Aimee Barnes conducts an exclusive interview with entrepreneur, Sam Goodman on how to launch a successful business in China for expatriates
by Aimee Barnes
In today’s uncertain economic climate, China has rapidly become a land of opportunity as more Westerners leave behind their home countries to chase after the potential for success in the East. China is now a formidable world leader in technology and manufacturing, luring both talent and innovation from all points on the globe. I linked up with Sam Goodman, an entrepreneur in China and author of “Where East Eats West: The Street Smarts Guide to Business in China” to learn more about starting a business in China as an expatriate.
Aimee Barnes: You grew up in Toronto but have been living in China since 1995. What originally led you to make the move and what have you been up to since then?
Sam Goodman: I actually went to Hong Kong in 1993. I had a buddy who was living there and I knew that I wanted to be in Asia. I grew up watching black belt theatre, enjoyed reading Oriental philosophy in university and, to be quite honest, I’ve always found Asian women gorgeous, so I decided to go to mainland China while I was living in Hong Kong. I had been studying Chinese in BCLU in Beijing for about 7 months when myself and a few friends were whining about not having a place to hang out and study (like a cafe from back home) so I decided to make one myself.
That was the beginning of my entrepreneurial career. I set up a place called “Beijing Sammies” and over seven years, expanded the business into a chain with five locations, a public catering business, about 100 employees and $1M in sales.
After about 5 years, I knew that I didn’t want to be a food and beverage person for the rest of my life, so I positioned myself to get out of Sammies and to sell it. Unfortunately, SARS did quite a number on the business. When I exited, the business was not as strong as it had been. After Sammies, I did a quick stint in the field of due diligence with a Canadian investment firm and then I was asked by Korn/Ferry, the world’s largest executive recruiting firm, if I would be interested in being a client partner for them.
At the time, I’d never done any corporate work in my life, so I decided to try it out. I stuck with it for two years and it was interesting, but not for me. Following that experience, I was recruited by Westinghouse Nuclear to help them on their bid for a $5.4B nuclear power plant. They basically came to me and said, “China bought our nuclear. We know nuclear but we don’t know China.” We went through negotiations of bidding and then, once the bidding was completed, I worked on subcontracts and helped them build up their China team.
Once I was done with that, I knew it was time to move on, and that’s when I decided to write the book, “Where East Eats West: The Street Smarts Guide to Business in China.” I named it this because Westerners come to China and get eaten alive by making the same mistakes over and over again! While I was writing the book, I was also working on a start-up, a Web 2.0 reputation-driven platform called Me-2-B. I spent quite some time putting that together. We started rolling that out when the economic crisis hit and unfortunately, the project was put on hold.
I’ve since been introduced to a clean energy focused NGO called JUCCCE (Joint US-China Cooperation on Clean Energy), and they’ve asked me to head up one of their projects, which is pretty much everything I did with Me-2-B, but with a focus on solving the world’s clean energy problems through collaboration and an interest in decreasing the duplication of efforts that have been happening worldwide.
AB: China seems to be the number one destination for budding entrepreneurs who hope to make it big in business. Based on your own successes and failures, what advice would you give them?
SG: That’s easy- first you should read the book and do your homework! There are a number of China rookie mistakes that foreigners make when they come to do business in China and really, there’s no excuse to not learn from other people’s mistakes. It saves a lot of time and money. The purpose of the book is to reduce the understanding gap that Westerners have when doing business in China. Do your homework.
AB: In your book, you mention three options for people who want to start a business in China but have no China business experience: taking a corporate job in China that closely aligns to what you want to do, just taking the plunge in the “School of Hard Knocks,” or finding a mentor. Which path did you take and what seems to be the overall best route?
SG: I jumped in head first. At the time, I was 25 years old; I was overflowing with confidence and brimming with ignorance. My advice is, do your homework and find a mentor. There’s many people who have already done it- find out directly from them what they did right and what they did wrong. Learn from people who have done it before. I’m not really the corporate type and I can’t say that I’ve seen many corporate types take the plunge outside of the corporate world. The skills that you need as an entrepreneur are quite a bit more varied than what you will find in a corporate setting. It’s not the nature of corporate design to give you all the tools you will need as an entrepreneur.
AB: Would you say that speaking Mandarin is a prerequisite before going over to China to do business?
SG: It would certainly help- no doubt. Miscommunication is one of the key challenges that foreigners have when coming over to China. Taking the time to learn the language is an investment that will absolutely help you. Is it mandatory? No. I know a number of relatively successful foreign entrepreneurs in China who have not mastered the language.
AB: You state that “everything that’s not about face in China is about guanxi.” Could you elaborate? How best can foreign professionals gain the face and guanxi necessary to forge a successful business relationship with a potential Chinese partner?
SG: That’s a really good question and one I actually get a lot. Guanxi is a foreign concept; what does it mean? For Westerners, they should think about guanxi as “connections.” The best way to get connections is through networking or buying it. Yes, you can buy your guanxi. It is not so different from business in Washington paying people to lobby for them on Capitol Hill.
AB: Negotiations with Chinese companies take a lot of time, patience and cultural understanding. In your opinion, what specific factors must be considered and how can one successfully close a deal?
SG: There’s a lot in terms of homework. The quick and dirty is that common sense still applies. I am truly amazed at how often and how easily foreign companies come into China and are willing to go against what their gut says just because it’s China- as if China is some Bizzaro World. Stick to common sense and go with your gut. Do not overreact or get emotional when things go wrong because invariably, some things will go wrong.
Basically, you have to keep your cool and when you come to a point where things seem to be too much, take a step back and move on. It is acceptable to say “I’m done for the day.” Keep cool, maintain your focus and don’t get too emotional. I would also add that, if things are going really smoothly, be concerned that you’re being set up for what I call “getting on the boat.” Once you’re on the boat and have left the harbor, things can really start to change.
AB: Back to finding a mentor…Great entrepreneurs have at least a few teachers to show them the ropes. Who were some of your mentors in the China game? What was the most valuable piece of advice you received?
I have to say that I had quite a few mentors when I was first starting out. I was in a really good position at Beijing Sammies because there were a number of Fortune 500 companies that ordered my sandwiches. I would introduce myself to these CEOs and CFOs and just start with “Hi, this is Sam from Beijing Sammies.” They would usually reply with “I love your turkey sandwiches” or “your smoothies are great” or something like that.
They recognized my brand, and I would offer to buy them breakfast or lunch in exchange for having the opportunity to pick their brains. That enabled me to really tap into a wealth of experience on doing business in China. I realized that the problems I was going through in HR, logistics, consistency and operations were the same problems that Mattel and Motorola went through. The best advice that I received and that I still use- and I’ll paraphrase- was that the next time something goes wrong or somebody screws something up, you just have to be thankful. Because, if everything ran according to plan, then there would be no need or opportunities for foreigners to come to China to do business.
AB: For the past two decades, Western companies have been anxious to get a “piece of the China pie” and often rely on China consultants to help them along the way. It appears that this trend seems to be changing; more Chinese companies are looking to go West. How will this shift impact the China consulting industry?
SG: Let me quickly say something about China consultants: beware of anyone who calls themselves a “China expert.” If you think about it, have you ever heard anyone refer to themselves as an “America expert?”
It’s too broad a title. That said, after my fourteen years of experience and making a lot of mistakes, I certainly have some perspective. For companies going East to West, there are a number of China consultants that exist here now. Just as there is a gap in the West on how to do business in China, there is equally a gap that the Chinese have in doing business in the West. There will be more opportunity for those consultants who are willing to stand in the middle and assist both sides.
AB: You’ll be speaking at Harvard Club and Columbia University in September. If you had to classify the demographic most interested in US-China business today, how would you describe it?
SG: I would have to say that it’s not so much a demographic. I’ve seen everyone from fresh college graduates to retirees who are looking to come over to do business in China. It is more of a psychographic. These people are all very excited about the opportunities and challenges that living in a foreign country brings. You do see corporate types that are sent here who are not enthusiastic. The biggest factor I see to describe a person looking to do business in China is a combination of perseverance and optimism.
AB: What are some of the less obvious misconceptions that Western businesses and entrepreneurs have when they first arrive in China?
People get hung up on the extremes. Understanding subtle differences is extremely important. One example is getting bumped on the street in China. There are a lot of people here! But, if you get bumped on the street in China, you should not expect a Chinese person to say “excuse me.”
Westerners really get upset about this. If someone bumps into you on the street in China without saying excuse me, you have to realize that personal space is not even an issue here. Having an understanding that things are not perceived in the same way that you might perceive them is important. The Chinese do think differently and they perceive things very differently from a Westerner. If you can successfully wrap your head around that concept, you’ll have a better chance of success.
AB: You are currently raising a family in China. Would you consider the country to be your permanent home?
SG: My daughter is amazing! The one thing that I am most concerned about in raising a child in China is the pollution- it is certainly an issue. As for whether or not I think China will be my permanent home, well…permanent is such a strong word. I am here for the foreseeable future. I would very much like to have my child grow up to enjoy some of the same things that I enjoyed. That being said, living in China is becoming easier and easier to do. I don’t see it as a hardship at all.
AB: What’s next for you?
SG: This book should be pretty fun- I will be doing some tours for that. Of course, there is my connection with JUCCCE now- it’s a wonderful place to be in. It’s that sweet spot where morality meets capitalism, so if I can do some good, that works for me.
For Further Information
Want to learn more about Sam Goodman and entrepreneurship in China? Check out his book, Where East Eats West: The Street Smarts Guide to Business in China.