Start-up Capital of a Few Thousand Dollars
On the wall of Greg Oztemel’s office hangs a portrait of his father. Next to it is a blackboard with graphs representing various assignments. Every employee coming to see the director can read the sign: “Smile – the boss is happy.”
“I get my interest in Russia from my father,” relates Gregory. “During Communist times he was involved in the buying and selling of metals through Soyuzpromexport. I first went to the Soviet Union whilst I was still a student. In 1971, I saw Leningrad, Tashkent and Samarkand. When I finished my studies in America, I went into banking. In those days, a number of countries were selling ferro-chrome from the USSR to add to steel alloys. Then, in England, I was selling small Lada runabout cars which I procured through Avtoexport in the USSR. And in 1985, following in my father’s footsteps, I came straight to work in the USSR. I found everything about this country interesting. By the end of perestroika, I was buying and selling synthetic rubber in the US, and working with factories in Kazan and Tolyatti. Due to the financial crisis of 1995-1996, I had to change the profile of the business. It seemed to me that supplying medical equipment to Russia might be profitable. That niche hadn’t yet been filled here. Straight away I received a large order.
Everything will move forward a lot more quickly with a Russian partner. Especially if you have someone “with connections” as your ally.
“A clinical hospital in Moscow was preparing to build several new blocks. It was part of the scheme providing hi-tech medical assistance. The hospital received 40m dollars for its development. We became its primary medical equipment supplier.”
– Gregory, what kind of resources do you need to set up business in Russia?
“I started off with just an idea and start-up capital of a few thousand dollars.”
– Does a foreign businessman have to have a Russian partner?
“Everything will move forward a lot more quickly with a Russian partner. Especially if you have someone “with connections” as your ally. That carries an awful lot of weight here. Luckily, I didn’t have to start my business in Russia from nothing: by that time I had a lot of friends and acquaintances here. We chose the right premises with the help of the Main Administration for Service to the Diplomatic Corps under the Ministry of Foreign Affairs of Russia. And, these days, many representatives of international organisations and foreign companies use the services of the “Ministry of Hospitality”, as they still call it.
“Then we started building our own office in the centre of Moscow. I came to see the final storeys being finished, and I noticed a sign: the space cost $2,500 per square metre. I thought ‘God, that’s a lot!’ But now, in the centre, you can find a square metre going for twenty, even forty, thousand euros...”
– How difficult is it for a foreigner to start a business in Russia?
“It’s relatively straight-forward. You need to be able to find a competent lawyer and be able to afford his services. He will then amass the pile of necessary documents.”
Sage CJSC is the Russia’s sole representative for Ortho-Clinical Diagnostics (Johnson & Johnson), Cepheid, Datex-Ohmeda, Beacon Medaes, Respironics, Bio-Med Devices, Teleflex, Hudson RCI, and Rusch medical equipment manufacturers. Sage’s core business is anaesthesiology and life support, operating theatres, pulmonology departments, somnological centres and laboratories. In the years it has been operating in Russia, the company has supplied medical equipment to the largest healthcare institutions in Moscow, Saint Petersburg, Kazan, Chelyabinsk and other cities.
They Sat Drinking Tea With Us For Five Hours...
– How hard was it to recruit your staff?
“It was difficult finding people who wanted to work for the good of the company. A lot of people in Russia then wanted to go into business for themselves. Also, it was hard to find experts with sales experience who could get to grips with technical issues: after all we were supplying the very latest medical equipment. I myself had to learn a lot from my suppliers.”
– Is it compulsory for your employees to know English?
“No, our requirements are not so strict. We have four people with a good knowledge of English. Initially, the staff was made up of 15 people, and now there are 50. Almost all of them are Russian. Only 12 of them have higher education in a medical field. We have too many accountants and logisticians.
“I would like to say that Russians are changing. The people I work with show more and more initiative, and make decisions for themselves. I enjoy watching them develop. But we get more and more young people coming to find work who immediately request a huge salary. This, I don’t understand.”
In Russia, you get a hostile reception. But when they know you a little better and get to know your good side, they lay bare their soul.
– How much do your employees receive?
“Between 70,000 (about $2,240) and 120,000 rubles ($3,840). It is an excellent salary for Russia. And don’t forget that income tax here is only 13 percent. And yet everybody still wants more.”
– What kind of difficulties have you encountered?
“Everything has changed and developed very rapidly. In the 1990’s, all businessmen in Russia were “cowboys.” You only had to hold off for a week for the contract to disappear into thin air. And there were problems with internal transportation and customs too. There was an instance when we were importing the very latest anaesthetic equipment. Its monitors display the levels of the carbon dioxide mixture being breathed in by the patient. The customs officials saw this instrument and decided that it was for measuring carbon dioxide levels in car exhaust fumes! The whole point is that the duty on medical equipment is 5%, but for that kind of device it is 35%. We had to show the instrument in action in one of the hospitals.
“For the foreigner it is worth knowing that often his business might depend on the next Russian Federation Government resolution, or decree from the Ministry of Health. Once we made huge losses on a large contract in Khabarovsk. The manufacturer in Europe held up supplying the equipment. When the two containers arrived at customs on lorries from Germany, it became apparent that after the New Year one of the laws had changed yet again, leading to a change in the rules on cargo clearance. Our equipment was stuck at customs for three months. The cardboard boxes in which they had packed the wall panels used to shield patients from X-ray equipment radiation started to disintegrate. The cargo was insured. But the insurance companies were also in turmoil, and so we didn’t receive the whole insurance pay-out.”
– Did you have any problems at the hands of the supervisory bodies?
“I’ll never forget when we were getting a reconstructed building on Malaya Nikitskaya ready for use. We had to cut down one of the trees, and before we knew it an employee of the local council appeared and asked angrily: ‘Where is your permit to fell this tree?’ When we showed her the necessary paperwork she was very surprised and, so it seemed to us, somewhat disappointed. Then a committee of ten people arrived to approve the building. Once it had inspected the building and checked all the permits covering health and safety regulations, the presence of a fire-alarm and fire-extinguishers, evidence of undergoing fire-safety courses, that there were instructions on what to do in the event of a fire and a fire escape plan, the committee was in no hurry to leave. They sat drinking tea with us for two, three, five hours...They were waiting for something. The firemen went to check the distribution of the sockets for a third time...”
You Will Never Be Bored In Russia
– What is your company’s turnover?
“750m rubles (around $24.02m). We are a small company. But our business has grown by five times compared to the 1990’s.
We have a warehouse, we buy equipment from Europe, and we trade with the whole of Russia. I now know this country better than my native America. We supply up-to-date equipment but sometimes we come up against the problem of there not being enough people in the provinces who know how to operate it.”
The inspectors sat drinking tea with us for two, three, five hours...They were waiting for something. The firemen went to check the distribution of the sockets for a third time...
– Is the competition growing?
“Yes, a lot of large companies are opening representative offices here in Russia. And small companies crop up, operate for 5-6 years, and then disappear only to re-open under another name. But there are many subtleties to our business. It is very complicated, for example, to register as a medical supplier. It is very time-consuming. You have to gather together a pile of documents and spend quite a lot of money. You need to know doctors in the scientific research institutes in order to be able to carry out clinical trials. The civil servants at the Health Ministry are incredibly bureaucratic. Sometimes it can take 3-4 months to receive the necessary paperwork from them. And when there is a change in minister, there is, as a rule, a change to his whole team. New people arrive, and this means being prepared for changes to a lot of rules and regulations. At the moment, for example, the civil servants cannot decide whether to distribute money to the regions or to stock-pile medical equipment centrally.”
– What do you need to know about the Russian mentality?
“In America people behave well until something goes against their wishes. In Russia, it is the other way round: you get a hostile reception until they know you a little better and get to know your good side. Then Russians open up to you and lay bare their souls. Generally, here, it is important for you to be introduced in a number of places before you are accepted.”
Russians are changing. The people I work with show more and more initiative, and make decisions for themselves.
– What would be different if you owned a similar company in America?
“There would be massive competition in the US. In Russia it is on a different scale. I deal with the entire country. In America there would undoubtedly be less work in the regions, even in the big cities.”
– Let’s summarise: is it worth doing business in Moscow, in Russia?
“Yes, definitely! It is extremely profitable. And you will never be bored here. You need to be prepared to be flexible, to have patience, and to go about your work in a methodical manner.”