NOTHING VENTURED

You can do business in Russia without getting your hands dirty

Philipp Rowe helps foreigners do business in Russia

Berlin native Philipp Rowe became a Muscovite right after getting his degree in Germany. He came to Russia several times as a student as well. “This was a time when I believed in all the stereotypes about Russia: that it’s always cold, there are nuclear plants and KGB agents everywhere, and bears roam the streets,” Rowe tells Capital Ideas in perfect Russian, “There cliches dissipated quickly. It became apparent that Russians and Russia are much better than their image abroad.”

After graduating, he started an internship at the German embassy in Russia. However, a future career as a diplomat didn’t appeal to him. He spent a year working for a Kuehne + Nagel, a logistics company. In 2007, he decided to start his own business. Today, his company Rufil Consulting, which is located in the center of Moscow, employs about 20 Russian and foreign workers.

Mr. Rowe, why did you decide to go into consulting?

Because I have always wanted to help German companies do business in Russia. When I first arrived here, I immediately noticed that German products and technology is popular here and in high demand. I also understood that not everything in Russia is easy for Germans and Western Europeans in general to understand. German companies in Russia need help, especially when it comes to bureaucratic details like accounting and taxes. This is primarily the type of consulting I’m talking about.

Rufil Consulting is not the only company in Russia that offers these services. Is it tough on the Russian market in terms of competition?

Of course there are a lot of consulting companies, but you have to keep in mind that I’m German. This is a big advantage for my clients, who mostly come from German speaking countries: Germany, Austria, Switzerland and Luxembourg. Incidentally, I didn’t think about competition when I started my business; I just started it. Moreover, you shouldn’t be afraid of competition. The fact that it exists means that you’re working in a field where you can make money. There is no competition in fields where you can’t make money.

As Germans like to say, it’s always hard to get started. What kinds of challenges did you run into when you started your business in Russia?

Looking back, I can say that I really didn’t run into any overwhelming difficulties. Though of course there were challenges when I was starting out. For example, some things were tough just because I’m a foreigner. I had to register my own company in Moscow, get a work permit… It was especially difficult in the very beginning, before I had assistants and didn’t have the money to hire professional agencies who could help. I had to do a lot of running around. I wore out several pairs of shoes before everything was settled. But it was a good kind of challenge.

There weren’t any other difficulties?

There were other kinds of difficulties. It’s hard to do work when you don’t have any clients. I started with no clients. I opened my company and looked for clients, talked to hundreds of people. It took a couple of years before people started to take me seriously.

Did you need a lot of startup capital?

I didn’t have much trouble with money. I lived simply.

But you needed some kind of capital to start with, right?

My startup capital was a laptop and a suit. So I didn’t need much money to start with.

What was the most important thing for you at this stage?

The most important thing in the beginning is to stay motivated. After you get a “no” for the 100th time, you have to keep going and asking more people. But these are challenges that aren’t unique to Russia. I actually think that it was easier for me in Moscow in this respect than it would have been in Berlin.

Did you run into any bureaucratic obstacles in Russia?

Of course, since bureaucracy is my business. It’s what I do every day. On the other hand, I have yet to run into a bureaucratic hurdle in Russia that I wasn’t able to overcome.

There is a lot of talk about corruption in Russia...

Some typical questions that my clients ask me when talking about doing business in Russia: Do you need connections? Do you have to pay everybody off? I established Rufil Consulting, as well as a lot of companies for my clients, we do accounting and taxes for a lot of businessmen and I’ve never run into a situation where I had to pay a bribe for something. And I don’t recommend that anybody does this, by the way. I tell my clients that you can do business in Russia without getting your hands dirty.

Much like any other market, the consulting market is developing. Are consulting services especially in demand in Russia today?

You’re asking how much the market has changed in this segment. Nothing is ever stagnant, including the market in Russia, which is always changing. For me, this is a positive moment that opens up new opportunities. Since 2007, when I first started working on the Russian market, we have gone through several crises, ups and downs. During the “Russian boom,” when everybody wanted to come to Russia, the most important thing for German companies was to open a business in Russia and set up accounting. A lot of German companies established their own companies in Russia just so they could be on the market, and only started thinking about how to sell their products here after the fact. After the Ukraine crisis happened and sanctions were introduced, German and other western companies decided to wait things out and put their plans on hold. But now everybody has gotten used to the current state of affairs and have an understanding of how to move forward. So western investments are starting to pick up in Russia again. German companies that want to work with Russia are determined to take advantage of the situation here and make investments. They haven’t lost faith in Russia and understand that Russian-German economic ties date back centuries. These companies are taking advantage of the fact that things are cheaper in Russia right now. For example, you can buy land to build a plant or get special terms and government benefits for business development and attracting investments.

Some foreign businessmen insist that the market in Russia is no different from other markets these days. But there are nuances, right?

The Russian market is developing, and is now at the stage of saturation. Russia is a huge country with a population of 140 million people. Moreover, Russia has always been a special market for Germans – it worked out that way historically. This market is practically at our doorstep, not across the ocean somewhere. Of course Russia is a difficult market that is very different from Germany. However, it’s easier to work with than many other markets. It’s easier for us to navigate than the markets in China, Japan or the Middle East.

So you think that Russia will continue to be an attractive market?

I am convinced that Russian-German relations are important not just for our countries, but for the world in general. Germany has traditionally been able to influence other governments through trade. There was a time when leading German companies like Siemens did a lot in Russia, and this was important for both Russia and Germany.

I think of my work in Russia as my patriotic duty. For Germany, there is nothing more important than keeping peace with Russia and strengthening our ties here. I also owe a lot to Russia. I started my career here, my business is here, my family is here and I live here. I really like being in Russia. Of course there are issues, but I am very happy to be here. Initially I didn’t think that I would go into consulting, accounting and taxes. I just wanted to support Russian-German relations. And now I work in this sphere.

A lot of people complain about the crisis and how difficult things are in Russia right now. Has your company experienced this?

Yes, of course. Business has slowed down and the growth we experienced prior to 2013 has come to a halt. My clients have been affected by it, which means I feel it too.

So would it make sense to start doing business in Russia right now?

Of course. I am sure that every German enterprise that does business abroad can enter the Russian market, provided, of course, that the company profile and products are a good fit for Russia. It’s even possible that entering the Russian market is easier now. For example, buying some kind of enterprise or real estate would be a good investment right now because the prices are fairly low. Nobody should expect to quickly turn a profit in Russia right now. But it will definitely come if you’re aiming for the long-term. For new investors, right now is a good time to make acquisitions in Russia.

What kind of advice would you give to businessmen who want to try entering the Russian market?

Definitely come to Russia first and feel things out. You won’t get far trying to set things up remotely. And forget everything that the German media says about Russia. Forget everything you read about Russia in Spiegel and Bild and saw on ARD and ZDF. Clear your head and come see Russia for yourself.

Once you’re here, plan your time a bit differently than you would in Germany. In Russia, you will need more time to do everything: to get to your hotel from the airport, to open a bank account and so on. Prepare to be patient. If these is one thing Germans can learn from Russians, it’s definitely patience. By the way, if you’re going to Russia in the winter, make sure to bring weather-appropriate clothes. Fashionable shoes are not a good choice for Russian winters (laughs).

 

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