Czech List

Doing business with Eastern Europe
Magazine Contributor
4 min read

This story appears in the July 2000 issue of Entrepreneur. Subscribe »

While the demise of communism in Europe's Eastern bloc has meant more global opportunities, these countries' rapidly shifting political and economic climates make such ventures risky.

Among the bloc nations, the Czech Republic is seen as the most stable, and its economic growth means more demand for foreign products and services. Export opportunities abound, particularly in computer hardware and software; the Information Technology Agreement (ITA) of 1997 promises that technology tariffs will be eliminated by the end of 2000. There are also opportunities for companies offering management consulting, marketing, PR, legal or financial services.

Those opportunities were apparent to Howard Woffinden, 42, and Greg Gold, 43, soon after filming a series of Claudia Schiffer fitness videos in Prague. Receiving a flood of inquiries about their experiences, they joined Prague partner Tomas Krejci in 1996 to form Los Angeles-based Milk & Honey Films, a production company supporting U.S. filmmakers shooting abroad and overseas shops shooting in the United States. According to Woffinden and Gold, the Czech Republic offers inexpensive, top-quality resources and, Gold adds, "a large labor pool of highly skilled, highly educated craftspeople."

Yet they admit that working in the Republic can be challenging. Here's their advice:

  • Don't rush familiarity. Czech society is very formal. "Unless you know people well, use a formal manner of speaking," says Woffinden. This includes using titles like "doctor" and "mister." It's rarely appropriate to use first names unless you're close friends.
  • Build relationships. What matters most isn't money, says Gold, but "being referred by someone you've done business with, building personal relationships or [cashing in] favors owed."
  • Find a Czech partner. Because the Republic was communist for 40 years before becoming a capitalist democracy, Wof-finden says, "the method for getting things done is different from ours." You'll need a local to deal with still-prevalent communist attitudes.
  • Expect limited resources. Woffinden points out that the country's infrastructure, though improving, is still underdeveloped. "When we arrived five years ago, the phone system was archaic. Often, you can't call someone-you have to physically locate them." Frequently, supplies aren't available, but Woffinden says this is sometimes an advantage: "When faced with a problem, [Czechs] find creative solutions; they don't just throw money at it." One such solution has been the Internet, facilitating communication in the absence of personal phones.
  • Hire local professionals. Milk & Honey Films uses a Czech accountant to handle the paperwork required by Czech taxes (including a VAT tax of 17 to 22 percent) and red tape. It also employs a bilingual attorney to interpret differences between Czech and U.S. law.
  • Establish who's in charge. Companies must have a "responsible person" (jednatel), who is in charge of all aspects of the business. Woffinden notes that Czechs often want to work directly with this jednatel rather than company reps.
  • Visit Prague. Prague is the place to look for trading partners, professional services and workers.

According to Woffinden and Gold, the challenges are worth it. "We've brought hundreds of clients into the Republic to do business, and they all want to go back as soon as possible," says Gold. "The people, the country, the business environment are fantastic."

Moira Allen is a freelance writer in Mountain View, California, and an editor of Global Writers' Ink, an electronic newsletter for international writers.

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