SME Spotlight #7 - LNP China
"Business in China can be easy" – that's what Andy Clayton, CEO of LNP China says, and he's staking everything on that assertion.
Having experienced the ups and downs of working in an office in China for more than ten years, I'm keen to know more. The first time we met I was struck by his enthusiasm, so I start out by asking what it is that excites and inspires him about the work of LNP China?
"That is such a great question! I have been involved in business in China, and passionate about it, since I was 19 – that's nearly 20 years now. I went there as a student and got my first professional job there (with B&Q). I love being part of that community - it's my life's fascination and my life's work. British SMEs have so much to offer China. Chinese society and business is changing a lot: it's becoming more focused on knowledge and services, and more consumer-based – all things that British companies do very well. But it's still a hard place to do business. So to be part of a team who use their experience and skills to help smaller companies, particularly from the UK, to be successful in China is immensely satisfying. We're proud to be able to do that."
I can tell from that this and previous conversations with Andy that he sees his role as being part of a larger, more important movement to change the net flow of trade between the UK and China. He speaks enthusiastically in terms of "the tide changing" and "British SMEs catching a wave". "Every time I see local companies hiring staff, and us helping to repatriate profits for them, I feel we're contributing to part of the solution. Our government is very bullish about UK SMEs increasing exports, especially to places like China, and I think they are absolutely right – I support that as a direction for the country. LNP China represents everything that is positive about that initiative".
"Business in China can be easy" says their website, so what do LNP do to make it "easy", specifically? Andy answers: "There are two bodies of knowledge that you need to succeed in China. First, you've got to know your market – who your clients are, what they need, how to make your product and communication relevant to them, who your competitors are, and so on. A lot of companies assume, that because their product and marketing are relevant in the UK, they are also relevant in China – that's a huge mistake, of course. But, second, you've got to know how to run a company in China – how to structure contracts, how to hire and legally employ staff, how taxes work, what the accounting and reporting standards are, how to manage bank accounts, how to get through the audit process. That's s very particular skill- and knowledge-set; it all works in a very different way to the UK.
"A lot of small companies go to China and try to do these things on their own, or they hire a young Chinese sales person to do them. Soon they find that though they may be able figure out the first part (i.e. knowing the market), the second part (knowing how to run a company) ends up distracting them and stopping them from being successful. So what we do is essentially remove the need for companies to figure out that second part – we know how to do it, and we do it for them. We become their back-office operations in China so that they can focus on developing their product, their team and their client relationships."
It's a service model that seems to be meeting a real need. LNP China certainly have momentum and the trends are encouraging. In the first half of 2015 they've picked up as many new clients as they did during the previous 12 months. Their clients are also coming to market quicker and growing more quickly than happened before. And they are adding to their own staff team in the UK too.
We've talked a bit about the challenge of getting into the China market, but what about staying in two or three years down the line?
"One of the main issues is building a business whilst maintaining cash flow. That's a problem everywhere of course, but in China there is practically no access to credit for foreign companies, and payment terms can be very challenging. We see a lot of companies really struggling in that area.
"Here’s another challenge: China is a bigger opportunity than most people conceive, but it's also much more competitive than they imagine too. When you see how quickly copycat competitors pick up on something and then flood the market, it can be shocking to watch – it really can! You have to be nimble and move fast in order to stay ahead of the competition."
I agree – foreign companies are already at a disadvantage in China because they are working remotely and in a strange business environment, so any competitive advantage they have due to product uniqueness, once lost, is much harder to regain that it would be on home soil.
Finally I ask Andy, what are some of your favourite aspects of Chinese business culture?
"In my experience, Chinese staff are great – hard working, loyal, intelligent, undemanding. It's easy to build a good team there. Also, I like that fact that over there everything is negotiable: here in the West, companies are very wedded to certain systems and structures but in China they are so flexible, very pragmatic; they are keen to do business and therefore always willing to negotiate. It isn't always the most efficient way [he laughs], but I like the negotiations. Very pragmatic, very flexible, very keen. China has a dynamism about it that gives me energy – I go there and I come back fired up! It's invigorating."
My thanks to LNP China l for their time. You can find them at www.lnpchina.com. If your business would be happy to feature in our SME Spotlight, please get in touch by writing to email@example.com