Managing your growth means focusing on several aspects.
Taxes, for example. What changes in taxes when you become a BV?
We will also discuss the possibilities of hiring staff.
What type of employment suits your business best and what would change?
And we will take a look at financing.
What types of financing are there in the Dutch financing landscape?
We will discuss these topics with Johan Laffra of the Chamber of Commerce
and our entrepreneurs Geta and Karim.
With these different legal structures, there are different tax regulations.
How does that work differently?
I think for all legal entities
the one that you all have to work with is the VAT.
In Dutch called the BTW, the value added tax.
That's something that works for every legal entity.
The main difference is when it comes to income tax
versus the corporate tax.
That's the biggest difference between the personal entities
and the legal structures.
Does anything change in these taxes when you become a BV
compared to the other legal structures?
The one that isn't going to change is the VAT. That works the same for all of them.
The biggest difference is that once you have a one-man business
a general partnership or a professional partnership
you pay income tax over all profit.
And the difference with the legal entity, the BV
is that you'll be paying a salary
which should be what's normal in the market
but it needs to be at least 46.000 euros.
That's money that you'll pay your income tax over.
But on top of that, if there's more profit, you'll start paying your corporate tax.
And that's the biggest difference
between the personal entities and the legal structures.
Does that mean that if I would choose a BV, I would have to fill in two forms
both one for the income tax and one for the corporate tax?
It's going to be in two different tax systems, yes.
So it's in addition to just the income tax as a sole proprietor.
Well, that's good to know at least.
Are there also tax reductions that entrepreneurs can use?
Yes, those go for the one-man business and the partnerships.
If you meet certain criteria, you're entitled to all kinds of tax discounts.
Those discounts won't apply if you have a legal structure.
That's normally the reason why your profit needs to increase on an annual basis
before switching to a legal entity becomes interesting from a tax point of view.
So you would say that becoming a BV in a tax point of view
would be a disadvantage, but especially if you're making more profit
those will weigh up against each other. -That's true.
Are there any other deductions for the other legal structures apart from the BV
that these entrepreneurs could benefit from before?
I'd say that those are not part of the actual legal structure
but it depends on your activity.
Once you start doing something
there might be subsidies or research and development things
that you can use for your business.
But those don't solely apply to just the legal form.
It has to do with what it is that you're doing.
That sounds logical. -OK, that's good.
In that case, let's start talking about hiring staff.
Geta, do you currently employ staff?
Yeah, we have a team of eight right now.
Well, that's the executives and the office team.
Everyone is working on their own terms
because we're still fundraising at this point.
We have people who we hired for zero hours
and then they get paid per job...
Well, number of hours they actually put in.
But then there are people who are full time
and they are very important to us for growth.
And then there are people who we deal with externally
and just do contract basis.
So you actually have quite a few different ways of employment.
Karim, do you also have these different ways of employment?
Essentially, we work mainly with freelancers.
So writers, editors, marketeers, essentially.
And no one is employed by us. We just have freelance contracts with them.
I'm sure that has its advantages and different structures.
So maybe, Johan, you could enlighten us in the theory.
What kind of different types of employment are there in the Netherlands?
There are so many ways to employ people.
There's a scenario for each and every one.
But I think the biggest difference is: You can hire someone as an employee directly
so put them on your payroll and then start working from there.
I hear you saying something about zero hour contracts, which is fine too.
You'll still be their employer, but the amount of hours worked is a variable.
That's an option. You can hire people through temping agencies
through payroll organisations, and you can even hire independents
like freelancers or ZZP people.
That's all possible.
So you'll be looking at whatever works for you
and there's probably an option for that.
That's what entrepreneurs should always keep in mind.
What works best for me?
Maybe that's a great intro for the next statement I have for entrepreneurs.
The statement is: It is better to have fixed term contracts than flexible ones.
And I feel you might both have a different answer to that.
But, Karim, let's start with you.
I'm a big fan of flexibility, so
you know my answer. -I figured that would be the case.
Will that differ, maybe, when you become a BV in the future?
Yes and no. We just need to see how the growth plan goes
and what resources and skills we'll need.
It's all about what's available readily on the market.
So I can imagine that we will need that.
As the company grows, we will need new skill sets in the business.
That sounds logical.
And Geta, I believe from your story, you had several types.
It really depends on who we're talking with
and exactly what's the type of work that they are putting in.
Like, for example, when there are
things related to intellectual property
because we have a lot of innovation to what we're doing
so there are probably rigid terms that we would impose.
But on the other hand, having flexibility in our collaboration
with anyone who'd work with us, I think it's pretty important
because you can't just be a woodpecker about this.
Especially when you're talking about IP, it's really important, of course.
So there's not one which you particularly would prefer.
No, I mean, it's situational.
You have to adapt to the situation, to the task at hand.
So when you started Babymoon, in the beginning
did you start with the flexible ones or the fixed term ones?
When I started, I started with exploring where I landed
let's put it this way. And it took a while.
At that stage, there was a lot of
research and development done, by me mostly.
But then when I had to get people to do something for the company
then it would be a short term, like task-based agreement.
And it was limited.
Now, at the point when we have people on an ongoing basis
as part of the team and doing the Monday meetings and all of that
with a stable team, it's a bit different.
But still we keep the flexibility
and we still have people from outside the company also providing input.
So right now, it's a matter of managing what's on the inside
and then all those satellite supporters that we have.
It sounds like a colourful bunch together.
Do you have any advice for the entrepreneurs at home
how they could choose what would best suit their company?
I would think: Just to know exactly
the requirements they have for the people they hire
and based on those requirements, adapt the way they hire them.
I think that's good advice.
It's best to know what you want and upfront.
So then maybe a quick theoretical question for Johan again.
Can a sole proprietor also hire staff? -Yes, that's possible.
Is that possible in any legal structure?
The sole proprietor only says something about
the number of owners of the actual business.
So there's going to be one owner. As a partnership you'll have multiple owners
as a legal entity, both can apply.
But it only has to do with ownership
and both can have employees
in all scenarios that we just mentioned.
I can imagine when you actually employ these people on fixed terms
it will probably have financial consequences.
Could you tell us a bit more about that? -Once you hire someone
then they become your employee.
At that point, you need to set up an administration.
There are payroll taxes that need to be done, that need to be set in motion.
For some, it's fine to do it yourself.
I hear a lot of people saying that now I start working with personnel
the first thing I'm going to do is hire myself a bookkeeper or an accountant
to make sure that payroll taxes are taken care of the way it should be.
But yeah, in the end
you'll have to deal with employer stuff.
You touch upon a really important point there.
Because of course there are many regulations and rules around that.
So what would you say are the most important
employment contract terms and conditions
in the Netherlands that you should be aware of?
First off, it depends on the contract that you're going to set up.
Will you be setting up someone for 40 hours a week for the rest of their life?
That's a different scenario than when you start working with people
on a zero hour contract.
So that's the first thing that you need to look at.
What kind of agreement am I going to set up?
And once you do there's all kinds of stuff.
You'll be paying your employer wages for your personnel
the salary that's required.
Most of the time, people actually want to earn some money.
You'll be paying some benefits on top of that, as an employer.
So that's important.
But there are all kinds of...
Well, as I just said, there's the minimum wage to take care of.
You need to set something in place for holidays and stuff like that.
There's pension. There are insurances that need to be covered.
All those elements combined make the official contract.
That's quite a bunch of rules and regulations to be aware of.
Karim and Geta, any of these Dutch rules that we have here
did they come as a surprise? Were they different to what you were used to?
No. -I worked here already for a few years
so there was a lot of stuff that I knew about the system.
So it was a little bit easier for me in that sense.
And for you, Geta? -No.
These are all points that are valid and relevant wherever you do business.
So you have to keep all of that in mind.
On the other hand, if I compare
just the paperwork processes here, it is much less complicated
than in Eastern Europe, where I come from.
But then the fact that it's simplified
has to make you a bit more aware of what you're putting into that contract.
Because when you're just winging it
that's not a good idea ever.
So at times, it's actually good to have the possibility to have an adviser
to ask someone for their professional input
if you feel that you're not qualified well enough
to build the contract yourself.
Because sometimes you can just not be aware of some aspects
and then that can bite you later on.
It's good that you mention it. Because just to sort of close this off:
Are there any other aspects that an entrepreneur should know
when working with staff, Johan?
I'd say always start at the beginning.
As already mentioned by our two guests today:
What is it that you're looking for?
If you have a very clear picture of what the future is going to look like
it's going to be much easier to hire someone directly
for a longer period.
So look at the coming months
maybe the first one, two years.
See where you're planning on going. And based on that
you can make the right choice regarding your staff.
So have a clear picture. It applies to every segment today.
Have a clear picture of where you want to go.
Think about it and have a clear picture. And then you can start with your staff.
And I can imagine you have staff and your employees.
They have to work somewhere. Do you have an office space, Geta?
Yes, we do have an office space. I'm very excited about that
because we moved to the office just a few months back.
So it's really exciting that the people can come.
There is this point that a big part of our team works remotely
because they're not located in the Netherlands.
We have people in Switzerland, in Tanzania, in Moldova. So it's pretty international.
How did you find them, actually, if they're from all over the world?
It took a while. -Did you use LinkedIn?
Some people, yes. Someone actually I found on LinkedIn.
With others it was just a matter of
engaging the networks that I have.
So, well, me and then the other people involved.
And it doesn't have to be LinkedIn necessarily.
A network is a network. It's just human connection.
So that's the biggest part, probably. A good network.
And through that, find the right employees.
Is that the same way you do it, Karim, with your freelancers?
In some way, yes. The thing is, we already have a huge following.
I mean we have close to 110, 115,000 followers
that's expats living and working in the Netherlands.
So for us to recruit talent, we just use our own network.
Already people come to us and solicit us.
Hey, can I write for you? Can I work with you?
I've had that luxury, actually. So that's great.
And I have some incredible people on my team that I'm really proud of
and it's been really a nice journey.
So actually, once again it comes down to a network.
But in this case, the fact that everyone knows you.
'Luxeprobleem', as they say in Dutch.
Because, Geta, for you again with hiring staff
what are the most important aspects you look at when hiring a new person?
at this point of the development of the company
we're definitely looking at people who can deal with
uncertainty.
Uncertainty is not necessarily a 2020 thing.
Especially when you're dealing with start-ups and innovation.
We're looking at people who can self-organise
and can be goal driven.
That's probably a common denominator that we're looking at.
But then also having good background in the specific work that they are doing.
That's important. -That's really important.
Look what they've done and see if they can build on from there in your company.
I believe we've got quite a lot of tips for entrepreneurs regarding hiring.
So let's go to financing.
Could you elaborate on the types of financing there are in the Netherlands?
You can ask friends and family
I think that's the easiest one.
There are micro credits that you can apply for
there are bank loans, there are investors
that you can get into your business.
I'd say that for every scenario
there is a possibility to gain money somewhere.
Quite a number of ways to get to financing.
Maybe it's interesting to have a statement for our entrepreneurs again.
The statement this time is: I recommend looking for funding.
It depends. -Of course, it depends.
Because once you take in financing from somewhere else
there are restrictions and terms to that financing
to finding financing. Do you actually need the funds?
Because raising money for the sake of raising money without a purpose...
You see a lot of entrepreneurs, they got their pitch deck really good
'I raise so much'. But in reality
in my view, the best investor is a paying customer.
That's very true.
Geta, how do you look at this? -I agree with Karim completely.
Most of the times, it's best to have the paying customer.
And then on the other hand, when you have to deal with
like in my case, because we have all the research and development
because we're dealing with electronic textile and things that are like...
A physical product. -Aside from being a physical product
it's also innovation and it's not something that's common and widespread.
You have to fund the innovation in various ways.
You have to figure out how to build it, because it's a long process.
You have to build it, you have to certify it, blah blah blah.
So the good opportunity here
is actually the possibility to fund R&D.
Because there are a bunch of subsidies for that, a bunch of grant opportunities.
There are even loans that
are non-dilutive, so then you can still keep the ownership of your company.
But then again, you can also have access to venture capital
which is a useful tool.
But again, it depends very much on what you're doing.
Because if I remember correctly, you are currently in the process of funding, right?
Yes.
How did you get to the choice of which funding you were going for?
In my case, aside from the fact that we have a lot of R&D in our company
I still have a physical product
that is already there and ready for market release.
Because the innovative versions, well
they are all innovative, but the electronic connected versions
they still have to go through a lot of work.
But we have a product ready for release to market
which means that I can have my company income
and I can have paying clients on top of the R&D part.
So that's a specific of my company
because I have colleagues in the start-up world
who only have the R&D for the first three years
and they can't generate income.
So you really looked for R&D funding in the beginning.
We are looking for R&D funding at this point as well.
But, so... Yeah.
And how did you know how to find this R&D funding?
Did you have a network again? -That was a process. That was a challenge.
To be honest, I had three years that were really, really financially tough.
We had to go through a very tight belt
let's put it this way, period.
The bootstrapping phase. -Oh, yeah.
But then again, it wasn't easy
but on the other hand, I think it's important
not to take on funding before you know where you're going.
Before you can handle it as a company.
We had to explore, so we took our moment there.
That's really good advice. -But then again
we also took that time period to explore the possibilities for funding
because here in the Netherlands, it does give you a lot of opportunities
that are on a spectrum.
You can literally go from subsidies to grants and loans.
So aside from just the money coming in
you have to also take into account: Do you want to keep shares in your company?
Do you want to deal with other people telling you how to run your business?
Do you want to put in an effort and pay out loans?
So you have to have a funding strategy. -Yes.
Not just like: Oh, there's cash, let's go for it.
I can imagine that this strategy, had to be written up in a written plan
for when you were looking for this funding.
You have to put things on paper
because when you go to any funding organisation
they will not give you the money just for the pretty eyes.
That's very true. -You have to turn it into a document.
But before you put it on paper, you have to know what you're putting on paper
and then you have to do the research before that. So it's a backtracking thing.
Karim, do you recognise this situation?
Do you have entrepreneurs in your network that are looking for funding like this?
Sure, we see it all the time. And what's actually interesting in the Netherlands
there's actually advisers that can go and help you raise money.
Of course they take a... It's for a price, of course.
But that's a profession that's readily available to help people raise money.
So we're quite lucky setting up businesses in the Netherlands, actually.
Would you advise entrepreneurs to also look at one of these coaches?
Yeah, absolutely. A hundred per cent. -Definitely.
Johan, can you also relate to the answers Geta and Karim just gave?
I was wondering, did any of you contact me?
Because we as an organisation as well can help in the early process
of getting possibilities out
and maybe even refer you in a certain direction.
But, yeah, I totally agree with what was just told.
And again, keep an eye out for what it is that you need.
I think that's a very valuable point.
It's not just about raising as much capital as you want and can
but there's a need and that needs to be clear.
Once you know that, you can decide which way you're going to go.
That makes it a lot easier to write down all the necessary paperwork.
So I totally agree. -That's good to hear.
Then the advice can be followed.
We've been looking at taxes for entrepreneurs
and what changes when you become a BV.
And we looked at the forms of employment in the Netherlands
and the things that you should take into account when you start hiring staff.
If you want to know more about financing your business
we recommend you watch our webinar on this specific topic.
There, you learn all about the Dutch financial climate
and preparing to apply for Dutch funding
and more about the financing options in the Netherlands we discussed briefly today.
You can find this at our website business.gov.nl.
In the last part of this webinar, we take a closer look