In this first of this series of interviews with leaders of Small and Medium-sized Enterprises (SMEs), I talk to Jan Černik about the challenges and opportunities he and his partners faced in establishing their company, Happy End, in the Czech Republic in 1994.
Happy End’s foundation came not long after the ‘velvet divorce’ from Czechoslovakia and after the end of over 40 years of communist rule. In this interview, Jan describes the challenges his company faced, the solutions they found and the lessons other SMEs can draw from.
Jan (below) and his partners, Milan Richter and Alois Lostak, held religious beliefs for which they had experienced persecution under the communist regime. After the Czech Republic gained independence, they started their business with the traditional start-up ingredients of ideas, ambition and commitment.
Serendipitously, they came across oil spill prevention products from the UK. The environmental protection industry under communism had been ignored and they believed the UK provided a template of the future trends in Eastern Europe. They therefore made their first ever trip outside of their own country to my company, Fosse, in an old Skoda car with a trailer. They loaded up with samples and drove, very slowly, back to the Czech Republic and started approaching fire brigades and companies with oil and chemical spill control products. This was the start of Happy End – a name which belies their attitude to hard work and its outcome.
25 years later, Happy End is now the leading environmental protection and safety product supplier in Eastern Europe with a turnover of E10 million and employing 65 people in five countries. But during their development, they faced challenges. At the fall of communism, state assets were divided up amongst the favoured. Not quite on the Russian oligarch scale but nevertheless amongst a clique who protected their business by employing in Jan’s words “unfair practices”.
Jan’s response was a determination to “follow his conscience” and so Happy End was effectively excluded from business with the large, corrupt established businesses. They concentrated their honest efforts on new and untainted clients. Their customer base now includes smaller clients, fire brigades and international manufacturers with ethical standards such as Volkswagen and Unilever.
In 2007 the bank with whom they held all their balances went bust. Under invoice financing arrangements they had also borrowed heavily from the same bank. The administrators of the failed bank insisted that they pay back their borrowings whilst they lost their savings. Their business partners helped them survive, but their solution was to never again to rely on one sole bank.
The next black swan alighted when their rented warehousing, which consisted of large decrepit hangers vacated by the Russian military in 1992, were suddenly put up for sale. They could not find alternative space at a price they could afford and their banks were unhelpful. They turned to their business partners with whom they had close relations. I had a choice – do I lend money and defer payment to a progressive and trustworthy customer or incur a bad debt and lose their future business. It was not too difficult a choice and we were duly repaid in full.
Jan believes that honest trading, despite an “unfair” market is crucial to business and personal integrity. He also believes the balance between developing strong relations with business partners beyond the transactional, whilst diversifying banks and suppliers, is not an easy balance to make but is essential to minimizing risk.
They see their market as increasingly requiring more technically advanced products and services including more electronic trading – both ERP and e-commerce. Jan believes that electronic trading reduces personal business relations and that effort should be made to maintain them to mitigate risk.
Jan’s fascinating story can be heard below. Click to hear first-hand how he overcame the challenges he encountered and how they altered his approach to business practice.