Opportunities and Challenges in Starting a Business in Finland

In recent years, we have repeatedly encountered situations that have led foreign companies operating abroad to face liquidity crises. In the worst-case scenario, they may be forced to cease their operations.

Many entrepreneurs in Estonia find that the local business environment limits greater development due to the small size of the market. Therefore, they seek opportunities to find collaborators and clients in foreign markets. The main markets entered are Finland and Sweden. There are several factors favoring the decision to choose Finland, including a similar language, convenient and fast transportation connections, and a positive attitude towards Estonians. Due to a long-standing demand for labor exceeding supply in Finland, there is often a willingness to enter into cooperation agreements with new entrants.

A similar language allows for initial negotiations and agreements, but it often gives a false sense of security regarding the achieved agreement. To fully understand the details of the contract terms, it is necessary to have a very good command of the language.

Furthermore, operating in another country brings additional responsibilities and obligations arising from local legislation. Since there are several differences between Estonian and Finnish legislation, it is worth familiarizing oneself with the provisions related to both the execution of work and documentation.

What are the main mistakes that can be fatal for a company starting business operations in Finland?

Our experience shows that the biggest mistakes made by Estonian entrepreneurs when starting business in Finland are as follows. Firstly, deadlines for completing work are not consistently adhered to. Secondly, proper documentation is not consistently prepared when handing over completed work. Thirdly, additional agreements are made verbally.

When reaching agreements with the client regarding additional deadlines or technical matters, these agreements are not formalized as mutually signed documents. The other party is trusted blindly, relying on the client's verbal commitment. Unfortunately, this often leads to later problems.

Clients often rely on the goodwill of service providers. Despite payment delays, they may request to continue work, stating that it is necessary to avoid delays in deadlines. If the client wishes to continue work even though the completed work has not been documented, it directly indicates a risk where the client may not be willing to compensate for additional expenses.

If the project is not at a stage where you can complete the work on time, it should be documented in writing. A written agreement should also be drawn up regarding the extension of your contract deadline by the specified time. Without appropriate written confirmation, work should be halted until the document is formalized.

A crucial aspect is the client's signing of all meeting minutes and agreements. This is particularly important if you have had meetings regarding delays caused by the client, affecting the deadlines and conditions of your work, and may result in additional expenses. If you fail to obtain such confirmation from the client, you should proceed with caution. Later, it may be argued that you are responsible for the delays, and you may not have the right to additional fees or compensation. In the worst case, you may even be forced to compensate the client for the damages caused by the delay.

If you have not been able to arrange a meeting with the customer within a few weeks to formalise the changes that have occurred in the project as well as your mutual demands and obligations in writing, this is a clear indication that your claim will not be satisfied in the future.

What is the main mistaken behavior in a situation where deadlines are shifting not due to the entrepreneur's fault?

We have often seen that Estonian entrepreneurs operating in Finland (or Sweden) are willing to continue working with personal funds when obstacles arise. They hope to recover their money in the future. However, this is often later exploited against them.

Cases have been encountered where a client who has been waiting for months for their payment is offered 60% of the agreed fee if they complete the work and do not make additional claims. If they agree, no additional claims are made against them for delays in the work. In addition, they are informed that if they do not agree, they will receive nothing, and a counterclaim will be filed against them. The client knows they are entitled to the full payment because the delays were not their fault. Since legal disputes in another country are complex, time-consuming, and unpredictable, clients often agree to such an offer.

When an entrepreneur consults a lawyer in such a situation, they usually do not hear anything positive. Because they lack written evidence of the other party's mistakes, their chances of winning are not very high.

We have come across such cases repeatedly in our work. It is important to note that such unfair behavior may be encountered not only with small construction companies but also with large corporations, where such actions might not be expected.

How to avoid mistakes from the outset?

Our recommendation is to carefully review the completion deadline and contract price before signing the contract. It should be analyzed whether it is possible to carry out the agreed-upon work under such conditions in the given market. It is crucial to know the exact amount of additional costs associated with the employment contract, as well as transportation, accommodation, and other expenses related to dispatched employees.

First and foremost, before signing the contract, it is essential to thoroughly understand the content of the contract. In addition to what is described in the contract, it is necessary to determine the unwritten rights and obligations that come with the contract. Just like in Estonia, contracts in other countries do not always include all the legal nuances derived from the law. However, in case of unresolved issues and disputes, the law is applied. Knowledge of the rights and obligations arising from the law is crucial. The fact that you are just starting in the market of a particular country does not exempt you from compliance with the laws.

Secondly, if your business partner in any way tries to force you into a situation where you cannot complete the work on time, it is advisable to be very cautious.

Fortunately, we have succeeded in helping our clients prevent situations where they would enter into a harmful or dangerous contract. Sometimes, people come to us only when the contract has been signed and things have already become critical. Even in such cases, we can help find the best solution, but we strongly encourage proactive problem prevention. Analysis and consultation before signing a contract help avoid excessive risks and enable you to be a successful entrepreneur in Finland on equal terms with the locals.