One of the phenomena that crops up after a long career in China is the style of the questions that get asked. When once it was questions over taxes for representative offices, the impact of WTO accession, or where the hell was “Quangjoe (sic),” nowadays I increasingly get asked about managing and developing a business in China.
There is, of course, no one real answer, it all depends on the size of the business as well as other salient pertinent matters that impact upon the business environment. But while many, when it comes to China, tend to focus on the China cultural issues, I believe that even more important are the disciplines of business itself. Even sensible, practical advice can become drowned out among the cacophony of the “China” angle.
I began Dezan Shira & Associates (then named the rather long-winded “Dezan Shira Business Management Services (China) Ltd”) back in 1992. Newly divorced and pretty much financially cleaned out, I knew my Hong Kong, and had traveled to China a few times. Shekou, part of Shenzhen, and a deep water port, had seemed a good bet, not least because Deng Xiaoping had anointed the new city and declared “to get rich is good” there, but also because his old presidential yacht, the Minghua, a gift from Charles DeGalle, was moored in the port. It also had a low tax rate of just 12 percent against taxes in Shenzhen of 15 percent, and those compared to the rest of China at 25 percent. Money, at least it occurred to me, would be a motivating investment factor.
Deng had been appalled at the poor state management of China’s energy requirements – and with the South China Sea close by had earmarked Shekou as a base from which the international oil companies would partner with the China National Offshore Oil Corporation and jointly explore for oil and gas reserves in Nanhai. Shekou at the time was a true wild west – oilmen from Texas, Norway and Scotland, plus a few hardy souls relocated from Nigeria made up the expat scene there. Racing around on Harleys illegally imported as part of the rig equipment, these were hard working, hard drinking two weeks on, two weeks off guys built on Budweiser and Brazilian tattoos. Lan Kwai Fong seemed somewhat pretentious by comparison.
I set up shop. Dezan Shira & Associates would provide legal advice to the MNC oil companies in Shekou.
Eighteen months later, I got my first client, and it was a trademark registration for a Norwegian pub. I had had to literally fight tooth and nail to support myself in China, earning money from DJing, teaching English, and appearing on Shenzhen TV. I was lucky sometimes to have enough to eat McDonalds, and a large bottle of beer was an expense that had to be considered. I hadn’t realized that the local market didn’t really need a small-time guy selling legal administration services, and that all their juicy legal and contractual work was being handled by corporate lawyers back home or some of the few fat-cat firms that had tentatively entered the China market at that time.
Lesson 1
“Do your market research before you enter China, and understand your competition. A lot of people ignore this, and hope to learn as they go. If you can afford to – spend some time in China doing your own due diligence and ask as many questions as you can before you start up.”That said, I had been tenacious in still plugging away. It hadn’t been an easy 18 months and certainly had led to numerous moments of self-doubt and wondering if China was in fact the right move. Supporting myself through working in nightclubs and teaching English had been a bit of a come down; just a few years prior to this I had been working in Singapore with a company apartment and a big Mercedes. I was now way behind my peers, all working in MNCs and appearing bemused by why I was living on the edge of poverty to keep a business going that obviously did not appear to be working.
Lesson 2
“China can be difficult, and it pays to be tenacious. If you think what you are doing is right, even if it is hard in business – then you’re probably right and should stick with it. Gut feelings and determination are both part of a winning strategy. Don’t give up.”The trademark was duly processed, and I found by change that the choice of client – a large Norwegian oil guy called Tom, who ran the pub as a sideline to his real business – proved enormously beneficial. Running a pub, and pouring pints behind the bar, Tom both knew everyone and everyone knew him. He’d told some of his regulars – all potential clients of mine – that he was getting his pub brand “The Red Rooster” trademarked, and that I was doing it. When I eventually turned up with the documents to prove the filing, he would then advise them I’d done a good job. From 18 months to obtain my first client, it took just another five weeks to get my second.
Lesson 3
“Some clients can be beneficial in other ways, especially in helping you market your business. Although I got lucky to end up with Tom as an initial client, it can also pay to identify businesses who can not only use your services and will pay you, but who will also provide added value in terms of marketing or networking. These clients should be nurtured. Word of mouth and positive marketing by satisfied clients is the cheapest and the most effective method of promoting your business.”By now, with a few smaller jobs coming in, I was starting to get busy. The DJ work, the TV station and English teaching all had to go. I had real work to do, and I also needed support. I hired a couple of Sichuan girls out of a local bar to assist. Although my Chinese wasn’t that great, it was enough, and with the help of a Lonely Planet phrase book and a Chinese-English dictionary, we could make ourselves understood. I found my Chinese skills were improving fast too, and tried to learn 10 new words a day. It’s repetitive and can be boring, but if you’re disciplined, it does make an impact. Slowly I found myself able to make sentences; a green light bulb would suddenly pop on in my head as I learned how to construct sentences. My office in those days was also in my apartment’s second spare bedroom. Kitted out with just one computer and a printer, I was able to painstakingly hand-produce typed business flyers which I would have photocopied and leave in the business centers of hotels (in those days many foreign companies were extant in specific hotels, which had two or three floors given over to business tenants). I started getting phone calls from interested clients. Money was still tight, but at least I had a raw business model that was generating both enquiries and income.
Lesson 4
“Marketing is an aspect of business that is vital. Without it, you fail to create a funnel into which clients potentially interested in your services can fall. The bigger the funnel, the more chance of attracting interest. Whether it is by leaving flyers in hotel business centers (something we still do today with issues of China Briefing) or via use of the internet, the more you widen your net, the more chance you have of creating a sustainable source of enquiries. Developing, and continuing to invest in marketing infrastructure is key to your business development.”Of course, I couldn’t bring clients home for a meeting. But I could see them in their hotels. So meetings were always conducted in their hotels, meeting in the lobby over a coffee. Although I had a set program of services that I was providing – mainly legal administration work related to setting up representative offices, trademarks, and so on – I would also be asked if I could perform other duties such as market research, recruitment and even teach English to an entire Chinese management team twice a week for a year. Beggars can’t be choosers, and sometimes it is necessary to bill for related, yet non-core work during the early days.
Before starting the business, I had also gone through a divorce, which had cost me a lot of money. In fact, I was personally in debt as a result (spouse credit card bills on a joint account) and I couldn’t get credit. So no credit cards and I had to manage my cash flow very carefully. In fact, I got so used to not having a credit card, it became normal. I applied and received a new one – my first in 20 years – just last year, and then only due to hassles with bill payments for overseas travel. Having no credit can also in the longer term have a very positive impact, which can also be crucial to a young business. I had to live within my means. If I couldn’t afford it, I couldn’t have it, and the entire business, even today, still adheres to those principles. Dezan Shira & Associates today still has no overdraft facilities or loans. What money we have is ours – and not someone else’s – to manage, and it makes business decision-making processes a lot easier without bankers or other creditors interfering.
Lesson 5
“You can’t build a business on credit. If you try – and I have seen many attempt it – it always ends in tears. Only spend what you can afford – and especially in early days of erratic cash flow it may even pay to cut up your card. You don’t need it, and the business will grow stronger and faster as a result.”There’s a term for this – “Bulkhead financing” –which means you keep the banks completely out of your business except for maintaining your account and giving you a safe place to hoard your income. Otherwise, keep them out of your company.
