What Types of Business Opportunities can be Found in Russia?

Investing in medium-sized enterprises is perhaps the most promising and, at the same time, most difficult part of direct investment in Russia, believe it or not. Statistics say that medium-sized enterprises are the weakest link in the Russian economy, due to one of Russia’s main headaches: the lack of people necessary to develop such a large behemoth of a country.

The main problem of this sector is the lack of skills in management: this is reflected in providing medium-sized businesses with investments, problems with business organization, searching for sales markets, etc.

There are, of course, cases when all the prospects for development are met; but there are also cases when a company on its death throes may be acquired by a competent entrepreneur and turned into a prosperous one in the blink of an eye. And, more often than not, it’s a foreign investor the one who ultimately becomes the almighty savior of the company.

You see, medium-sized companies in Russia are distributed in the following sectors: trade and repairs, which amount to 26.6%; real estate, rental and services, which make up 9.4%; construction, 11%; manufacturing industries, 24.6%; transport and communications, 4.4%; agriculture, 16.8%; and research and development, 0.6%.

You can see from these statistics that Russian medium-sized companies are practically not represented in such traditional sectors like light industry and in food production; its role in transport, medicine, and also in the sphere of industrial production and services (like the hotel industry) are just lackluster.

The low activity of medium-sized enterprises in all these sectors creates a pretty unfilled market, made even worse by the fact that this market has a lot of potential for development. One positive thing though, is that the state understands the problems of this sector and shows support to it via framework of a special state program.

So, as you can you see, investments in this sector do require a lot of looking-after, direct guidance from investors and control over management, not to mention a serious prior study of the Russian markets. Given the underestimated export potential of the Russian regions, you may want to keep this in mind, since maybe, just maybe, you will be the only one able to see that flashy new business idea lost in the endless fields of Russia.

Small businesses, unlike medium-sized businesses, are developing much more successfully, because usually the entirety of a small company consists of a team of like-minded people, and requires less capabilities in management and financing. The bulk of Russian small business is concentrated in the field of trade, services, catering and creativity, education and entertainment. Small businesses also carry out a significant amount of work in the IT field. In recent years, family businesses have also been developing actively.

So, what makes the development of small businesses even easier? You guessed it: the fact that cooperation with the Russian state ensures a comfortable infrastructure. You also have the possibility of electronic document management and electronic accounting, while, for micro-businesses with a turnover of less than $ 1.5 million per year, there are two types of preferential taxation.

An entrepreneur can choose to consider his income and expenses and pay 15% of profit or 6% of the total turnover of the company, but who wants to do that when municipal authorities can reduce these rather low taxes even more? Companies operating under this scheme are exempt from all other taxes, including VAT; and, as if that wasn’t enough, individual entrepreneurs working without a legal entity are exempt from personal income taxes and pay insignificant fixed payments on social taxes. How’s that for a cherry-on-top?

Now, let’s talk a bit about small businesses opened by foreigners: these are mainly concentrated in the crown-jewels of Russia’s cities: Moscow and St. Petersburg (as well as other cities with a population of more than one million).

It is wise to keep in mind that the services turf in these cities is saturated and competitive, so, if you want to be successful, you have to be able to hit your potential customers and make a name for yourself. It is very possible that your own national customs and background will help you in this, or even better, you could create something with an international flavor!

The main thing is that your business should reflect your personality, which is very appreciated in Russia. And, despite the high competition, you can’t really say the service market in Russia is entirely full; new forms of leisurely fashion are constantly opening up, and you can always get into a new wave.

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