Hello! Who are you and what business did you start?
Hi, My name is Chris Devonshire-Ellis and I am the Founding Partner of Dezan Shira & Associates. We are an Asian-focused consulting practice with specializations in law, tax, compliance, and related issues for foreign investors, mainly from the United States and Europe, who wish to trade with, sell to, or start-up businesses in Asia.
Our clients tend to be SMEs or subsidiaries of listed companies. I started the firm in Hong Kong in 1992 and today we have 28 offices across mainland China, the ASEAN nations of Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam, plus offices in India, Russia, and liaison offices in Europe and the United States.
I began the business with very little capital, just hard work, and today we turn over about US$20 million per annum. Apart from the large law and tax firms, we are one of the most influential companies of our type in Asia today, with over 8 million readers of our websites and media outlets and a client base of several thousand companies. Over the years we have handled about US$8 billion of foreign investment into Asia.
What's your backstory and how did you come up with the idea?
Back in 1992, Hong Kong was still British and the handover to China was five years away. The Territory was booming while mainland China was considered dirty, backward, and possibly dangerous. Yet I traveled there and could see the potential: cities such as Shanghai had everything but seemed asleep.
Yet I could see the potential. And China’s leader, Deng Xiao Ping then said they would open the country to investors. My then boss told me “Don’t go to China Chris, it is dirty, nothing works, and they’ll rip you off.” All of that was true, but not to any terminal effect. That means don’t listen to others’ opinions if you think it’s the right thing to do! So I moved to China. I knew it was going to take off. Everyone else stayed and partied in Hong Kong but knew that one day that would come to an end.
I began looking for clients, but no-one would give me any work, so I had to subsidize myself by teaching English and DJ work in a nightclub in Shenzhen. Eventually, the owner of a popular bar asked me to do his trademark in China, which I did. He then told all his expat customers I‘d been able to help him, and shortly after that I was getting in a lot of business. It taught me that having strategic clients that can help in other ways is important.
I had very little money but thought I could get over that by doing things that my competitors wouldn’t do, which mainly meant working harder. I also learned to celebrate our failures, when we didn’t get a client, we would examine why - all over a bottle of wine and decent dinner. Then we’d use the negative experience of losing business to our advantage and learn from it to become better.
Over time, I traveled all over China, wanting to explore and learn. All my holidays I spent traveling around. That taught me not to be afraid of large countries with lots of people. Gradually I hired staff, also keen to learn, and after a while gave them equity. Many have now been with the business for years. We kept expanding and then chose to set up outside China. We chose India because it was also developing, and we were not intimidated by such countries after China. After that, expanding into other countries such as Singapore, Vietnam, and so on became relatively easy.
Because money remained tight, we had to learn how to overcome that through being inventive, especially in marketing. We had a little budget for advertising. So I printed stickers instead and placed them in public places where expats would be, as these were a target client group. We stuck them in the backs of taxis, in the toilets of bars, anywhere people could see them. We went from being hardly known to being a national brand amongst the expatriate population in China inside a year because of that. We also changed the billing structure; most professional firms charge by the hour, we charged on a set project basis, based on specific deliverables, which was ideal for SMEs. It was more honest.
Take us through the process of designing, prototyping, and manufacturing your first product.
Professional firms essentially sell knowledge, knowledge about law, tax, and so on. Interpreting that comes with experience. There were no courses about Chinese law and tax for foreigners in those days, but there were books. I spent hours in the Hong Kong public library reading up on those regulations. I’m not a China lawyer, but I know enough to give basic advice, and later we employed qualified local lawyers and accountants to back that up and follow changes and then advise clients directly. It was that initial homework about the law in a foreign country, and sitting in libraries that set us on the way. I learned and knew what I was talking about even though I had never qualified as a China lawyer. At least I knew the background, and people were prepared to pay money for that at that time.
Nowadays it is more sophisticated, complex, and diverse, however now we employ local lawyers, accountants, and related experts to deliver. It really is all about study.
I also made a point of contacting lawyers at large firms who had impressed me and made friends. Sometimes I’d call them up and they would help. It was a very small market in those days and my firm was also small and they were dealing with huge projects so didn’t mind lending a hand - especially if there was a glass of wine in the deal! Some of those guys are still friends today. Building professional courtesy is also important when you need a friendly helping hand.
Describe the process of launching the business:
To begin with, it was all word of mouth, but then we needed to grow and develop and market ourselves. But we couldn’t afford to advertise and back then there was no internet. So I typed out and made a 4-page pamphlet, called it “China Briefing” and printed off 500 copies on a photocopier, then distributed these around all the business centers of the 4 and 5-star hotels in Hong Kong, Guangzhou, and Shenzhen. There weren’t so many in those days, maybe about 70 in total. The first issue was very basic and contained details of how to set up a Representative Office in China. An advert had our phone number on it.
Afterward, we received several calls and got business. The second issue a month later I did about “Individual Income Tax” in China - expats are always interested in how much they have to pay and how to avoid that legally! The same thing, loads of calls. Then for Issue Three I printed off 5,000 copies and placed those all over hotels and bars in Beijing and Shanghai too. I rented serviced office telephone numbers to answer them. Within three months I had enough money to set up proper offices in those cities too. At one point we were printing 40,000 copies a month.
Then the internet came in, and we moved most of that online and used the guerilla marketing stickers technique I discussed earlier to promote them, although we long ago stopped needing to do that.
Now we publish Briefings in China, India, the ten ASEAN countries, Vietnam, Asian Russia and the Belt and Road Initiative, and house them all under one Asia Briefing title (www.asiabriefing.com). We provide free subscriptions. Collectively they have about 8 million readers. Our publications business, which is now a separate company, is effectively our firm's marketing wing, meaning it is also fully under our editorial and financial control, which is far better than paying someone to advertise for you. We also developed an Asia-wide legal/tax resource called 'Asiapedia' which we update with more technical material, that is housed on our firms website - www.dezshira.com
So in solving our marketing problem by making these Briefings, we actually created another very valuable business.
In terms of financing, we never had any! That was tough, but it made us prudent. It also made us innovative, instead of throwing money at a problem, we worked it out instead. That means we properly understood whatever it was we were trying to achieve. But we were also patient. I didn’t receive a salary for the first seven years, I took living expenses out of cash flow. We didn’t start declaring dividends until 15 years. But we are completely in the black, we don’t run bank overdrafts, have no loans, and no other investors.
That gives us the freedom to do what we want, there is nobody else interfering with our business. It’s called ‘Bulk-Head Financing’ - no-one else is involved, there is protection against that. Everything we have we own. It makes our decision processes much faster and easier and means we are more adaptable than our competitors who have to go through committees and so on. We are free to react as we see fit, we don’t need someone else’s permission. That freedom is hard to obtain, and takes time, but is an extremely valuable asset to have to operate, directing, and developing the firm.
Today, the pressures are different, the days of an accounting practice having lots of staff behind computers are gone, improved software makes it a lot easier. We’ve also developed our own software services we sell to clients so they don’t need to employ accountants either. Digitization of services is important and we continue to invest in this. Covid-19 has also made us reassess our need for large offices; we simply don’t need all our staff in the office all at the same time. So we are developing shifts between them being in the office and at home, meaning we can reduce office rental space and overheads. These trends are going on all the time, small businesses need to be reactive to them. Digital sales and service and how products are ordered and delivered are undergoing radical change, on a global basis. All businesses need to adapt to this.
Since launch, what has worked to attract and retain customers?
We have two types of essential services products, those for which we get paid a one-off sum, such as a piece of legal or tax advice, and those which are repeatable, such as monthly accounting services. The problem with the first method is that it can be subject to downturns, and the business dries up for a period. A lot of businesses have seen this during Covid for example. Cash flow business might not be so initially lucrative but it is sustainable and it is important businesses try and convert project one-off payments into a service that gives sustainable regular income.
Dezan Shira & Associates was originally intended to be purely legal services until I saw the need for cash flow - so I added accounting and tax filings to our remit and that changed the picture completely, it made our business more predictable and less prone to any shocks. So working out how to retain customers is key.
Another issue is about paying yourself. It is a mistake to start a business and suddenly go and buy an expensive car just because you’re now a boss. That’s just ego and takes cash out of the business. Too many businesses take too much out too soon and then get burned when there is a downturn. At Dezan Shira, we always knew that emerging countries such as China and others in Asia can have problems, and recently this has become a global issue too. So we always left the company enough money to cover four months operating costs, just in case. It is on deposit and there if we need it but that is our rule, and we don’t take it out or spend it. It was good to know that during tough times like Covid and other incidents we have been through that we have that money there, it represents our future security.
In terms of increasing clients, that has come from investing in new markets in new countries in Asia. I never thought back in 1992 we would be all over Asia, just China seemed huge enough. But keeping an eye on the changing politics and trade dynamics - has helped us keep ahead of the curve.
We invested in Vietnam 12 years ago, because we could see that China manufacturing was getting expensive and some clients would want to look at cheaper alternatives. Now we have three offices in Vietnam and the US-China trade war moved many American factors from China to Vietnam, and we were ready and able to assist with that. So keeping an eye on the trade and political dynamics in international business is very important.
For companies involved in domestic trade, digitization and innovation is the key. Now, for some clients, Vietnam is getting more expensive so they are looking at Cambodia.
Within this decade, because African countries have just agreed to the “African Continental Free Trade Agreement'' - which eliminates tariffs on more than 90% of all intra-African trade goods, we will see global manufacturers and sourcing companies start to relocate there. That will affect us, in time you may see Dezan Shira & Associates expand into Kenya, Tanzania, or South Africa. We have to move to where our clients want us to be, and that never changes. To keep and retain clients is simple - you have to deliver where they want and when they want it.
How are you doing today and what does the future look like?
Our company has survived Covid-19, although we had the majority of our staff working from home at one stage, and have curtailed office activities. Although our 2020 revenues dropped 3% from 2019, our expenses also reduced plus we were assisted by various one-off Government schemes, meaning that actually our 2020 revenues came out in line with 2019. A complete reduction of business travel costs - which can be significant in a business with multiple offices across numerous countries and cities, coupled with a variety of different overhead and tax assistance measures provided by the various Governments of countries we operate in has also helped.
I doubt our travel expenses will ever reach the high we incurred in 2019 - new technologies such as Zoom and Teams have rendered such time and costs wastage ineffective. We also experienced zero staff attrition in 2020. No-one left our employment, and we are recruiting now in 2021.
To some extent we were prepared, having already begun a process of staff working from home, and had built up financial reserves to help out if necessary - which we didn’t actually need to access. But it was nice to have that security. We even managed to establish a new office, with a Partner firm, in Bangladesh.
Our online Briefings meanwhile had a record year, with readers effectively doubling in the past 12 months. That will in turn lead to new business for the practice in the coming two years.
2021 will be a year of consolidation, there isn't enough knowledge about how Covid will behave during the year, so we will be proceeding cautiously. That said, we have earmarked continuing and significant investment into I.T. This is to improve our own systems and to develop tools and services we can sell to clients. That has an impact on roles within the firm, as Chairman and Founding Partner I no longer have the competencies to run the practice going forward, so my role is more advisory.
I am not capable of making decisions concerning new technologies, and that means new talent has been coming in for some time. This is an important point, many senior executives don't know when they need to retire, but continuity needs to do so. I anticipate executives' careers lasting until about 55, and especially in businesses where new technologies are coming into the workplace.
My personal goals are to remain involved in some capacity - more strategic these days, while among equity partners there is no desire to sell the company - everyone is having too much fun. So we will partially retire and live on dividends until someone comes along to persuade us to leave!
Meanwhile, there is still plenty of room for expansion, I could open up another ten offices in Asia immediately given the resources, however, we will take our time. The ASEAN nations are where most of the new manufacturing and trade growth will come from, while China is also now moving to a consumer, rather than a manufacturing-driven economy. Global businesses can now sell to China - provided they understand the new online platforms and infrastructures to allow them to do that. We are and will continue to be in that space. Elsewhere, Africa over time looks interesting for the reasons I outlined earlier, while the Asian part of Russia is also becoming more integrated. There are developing opportunities in these markets.
We are looking to further develop as a separate business and add value to the Asia Briefing concept, which means developing readers - we currently have about 8 million, I am looking to attract ten million by the end of 2021. At that stage, we will be looking at how to monetize that.
Our profitability remains very strong for our industry, which we see being maintained as we steadily continue to grow, invest and expand across Asia, and we see that being maintained while embarking on sustainable growth. We were in Asia and China at the very start of its global trade and development, and that early bird status has kept us in good stead over the years - and will continue to do so. We are not afraid to open up in new markets - after all, we were in countries like China and India many years back, new operations and challenges do not phase us. We will continue to reinvest in the business.
Through starting the business, have you learned anything particularly helpful or advantageous?
The key issues to understand are as follows: any company is really just that - and a definition of the word “company” is often “a group of people”. We have always treated our staff well and built up a good team spirit - offices go on development trips together and we have other motivational and related activities. People make the business, so look after them.
Second is our experience concerning finance, and to work out how to fund as much as you can. Don’t borrow if at all possible, examine the options. That leads to creative solutions, innovation, and more freedoms. It is worth it.
Third, celebrate, and learn from your failures. After all, you put a lot of effort into them! So congratulate yourself for at least being in the game, and work out what you could have done better, and try and build yourself up so that next time you are more competitive and can win.
Fourth, never listen too much to other people’s criticisms. If you know you are right, then you probably are.
Fifth - and this can be a problem for SMEs - get into compliance as soon as you can. It is an investment. You need to put in place good business practices - so buy the real licenses, don’t use fakes, get in proper bookkeeping - it adds value to your company and will ultimately help you get in new investors or attract a higher valuation should you wish to sell. Having a good P&L prepared every month is a good habit to have. And that includes sales forecasts - cut out the blue skies. If it's in the pipeline but can’t be properly verified, don't assume it is real income.
What platform/tools do you use for your business?
We developed our own ERP and CRM systems. What we learned from doing that has now become a saleable service line. Otherwise, we use the relevant software in our respective markets, China for example requires accounting and tax filing programs to be compliant with their national systems and we operate the appropriate systems to allow us to do that, as we do in other countries we operate in. So much of this is regulatory-driven. However, our own firm's interface with our clients was developed by ourselves.
What have been the most influential books, podcasts, or other resources?
I generally don't read self-help books, finding them dull and egoistic. I prefer books on local history and culture as this helps more in assessing the market. For the same reason I avoid comments by academics with no business experience, they are increasingly politicized and not really grounded in the real world and how to deal with real business issues. And frankly, of those I have encountered, 50% get the understanding of the situation wrong anyway.
This leaves me time to read far more interesting books such as the cultural and history aspects I mentioned. You get to learn far more from these than what are now often politically biased opinions. I don’t listen to Podcasts for much the same reason. I tend to have more experience in my chosen field than they do and in business, which is tough enough already, it is better not just to listen to the naysayers, unless the situation is really bad.
China, India and Asia are a long way from being negative places to invest. Yet certain politicans, governments and law firms would suggest that they are. They all speak with vested interests of their own. Never forget that. Seek out the players who can offer practical advise, have been around and are not dicated to by changes in politics, as politics always waxes and wanes and blows hot and cold. Business though needs a steady, sustainable platform and so do the people who work for the company and who have invested in it and depend upon it for regular income. Of course there are ups and downs, but sustainability and profitability are key.
Most politicians I know have never read a balance sheet or developed a sales and marketing strategy, so treat their input as a temporary fad. Dezan Shira & Associates has existed during the lifetime of four Chinese, six US Presidents, six British Prime Ministers and seven Presidents of the European Commission. Their impact is limited to a few years, and although it can be bumpy (Trump) they come and go.
We have maintained a far longer lifespan and any business should aim for the same. Business is not solely dependent upon political fashions of the day. Politics is of the time, not of the future, nor of the past. If you keep your fingers on the political pulse and don't let the bigger, business picture be distracted, you can invest in your own time and read culture, history and immerse yourelf in your country of choice. Then you will understand far more than any podcast or political rhetoric than happens to be the current 'must have' reading. Most of the opinionated books are outdated as soon as they are published! No politician ever told me anything of use for my longer term corporate strategy.
Advice for other entrepreneurs who want to get started or are just starting?
If you think you’re right, you probably are. And even if you are wrong, do it anyway because you can always change direction or reconsider and adapt your decision later. Doing something is always better than sitting on the fence and doing nothing. So go for it!
Are you looking to hire for certain positions right now?
We are looking for staff, and we post positions we need on our Linked Infeed. We are quite a large company now so have numerous positions in several countries we need to fill during 2021.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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