Russia rising: tips on doing business in the world's largest country
Difficulties once faced by exporters are being overcome as Russia's economy modernises. Photograph: Robert Harding World Imagery/Corbis
By Jon Card, Guardian Professional
Rapid change is thawing Russia's business climate, making it a good time to tap into demand for British trade.
The past decade has seen remarkable change in the world's largest country. The former communist behemoth is undergoing rapid modernisation, which will see it transformed into a sophisticated capitalist economy. Its population of 140 million has become increasingly used to a higher standard of living as its business leaders have grown more savvy and knowledgeable. British exports to Russia are steadily on the rise, amounting to £5.5bn in 2012, up 15% from the previous year. Nonetheless, there is a considerable untapped demand here, and entrepreneurs should look past the dark headlines and overcome the fear factor associated with doing business in Russia.
There are a lot of misconceptions associated with Russia, which can act as a barrier to investment and trade. For many, Russia is a dark, cold place, ruled by a controlling and corrupt elite who are hostile to outside intervention. However, entrepreneurs who know the country scotch such ideas, or at least downplay their significance.
Clive Woodger is managing director and founder of SCG London, a £1.8m strategic branding company. He first headed out to Russia in 1998, when "the concept of branding was unheard of", and has witnessed immense change. "Russia wasn't on anybody's radar 15 years ago," says Clive. "Going around there was incredible, as there weren't any shops. People here half-joked about getting a bullet in your head, or getting paid in vodka and potatoes."
Clive has stayed with Russia through good times and bad, and says it is a far cry from what it was in the 1990s: "There are many stereotypes, but today Moscow is a fantastic city full of fashionable young people having fun."
Entrepreneurs interested in Russia need to do thorough market research and gain contacts. UK Trade and Investment (UKTI) is the first port of call for many, as it will prepare detailed reports for businesses on foreign markets for affordable prices. The Russo-British Chamber of Commerce (RBCC) is also a good source of information and support.
Vikram Setia, co-founder of information management company Infomentum, a £4m turnover business established in London in 2007, used both of these bodies and was impressed with their support. UKTI passed on his details to the British embassy in Russia, which made calls on his behalf. His business now works as a sub-contractor for a Russian company, which handles a major project for the country's Ministry of Finance.
"If you listen to the advice which is available and can read between the lines, you can get a lot of useful information," suggests Vikram. "They can also introduce you to a lot of serious people in Russia. The British embassy called an IT firm on our behalf, and it carries a lot of weight when someone receives a call from them."
Entrepreneurs would be wise to take an experienced Russian interpreter with them to meetings, as although English is widely spoken it is far from universal. Being on time and well-prepared is important, but the real place for deal-making is often outside of the office. Personal time between senior managers and bosses is favoured and seen as more important than paper contracts.
Sarosh Zaiwalla, founder of law firm Zaiwalla and Co, has worked in Russia for over five years, with clients that include the government. Sarosh says relationships are crucial and are often more important than contracts: "They want to know all about you, your family and where you are from. It's not uncommon to go to their houses and meet their family, which isn't something that would happen between law firms here."
Creating bonds of trust between your partners and clients in Russia is key, and entrepreneurs testify to how loyal Russian business people can be once this has been established. For Clive, his own loyalties were tested shortly after he began trading there in 1998, when the Russian rouble crashed. The government reneged on its debt and SCG's clients couldn't pay. However, rather than withdrawing, he decided to wait the crisis out, hold on to his besieged clients, and hope to recoup his losses later. The plan worked, and now SCG London does a huge amount of work in Russia.
"The crisis became a good test of loyalty," he explained. "I came to realise that these were serious people and going to Russia had been a sensible move, which would later pay off incredibly. The loyalty we showed came back in the form of recommendations. We now have over 100 clients there."
The Russian economy is modernising rapidly and its business people are very keen to discover what's new and exciting in terms of ideas, technologies and strategies. Innovative British businesses should therefore be looking at Russia as a place to trade, as their products and services are in demand. When Vikram was establishing Infomentum in Russia, he discovered that London was respected as a place for technical expertise and thought leadership. However, his clients still wanted someone nearby to call on the phone who could speak Russian.
He said: "We have people on the ground in Russia handling the implementation, but the leadership and innovation is handled from the UK. This was a very attractive option to them as they get the best of both worlds. Top-class expertise from London, but also Russian people on the ground."
Breaking the ice: five ways to improve meetings with Russians
Russians are sometimes perceived as being cold, and meetings a little frosty, which can prevent deals. However, this is down to cultural differences that can be overcome:
1) Expect some silences: If your suitor becomes quiet, don't automatically think everything has gone wrong. It is more likely they just want time to consider your proposition.
2) Remember their pride: Russians are proud of their culture and their food, so be sure to take an interest in it. Ask for recommendations on where to eat and go out and the conversation should open up well.
3) Avoid jokes: The British sense of humour isn't always understood or appreciated and can fall flat, causing embarrassment all round. So don't try to be funny.
4) Go to lunch: Private meetings and socialising is part of making deals, so be prepared to buy a few lunches and drinks. Deals are made in restaurants as much as offices.
5) Show expertise, not superiority: The Russians are playing catch up in some areas and want British expertise. However, remember some business people are very sharp and well-informed, so don't become overconfident.