Are you considering setting up a business in China? Would you like to hear some top advice from experienced entrepreneurs?
In 2005, Juan Gutierrez and Veronica Menendez set up LinkPoint Europe, a China consulting and sourcing business. Their five years experience has provided them with valuable market insights that they are now willing to share with new comers to the Chinese market.
Tip 1: Start with a lean structure and minimum expenses.
Experience: When we landed here we set up a big office, we decorated it… we incurred in a lot of unnecessary expenditure. This is something we would definitely do different if we had to start all over again. Fortunately everything worked out well but not having a bunch of bills to pay allows you to make no-pressure non-rush decisions and places you at that stage in a better negotiating platform.
Tip 2: Land here with a client in your portfolio.
Experience: It may sound obvious, but ensuring that you already land here with a project in your portfolio is a really good situation to see yourself in. So, if your business nature allows it, do a bit of homework back home before you base yourself here. We came here for a three month project. Once in China we realized that there were plenty of opportunities in the market. We felt we could do a much better job than what we were offered locally (as a matter of fact, we had to re-do our local marketing agency’s job), so we decided to settle here and benefit from the existing opportunities.
Tip 3: Be opened to shape your business as the opportunities materialize and your market knowledge expands. The idea you have when you land may not be the best business opportunity after all.
Experience: During our first years here we did lots of consulting work. After 3 or 4 years, the trading part of the business started growing and taking a bigger share of our time, with also more satisfactory results. It is not what we first foresaw, but it is working really well for us. We are also involved in some very interesting longer term investment projects that we hope will further reshape our business.
Tip 4: Promoting your business: Go for targeted efforts. Quality is better than quantity!
Experience: We have tried a variety of promotion strategies for our business. Our experience is that quality contacts are the best way to go. We have a sales director in Spain that approaches potential clients based on our knowledge of their markets and our conviction that we have value to add. We also get good business volume from our own network and from satisfied clients’ referrals.
We have done press and on-line advertising in the past, but we were not getting the same type of quality contact. We wasted lots of time trying to screen through the requests we received and in general it was difficult to assess which ones deserved our time and efforts.
Tip 5: Do not be afraid to set your own conditions and have a client screening process. Sometimes it is better to lose a potentially uncommitted client than to waste time.
Experience: We started chasing every project that would fall in our hands, and sometimes clients were not really committed to them. Now when a sourcing client requests our services, we charge a fee that gets deducted from their final order. This has several positive outcomes:
1) Allows to screen clients that were not really serious or committed to looking for sourcing here
2) Prevents us from wasting our time, so if no order materializes we at least get a remuneration for our work
3) And, it does not penalize clients that finally place their orders, because it gets deducted from the order.
Tip 6: Be tough with bad suppliers and understanding with the good ones.
When we have a bad experience with a supplier, we stop the relationship. We had a case in which we had to reject an order because of a big mistake in the production. Later on, we realized they had started including small amounts of the rejected product in new orders. After we realized, we never worked with them again. If they are ready to play a trick on you once, they will keep on doing it in the future.
On the other hand, we have some suppliers that are really good and with whom we have developed a good working relationship through the years. It is not easy to find good suppliers, so, when a problem comes up with one of those (and they do come!) we try to work out with them the best possible win-win solution. It is a bit like working “the Chinese way”, building on “trust and relationship” to solve problems together.
Tip 7: Never relax! Even with good suppliers.
Experience: Never relax! Production monitoring and quality control is still critical even when you work with your most trusted suppliers! The underlying issue is that our perception of what “acceptable” means is quite different. Your supplier may candidly approach you questioning why you can’t you take a product which is not meeting your specification if it still serves the purpose…
So, do you have any good tips for entrepreneurs setting up business in China?