The FINANCIAL — For the past 27 years Paul Clark has helped small to large companies, governmental units and donor organizations improve their performance. Following six years in North America and Western Europe, Mr. Clark has more than 20 years experience in Poland, Bosnia and Georgia. His clients include firms such as Exxon, Lufthansa, World Bank, UNDP, BP and others.
In Georgia Mr. Clark single-handedly managed a two million USD World Bank sponsored enterprise restructuring project in Georgia including hiring, managing and training a local staff of 50 consultants in 2000 to 2002. TBSC was formed in 2003 and today provides high standard general management consulting and business support services to commercial companies, diplomatic missions, International Financial Institutions, donors and donor projects. The success of TBSC and the breadth of its satisfied clients is the best indicator of the value it creates for its clients.
Mr. Clark moved to Georgia 10 years ago. Since that time the nature of the investment climate has changed quite a bit..
“Between 2000 and 2003, there were a lot of uncertainties, regulations were unclear with all sorts of opportunities for some people to exploit the situation for their own personal benefit. It was actually a big problem.
“For some people it created difficulties in doing investments. On the other hand for people who were already here and had figured out how to navigate the troubled waters it was not such a bad place for them at all. Then the Rose Revolution occurred. For the first year or two there were no investments coming in, as investors were scared by the fact that there was a revolution and so forth. Since 2004 or so then regulations have become much more clear and transparent. By most measures it is a lot easier to start business and invest in Georgia than was the case in the past.”
Q. General management consulting is not a traditional business in Georgia. What does TBSC do as general management consultants?
A. The idea and use of consultants is not new in Georgia. Essentially consultants are merely experts that provide focused advice and guidance in their particular field of expertise. Everyone uses consultants, for example doctors that give us advice and guidance in medical areas. The doctor listens to your symptoms, analyzes what those symptoms might mean and then recommends a cure.
Successful consultants have two features: 1) expertise in some subject area and 2) the ability to provide good advice and guidance in that subject. It is important to note that being an expert in a subject does not necessarily mean that one is also able to really provide advice and guidance in that subject. In particular there is a real danger that the consultant or expert sees the details of his or her area of expertise but is unable to express those matters in a way that a non-specialist can use.
General management consultants like TBSC are unique among consultants in that usually our clients, general (or senior) managers, are themselves practitioners in the same area (i.e., general management). TBSC is uniquely positioned in this regard. As general managers with very long experience ourselves we understand the problems senior managers face, problems that keep them awake at night. TBSC has the time and expertise needed to solve those problems that worry senior managers, problems that the senior manager himself or herself might be able to solve if she or he had enough time and the right staff.
To the end, TBSC Consulting is the ultimate staff for senior managers of Georgian or foreign companies. We can get the work done that cannot be done internally.
Let me elaborate about the services we provide and why we excel at what we do. Our services fall into three groups.
In market entry and expansion we provide foreign businesses with all the services needed to decide whether to enter Georgia and then to actually do the market entry. This includes everything from pre-feasibility studies through business plans and ending in investment proposals. After the investment decision is made we help clients through fund raising and the actual investment process. For example, TBSC is an OPIC EPN (US Government investment group) originator for Georgia. We have a strong company and industry economics approach to this work.
We also help Georgian companies enter and expand in other countries.
In performance improvement we help managers improve the performance of their organizations. If an organization is not performing as well as it should, in whatever area, then we know how to identify the root cause of the poor performance and then work with the client to solve the root cause. TBSC is unique in that we can rapidly identify the root cause using our extensive experience and because we focus on solving the root cause, not on reducing the impact of the symptom of the poor performance.
In decision analysis we help organizations decide which among several competing courses of action is best for the organization. This is process oriented and management teams use the process to decide what is best and to develop consensus around that decision. We provide the analysis and facts needed to make the decision.
Q. How difficult was teaching people about the benefits of general management consultants?
In the rest of the world, the overwhelming majority of business people don’t appreciate the value of business consultancy, although in large businesses it’s very accepted to use consultants.
Here, in Georgia, the situation was difficult at the start; for sure consultancy is not traditional here. Having said that, the situation changed gradually as businesses in Georgia now understand the value of what we do, how we can help the senior manager solve the problems that worry them. Having worked in hundreds of organizations over the years I can tell you that despite what people might believe, management is a real hard profession and one that is filled with worries. It is rare to find any organization that is easy to manage or a manager that does not stay awake occasionally worrying about problems.
The other thing that people don’t understand well is why consultants are so expensive, as they see the service to be just people, individuals, compared to what they pay to their employees as a wage. Often companies do not understand that a consulting firm is a full-fledged business and that it has all the costs involved in running a business. In fact wages for people account for only 33 percent of our costs and a lot of people don’t recognize that.
Q. Do you help startup businesses in Georgia?
A. Not really. Consulting is business as any other and you have to look at your potential client and decide whether they’re able to pay the fees. We are not a donor project and we’ve never received donor money as we’re strictly a commercial consulting firm. It is unfortunate because smaller firms often have great ideas and I really wish that we could help them. We occasionally do help people on a pro bono basis when the case is of particular interest to us.
Q. Are you working with agricultural firms in Georgia?
A. Our client base and clients are very diverse. Over the years we have helped service companies, manufacturers, government, International Financial Institutions, foreign and domestic companies, diplomatic missions and NGOs. We have worked in perhaps two dozen industries. Naturally each industry and client is different but there are, nevertheless, lots of similarities. This lets us leverage and apply the long professional experience we have in TBSC.
We are doing more and more work in agriculture because it’s a current interest of business people in Georgia, so we respond to the market. We’re helping a lot of agricultural firms and we’re thinking of creating a separate consulting practice to accommodate that demand. Our traditional consulting work comprises perhaps 75 percent management issues and 25 percent very specialized knowledge (e.g., geothermal water engineering). We employ experts for those specialized knowledge requirements. In agriculture it’s more balanced at about 50 percent management issues and 50 percent specialized knowledge. So we’re trying to figure out how to deliver those services to agricultural firms at a competitive cost because generally technical specialists are less expensive than management experts such as ourselves.
In the past two years in agriculture we’ve done substantial work in cattle breeding, beef, dairy farming, vegetable farming/storage, mushroom growing/marketing, milk processing, cheese production and slaughter houses. The work has been done all over Georgia. Clients typically are Georgian business people who are either in agriculture or are interested getting into the business.
To be clear, however, agriculture represents about 40 percent of our work for commercial companies. At this moment we are working in five other industries as well.
Q. Your company is linked with many western companies, your business is based on a western model of business, but your staff is Georgian. Tell us about the people behind of your company. As we noticed on www.TBSC.ge many of them are western educated.
A. When we hire someone new, we tell them that they’re very well educated but they don’t know anything. The reason they don’t know anything has two features. First they’ve typically not worked before and despite that they have good knowledge they do not know how to apply it at all. So by doing work, they little by little learn how to apply their knowledge.
The second reason we tell our new hires that they don’t know anything is that the style of work in Georgia is completely different than in the US or Europe. There is a unique style of work, style of thinking and approach to problems. I don’t expect the universities to teach this but a style of work is very real. Consultants that have worked at TBSC for a year or two have a completely different approach to work and thinking.
We like to hire people that have a genuine record of accomplishment that they can speak about. It doesn’t have to be necessarily in business but even someone who is graduating from university might have accomplishments to talk about and which sets them out apart from everyone else.
Training of TBSC employees never stops; we’re lifelong learners here. To make our staff work independently it takes years (at least three) and this actually speaks about the sort of people we wish to hire. We don’t want people who say “I know everything already” – and who are not humble enough to say that “I don’t know anything”. If someone comes to TBSC and expects to be completely independent, a company director or something in a year then TBSC is not the place for them even if they are otherwise fully competent.
In the past it was hard to find people with business education like marketing, accounting or finance now there are a lot of them. But if you want to find engineer for instance then forget it. If you want to find a new well qualified, well educated engineer – you can’t. Also you can’t find agricultural scientists or single physicist especially new graduates. When we hired engineers for a UNDP project for instance the average age of the engineers was over 50. They were well qualified, but I would hope to be able to hire engineers of a mix of different ages.
I am not speaking of highly specialized engineers but rather generalists with an engineering style of thinking.
In Georgia there is no industry that is big enough to have specialized consultants although there are few consultants who are relatively specialized but generally in any industry there are no specialized consultants to do the work.
Q. Among your clients are leading Georgian companies from different fields of business. What kinds of services/consulting are more demanded?
A. The most common thing that businesses require are business plans that we build up for them. This starts with feasibility studies and a general understanding of market issues and ends with business plans suitable for investment proposals and financing.
Half the time, we tell people: “Don’t invest” – because, the situation in their particular industry in Georgia is such that there won’t be economies of scale.
I also observe that in Georgia, most people, companies will seek our services for market entry or business plans. They do not use us for performance improvement which is the opposite of what you see in the West. In the West, companies use consultancy to improve performance. Having spent time in well over a hundred Georgian companies I can say that nearly all of them underperform. If they were to focus on performance improvement their bottom lines would definitely improve. But to do that you should go through a genuine improvement process and you should use consultancy for that. I’ve been doing such things for 25 years now but not in Georgia, unfortunately there is little demand for it.
Q. You know that imports far exceed (3 times) exports in Georgia. Which industries do you think is the most perspective to counter balance this proportion?
A. In World Bank’s wealth of nations report there is given a clear view that developing countries such as Georgia first exploit their natural capital and only later can you reap the benefits of investing in human capital, education and so forth. So now Georgia is at the point, and it can only create value by exploiting its natural capital which is water, attractive environment-tourism and agriculture. But to make value from these things or on the other hand to export them there are lots of things to be done to make production efficient as someone has to invest in equipment and make the price competitive to that on the world market.
Q. What kind of obstacles do American businesses face in Georgia?
A. I don’t think American businesses face any unique obstacles relative to businesses from other countries. Most people from different countries are treated equally. Americans have some natural disadvantages, as they’re long way from home. Georgia is not a natural market for the US because it’s so far away. So for example it’s much more natural for Europe to trade with Georgia than for the US to do.
Georgia also is not a natural place to source product from because – why would you buy from Georgia when you could buy it from Turkey or Israel.
American companies except for the large ones of course, aren’t foreign-trade oriented, particularly when compared with the Dutch, a tiny country that historically has been a trading nation.
However when American companies come in Georgia there are good resources such as ourselves and AmCham to support them.
Q. How many Georgian companies have you helped to expand in foreign markets and how many foreign companies to do the same in Georgia?
A. The number of Georgian companies who wish to expand in foreign markets is large. What they don’t realize is that it’s actually very expensive to do that. Not including the cost of our service, it’s very difficult to start exporting. There are all sorts of hurdles to pass: you have to have the right product, find a buyer and so forth. My observation is that while a lot of Georgian companies wish to export, in fact they’re not prepared to pay what it costs to actually begin to export.
Having said that, TBSC has a very good network to help us help Georgian companies wishing to export. We are affiliated with Larive Group, a Dutch based consulting company. Larive has offices worldwide in 35 countries. Therefore, if a Georgian company decides to export or make investment in other countries we have access to people that can help in those countries. Particularly in Central and Eastern Europe, South East Asia and Africa. We have Larive affiliates in all those countries to help our clients.
Separately, we know how to pull in financing for Georgian businesses. We help people to get financing from OPIC (Overseas Private Investment Corporation), we can help people get money from EBRD or from other donor projects.
Overall we’ve helped a number of Georgian companies to expand in foreign markets. In addition we have helped more than 25 foreign companies enter the Georgian market; we’ve also helped trade mission from US organized by USDA which brought 12 American companies to Georgia and as we know Georgian business environment we matched them with Georgian companies of similar profile. So if we add up all those trade missions and all the companies entering Georgian market it’s probably over 100 of them.
Q. What is the largest investment project you’ve helped /consult in Georgia?
A. Currently we are working on a project which is 50 to 100 million dollars USD; this is the largest one in terms of investment amount. In total, we’ve worked on projects totaling over 200 million USD.
Q. How much does the service, you provide for investors or Georgian businesses, cost?
A. When we get a new project of any type we sit down and write a detailed plan, the approach we would take to perform the project. Then we assign people (consultants) to each step in the approach and estimate how many days these people have to work on each step like meetings, writing reports and analysis. We then multiply that time requirement by our daily rates. Daily rates depend on the level and experience of the consultant
Our rates are high by Georgian standards but still well less than fees paid to lawyers. Nevertheless, if one considers our high productivity and the high quality of the work we do, then we’re not expensive.
I don’t see any reason why cost of producing our product (consultancy) should be any less than what would cost company to produce the same product for themselves.
My standard daily rate is 2300 GEL a day, senior consultant is 500 GEL, consultant 250 GEL and analyst 150 GEL a day. Normally one project takes 3 people. Business plan for which client has a good starting information already about the market will cost from 25 to 30 000 GEL. If a company needs help on continual basis on a project then it will cost 5-10 000 GEL a month.
Q. Could you give an example of how you help Georgian companies to find a partner in a foreign country? And thus to start export?
A. There are basically two methods. Method one is to use our Larive connections in 35 developing countries around the world. The second method is in areas where the Larive network is not necessarily appropriate. In these cases we identify candidate partners, screen them, long list/shortlist of final partners and then we talk to them.
American companies should know that we’re OPIC originators, so we can do business plans as required by OPIC. We take candidates for financing through the whole application process.
Q. Making of feasible business plans is a hard nut to crack in Georgia – what advice do you give those in need to build a successful business plans?
A. For creating a business plan, first you should have a good idea; then you have to nail down/document to whom you actually want to sell to and how much; then you’ve to calculate the cost of doing business to express the idea in numbers or real financial forecast; and then you’ve to express the numbers back in words to stimulate the interest of people that it will be viable business in Georgia.
Entrepreneurs who come in, they have a great idea and sometimes the ideas they think of to be true, often times it’s not at all the case. Our job is to be extremely cynical – critical with all the assumptions that go into the business. It depends on the type of business plan, if it’s a business plan for a bank and the bank is going to make a well collateralized loan, then in that case the business plan is not so important as the collateral. If on the other hand someone is going to make 20 million dollars of investment and they want to know should I do it or not and how should I do it? – then that is a completely different question and it certainly requires the feasibility studies that we run.
Q. How perspective is Georgian companies exporting to US market? And which is the most niche market for Georgian goods to be exported? (How have you observed?)
A. To sell to the foreign market you have to have a suitable product at a suitable price. A lot of Georgian businesses think they’ve great products but they’re not really suitable for foreign markets for one reason or another. And when it comes to cost of running a business they often times cannot compete with large foreign firms producing similar goods.
Companies need to be very careful before making a decision whether to export or not. Unfortunately for so many products that are produced in Georgia the answer to the question is no.
Georgia being a small country itself, the economies of scale you’d get for producing for Georgia and economies of scale you’d need to compete internationally are different. In most of the cases for companies willing to export in foreign market it requires complete restructuring of the company and its cost structure.
Although there are certain types of goods which could be considered unique.
There should be different approaches from small companies and large ones too. The latter one can address the economies of scale issue. For instance cost of producing hazelnuts in Georgia is higher than in Turkey, largely because in Turkey hazelnuts are mainly produced in hazelnut farms whilst in Georgia a lot of hazelnuts are produced by people in villages. Hence the production costs are higher in terms of collection, purchasing then transportation. Large hazelnut producers can drive their costs down.
For small companies they have a completely different cost structure so they have to compete on some other basis.
There are actually some other things to be done to stimulate exports from small companies by having representative office in the US or couple of them for Georgian products specialized by the industry, and then it’d be easier to meet the buyers and sellers of those goods.
Q. Is there any type of a good that can be considered for export only?
A. Probably frogs as Georgians don’t consume them. Again going back to Georgia’s natural capital forests, maybe things that come from forests, mushrooms and so forth. We generally believe that firms need to first be successful in their home market – Georgia – before trying to export. If a firm cannot be successful there then it is unlikely they can be successful in exporting. There are exceptions of course with products or services that are not generally demanded in Georgia but are demanded in the rest of the world.
Q. How often do your clients use virtual service and what was the need of introducing such service?
A. We have quite a number of virtual office clients. To be registered in Georgia you must have a registration address There are four types of virtual offices available with us: 1) companies without a physical presence can have a registration address (we have BTC pipeline partners of this type); 2) companies that need some market presence but not a normal office (they get their names on our door in a prestigious building – the Green Building – but they’re not actually here; 3) companies that have people visiting Georgia and occasionally need a suitable office and meeting room; 4) physical office clients, like Microsoft as you noted on our door that actually have a permanent office here.
We also offer our clients office managers, secretaries so they just call us two days ahead of time and we will have everything ready for a visit.
Q. How do you help businesses attain external financing? And is it difficult in Georgia?
A. To attain external financing is difficult and it’s not cheap. People mistakenly think that if it’s foreign money then it will be cheap but in fact it’s wrong perception.
We can use our Larive connection to help Georgian companies attain external financing. For example Dutch government funded subsidies of three types: matchmaking to find suitable Dutch partners, finance feasibility studies and 50 percent co-financing of investments. All this require much effort and time to be put in it.
Another source of financing is from OPIC (US based) which always require a good business plan, so we help companies go through this process. People often underestimate how hard it’s to attain finances from abroad whether we help them or not. From OPIC for example, on surface it seems you can get loans with 5-6% 15 year loan but adding various fees including 9 months time to go through all the processes. Overall interest rate could go up to 9-10 percent, keeping mind the meaning of the interest rate could be different than usually interpreted.
It comes down to preferences. If receiving funding fast is most important then it is better to deal with Georgian banks that can approve a deal very quickly. On the other hand, if the cost of financing or the international connection is most important and if time is not so critical then it is better to take the OPIC or other IFI approach.
Q. You’ve over 10 years experience working in Poland – how would you compare Polish and Georgian markets in terms of investment opportunities?
A. First of all, Poland is part of Europe. Poland it also a developed country with over 40 million people so it is a very attractive place to invest for those reasons. Georgia is a completely different situation because Georgia is not familiar to investors, is not well developed and has only 4 million people. On the other hand, people who put money into Georgia can have returns much greater than in Poland.
In many ways it is more difficult to do business here than in Poland but Georgia is still a place for greater returns. So the competitive edge for Georgia is its natural capital: location, transit route to Central Asia and its position on Black Sea.
Q. During your long presence in Georgia, you’ve already undergone the financial crisis and August war. How has it affected TBSC clients?
A. TBSC started in 2003 . In the first stage only business services, space renting, language and transportation services were provided. At the initial stage there were only two people – a director and an office manager – involved. The business was developing as expected. Then there was Rose Revolution. Customers, primarily foreign businesses, just disappeared for two years because of the Rose Revolution.
Of necessity I came back to Georgia to provide consulting services. Thereafter things developed OK until November 2007 and the war in 2008 when business again collapsed. It was probably unlikely we’d be here except for one client for whom we did a very long project in 2009 and 2010. Starting in 2010 and continuing today, we were seeing pretty good demand and increasing the number of our staff here also.
Q. Do you have competitors in Georgia?
A. Yes there are other consulting firms in Georgia. We distinguish ourselves by our long experience doing these sorts of things – we have usually seen everything before – and the very high quality of the services we provide. Not surprisingly, our consulting services cost somewhat more than other consulting companies in Georgia, although much less than foreign consulting companies when they’re hired for specific projects in Georgia.
Q. Did you ever think of getting Georgian citizenship?
A. No, why? – There is no benefit to it. Coming and going is not a problem, no visa requirements. Foreign based businesses are treated the same as domestic ones, may be even better, and there are certain disadvantages of having Georgian citizenship. I’m lucky having an American passport – how would a Georgian passport ever provide benefits greater than an American one?
To the end I expect TBSC to continue to prosper and grow. If it does, then TBSC will be my pension as we have developed staff that will be very able to carry on the business after I leave Georgia. I do not know when that might be, but I feel confident in the people we have developed. TBSC is a true case of heavily investing in developing people to ensure future success.
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