NOTHING VENTURED

Paul Bruck:

Russia has niches for western SMEs

It would not be an exaggeration to say that Paul Bruck is a famous person in Russia. And not only because he heads up Balashova Bruck & Partners, which has a lot of clients. Mr. Bruck is also a well-known expert in management consulting and marketing strategy.

Paul Bruck is also the famous organizer of the longest ultra-stage bicycle race Red Bull Trans-Siberian Extreme, which is almost 9,200 kilometers long.

The route is impressive: Moscow – Nizhny Novgorod – Kazan – Perm – Yekaterinburg – Tyumen – Omsk – Novosibirsk – Krasnoyarsk – Irkutsk – Ulan-Ude – Chita – Svobodny – Khabarovsk – Vladivostok in the Far East, on the coast of the Pacific Ocean. The participants of the bike race, which took place for the third time in a row this year, are athletes from different countries who cross five climate zones and seven time zones. Paul Bruck talked about the bicycle marathon and doing business in Russia in an interview with Capital Ideas.

It would not be an exaggeration to say that Paul Bruck is a famous person in Russia. And not only because he heads up Balashova Bruck & Partners, which has a lot of clients. Mr. Bruck is also a well-known expert in management consulting and marketing strategy.

Paul Bruck is also the famous organizer of the longest ultra-stage bicycle race Red Bull Trans-Siberian Extreme, which is almost 9,200 kilometers long.

The route is impressive: Moscow – Nizhny Novgorod – Kazan – Perm – Yekaterinburg – Tyumen – Omsk – Novosibirsk – Krasnoyarsk – Irkutsk – Ulan-Ude – Chita – Svobodny – Khabarovsk – Vladivostok in the Far East, on the coast of the Pacific Ocean, 14 stages in 23 days. The participants of the bike race, which took place for the third time in a row this year, are athletes from different countries who cross five climate zones and seven time zones. Paul Bruck talked about the bicycle marathon and doing business in Russia in an interview with Capital Ideas.

What motivated you to enter the Russian market? How and when did you come here?

It’s tough to give a brief answer, since there are some historical aspects at play. I studied Russian in a school that’s quite famous in Vienna – Theresianum, which is located on Favoritenstraße street in the center of Vienna. This school, in addition to basic general education, focuses on the study of foreign language. Mandatory subjects aside from math and German include English, French, Russian, and Latin. This school was and continues to be the only school in Austria where students study four foreign languages. It goes back to the time of the Archduchess Maria Theresa and the Austro-Hungarian Empire. After WWII, the school continued this tradition. So I, an Austrian born near Vienna, started learning Russian at this school.

Then I graduated from university, started looking for work, and got a job with the American company Dow Chemical in 1985. I was working in agriculture at first. This was around the time of Mikhail Gorbachev with his glasnost and perestroika. There were new opportunities, including new opportunities for me: there was an idea to create and implement a new test project -- organizing and setting up business in the Soviet Union. This is how I became Dow Chemical’s first project manager in Moscow, in 1987-88. I came back to Vienna after. However, Russia opened up completely in 1991, it was a different situation. I remember one of my friends said: “Either you like Russia or you don’t.” I decided it’s better to like it, and I’m glad I did. These were very interesting times.

Then I made a career change. For 16 years, I worked in IT for an Italian company. Then there were new ideas, and in 2006 I decided to embark on a new path and opened my own business in management consulting, financial and marketing strategy. I started doing this in Vienna at first, but quickly picked up on the fact that all of the key projects were in Russia. So we opened an office in Moscow in 2007 and do outsourcing in areas like accounting, outsourcing management. My partners in Russia are lawyers, tax experts, and so on.

What kinds of challenges did you encounter when setting up business in Russia? Or did everything go smoothly?

No, of course nothing is ever simple. And it’s not just about Russia. All kinds of crises have negative effects. Just remember the global economic crisis of 2008. Things weren’t going well then. But we continued to move forward: slowly, step by step, without stress and fuss. This kind of tactic brings success.

Do you only consult Austrian companies?

No, not just Austrian companies. We work with German speaking companies, including German and Swiss enterprises.

Do your clients include any Russian companies?

Not direct clients, no. But we work with Russian-speaking companies that are branches of German companies.

There are a lot of consulting companies in Russia. Are you afraid of competition?

There is competition everywhere. It’s good for business.

But still, there are a lot of consulting companies in Russia.

Yes, but we are not a big enterprise in this sector. We work with our partners, lawyers, for example, that have 22-23 specialists. We don’t want to become a huge enterprise. There are some companies that employ 200 accountants, while we only have five. But we offer exclusive, quality services in this sphere, which is why we’re justified in counting on having clients in the future. We guarantee quality, which is why clients trust us.

What is your team like and how did you find staff? Are you happy with your Russian employees?

I have both employees and partners. Our group has a total of four companies. I believe in my partners, all of them are women. We are very happy with their work.

Who was your first consulting client in Russia? What did you do for them?

One of our first clients was KOTANYI, an Austrian enterprise that makes spices. We supported them to set up a Ltd. (OOO) in Russia.

Can you give a few examples of Austrian or other foreign companies that entered the Russian market with your help? Who do you remember and why?

Imagine, for example, that Austrian or German companies sell important products in Russia and all of a sudden run into problems due to the ruble devaluation. It’s difficult for them to make sales. For these companies, we opened local Ltd´s (OOO) that allowes them to make deals based on the ruble. That is, we implemented a full administrative cycle, from customs to transportation of goods, accounting, and so on.

So you created a fully functioning administrative chain for them?

 Exactly. This accounts for about 80 percent of business. In other words, what we do allows them to take care of what’s most important: the business itself, sales. We take care of all the administrative work.

Which of these services are in high demand in Russia right now?

It’s usually the full range of consulting services. There aren’t many companies that just come to us for accounting, for example. It’s usually a whole range of services that are provided by the same company. This is in demand, since the principle is clear and makes sense: you do business, and we’ll take care of everything else.

And it’s not just consulting. We do a lot of outsourcing services. For example, we can provide a company with a CEO and, of course, provide legal services.

Did sanctions against Russia, the ruble devaluation, and the economy in general affect your business?

It’s hard to say. Of course, over the past three years not that many companies started doing business in Russia. But I can see that in the long-term more foreign companies are ready to be active on the Russian market. This primarily includes the Eurasian economic zone. But western investors have an interest in the Russian market.

Localization plays an important role, since it’s obviously cheaper to manufacture products in Russia. Russian salaries are lower and the market has stabilized.

In terms of sanctions, it’s a stupid situation. In my life, I’ve seen that sanctions don’t do anybody any good: they’re bad for both Russia and the West. But to be honest, our business is not especially affected by sanctions.

In your opinion, does the Russian market still have a lot potential for foreign companies and investors?

The Russian market is tough, but it’s a market. Every market is tough when it first starts developing. If you look at how difficult it was to work in Russia 20 years ago and compare it to how things are now, you can definitely say that it’s not that tough now. A new market is always hard, and you need three years. It doesn’t matter if your new business is in Austria or in Germany, it still takes three years. The same applies to Russia.

But is there progress in this sense? For example, is it easier to open foreign enterprises in Russia now?

I won’t generalize, but I can assure you that bureaucratic procedures in Russia, for example, tax reporting, is a lot simpler than it was 10 years ago.

Which Austrian and other foreign companies could enter the Russian market? Are there niches that still have room?

Yes, there are niches in Russia that still have room. It’s best to stick to the supply chain principle here. There is always room for small and medium-sized businesses, for suppliers of different kinds of goods, not just auto manufacturing or medical equipment. There are opportunities everywhere for small and medium-sized businesses to find a market for their goods and services. Localization also provides pretty good opportunities, but unfortunately in Russia small and medium sized business is not where it should be yet.

You’re the organizer of the Red Bull Trans-Siberian Extreme bicycle race. Why did you start doing this and what kind of competition is it?

This is fairly simple. Five years ago, four Austrians, who had won Race Across America in the US, which is a bicycle race that has been going on since 1982 wanted to race from Moscow to Vladivostok. Then they started wondering if there are any Austrians in Russia who can help to make this happen. So we organized the first project in 2013. We had already established contact with Red Bull and worked with them to develop the concept for the race. And now we’ve organized the “Red Bull Trans-Siberian Extreme”, the longest bicycle stage race in world already for the third time.

Are you in Moscow full-time or do you travel back and forth? How do you feel in the Russian capital?

I’m in Moscow full time, more or less. My wife spends 70-80 percent of her time here, her mom lives in Vienna. I also have two sons. One of them works in Austria, the other one works in Russia. He graduated from Plekhanov Russian University of Economics. He has degrees from universities in Moscow and Marseilles, and works at Raiffeisen Bank.

Do you like the Russian capital?

Very much. That’s why I’m here.

But Moscow is such a huge city. It’s different from quiet, orderly Vienna.

Yes, that’s exactly why I’m here.

 

CAPITAL IDEAS

Founder: Department for External Economic and International Relations of the Government of Moscow

Address: Voznesenskiy Pereulok, 22, Moscow, 125009

Ph: +7 (495) 633-68-66, Fax: +7 (495) 633-68-65

E-mail: dvms@mos.ru

www.mos.ru/dvms/

Acknowledgements to:

PHOTO – www.mos.ru, www.dvms.mos.ru, ITAR TASS Agency, RIA-Novosti, Getty Images Russia, companies and organizations, represented in the issue.

If you wish to get new issues of Capital Ideas, please, apply to: editor@mcms.ru

The magazine is registered with at the Federal Authority of Legislative Control in Mass Media and Cultural Heritage Protection. Media registration certificate ФС77-53716, issued April 26, 2013.

All reproduction permitted only with the Editor’s permission and reference to ‘Capital Ideas’.

Published with support from the Department for External Economic and International Relations of the Government of Moscow