Maintaining a legal presence in Saudi Arabia is not a one-size-fits-all approach for any business, with the annual operational cost depending on multiple factors. If you haven’t already, we recommend you read our last article, where we discussed the various OpEx costs of landing in Saudi Arabia from a business owner’s perspective. In this piece, we will be putting the points discussed previously into action to provide you with more clarity on how they are translated into real life. 

For better understanding, we have outlined multiple sample parameters that may serve as a benchmark for real-life scenarios. For each example, we will calculate the total operational expense accrued for the year. In this way, you can identify which costs are applicable for specific business situations. 

Note: All scenarios are assumed to be for companies in their second year of operation. 

Scenario 1: Early-stage tech startup

In this example, we have an early-stage tech startup that:

• Operates under an entrepreneurial licence from a hotdesk in Saudi

• Is represented by a single General Manager who is a Non-GCC national.

- The general manager is a 30-year-old man who does not have any dependents.

- The general manager is salaried at SAR20,000/month.

• Does not have any positive net income. 
• Generates less than SAR375,000 ($100,000) in annual revenue.

Let’s calculate the annual opex costs for this early-stage tech startup.

Scenario 2: Small traditional business 

In this scene, we are considering a small traditional business with: 

• Three non-Saudi employees and one Saudi employee.

• Non-Saudi employees earn an average salary of 8,000 SAR.
• One of the non-Saudis is a young married female. 
• Saudi employees earning SAR10,000.
• Revenue generation amounting to SAR340,000 ($90,000).
• Net income of SAR20,000.
• A rented office of 60 square metres in northern Riyadh.

- Cleaning service, sign board

Let's calculate the annual opex costs for this small traditional business.

Analysing the two scenarios

As you can see, there is a major cost difference between operating an early-stage startup and small traditional business. The startup is less expensive to operate across every category, with the most notable difference being observed in commercial registration and third party costs. From our analysis, we have identified the following ways you can cut OpEX costs:

• Get an Entrepreneurial Licence

Simply using the entrepreneurial track can save you the 60,000 SR MISA licencing fee, which can greatly reduce overall operational costs. Saudi Arabia has kept these programmes in place in an effort to encourage business activity in the region, and it is a major incentive for tech startups. 

• Hire Saudis

Local hiring is always encouraged in Saudi Arabia, and this is reflected in the finances as well. By opting to hire Saudi nationals, you can save work permit costs, iqama costs, medical insurance, pensions, and more. 

• Register Hotdesk

A hotdesk is much cheaper than renting a physical office, saving you costs while still providing a legitimate address. For startups, we recommend using hotdesks or virtual offices to save money in the initial years until absolutely needed. 

Saudi Expansion Series 

This article is part of the Saudi Expansion series, aiming to educate international entrepreneurs and business owners on Saudi Arabia's foreign investment regime for a smooth landing. With a focus on original, technical, and informative content, our goal is to get business owners closer to securing that first riyal in their pocket.