is a high-energy place where you can easily get overwhelmed. An exciting work ethic runs
through the place, and for new arrivals, it may take some time to gain some perspective. While some
can quickly get a handle of things, others find the turbo-charged approach to everything quite
challenging.

The key to ensuring you keep your sanity while adjusting to life in UAE is to find a work/life balance
as soon as you can: set reasonable hours and take the time to switch off. If you don't, you could find
yourself burning out before you know it.

8. HIRING EMPLOYEES

The UAE has specific rules and procedures for hiring employees. That includes the obligation of a
company to provide Visas to its employees; no employee is permitted to work in the company until
they get their job visa. Once you get the basic ideas of the UAE's regulations, you'll have a handle on
this procedure.

9. MANAGING REVENUE

Even though the UAE can provide many opportunities for widening your business, it can be equally
risky. Recent surveys reported that 82% of the start-ups fail due to poor cash flow management.
Therefore, the business setup cost and your initial capital requirements need to be managed and
applied well. Without ensuring strict financial management and discipline, you may go out of
business sooner than you can guess.

10. PEOPLE MANAGEMENT

Like anywhere in the world, managing people will significantly impact one's success in UAE. The most
notable aspect in the UAE is perhaps the level of diversity present in workforces. As you will be
working with people from different diversities, people management can take some learning to be
carried out well.

Finding a local sponsor, tuning into the culture, managing your finances, and getting a clear idea
about the various rules and regulations can appear to be a daunting task.

Also, many a time, business requirements that you come across can be misleading and incomplete.
Yet, doing proper due diligence, patiently studying and following the rules, and asking for help from
other experienced business associates can make your business operation relatively smooth in UAE.
And once you're settled well, you'll find that the sky is the limit for your growth and opportunities in
this wonderful country.