Vol. 1, No. 10 September 2000 < L ~~~~~A Service ModelfLor SME Growth ~The Ukraine Consulting Network stablished by IFC with funding from the IN BRIEF EBritish Know-How Fund and the United e fStates Agency for Intemational Development, the The 1NAMEUkraine Consulting Network (UCN) is the NAME:UkaeCoutigNtok(N)ith i Ukraine Consulting Network (CAN) largest grouping of independent business consult- ing companies in Ukraine. It encompasses 11 ROLE: standalone companies (or consulting centers) that Establishing commercially viable IFC has opened over the last six years, each hav- consulting companies targeting ing its own distinct geographic and professional SMEs in Ukraine specialties. They fill an important void left unmet by the Big Five accounting firms and other major HOW IT WORKS: Western consulting companies, whose operations Established in 1994 by the typically are confined to Kiev and target only for- International Finance eign multinationals and the largest Ukrainian Corporation s Ukraine Business Development Project, the UCN provides quality consulting, train- ing and information services to local SMEs on an affordable, 0fee-for-service basis FUNDING: IFC has provided overall project management and covered start-up SMEFACTS cost during each consulting com- is a publication pan ies initial two years with $5.7 of the million in donor funds. Support World Bank Group camefrom the British Know-How - SME Departmnent Fund ($1.2 million) and the United States Agency for International Director. Development ($5.7 million) Harold Rosen For Information Contact: r c Rob wright r . UCN. Affordable consulting services for Rwright@ifc.org Ukrainian SMEs. Tel. # 202 473 7997 Fax # 202 522 3742 the new equipment needed fbr modernization. The RESULTS: company: is now highlv profitable. with 80% of'its Eleven consulting companies established: sales exported to Europe. Efi,ght now operate without donor The UCN's centers offer the full spectrum of f/unding modern business consulting, training and infor- • T7hree phasing out donor support . .. mation services. They provide assistance with More than 16,500 SME client issues such as international accounting standards, assignmentsha onducted, includingt business planning, financial management, mar- assignments conducted, including.- keting and market research, partner searches, * 5,500 clients trained on business and modem management techniques, customized management skills * More than 4,000 information and tech- training, company registration, legal advice and nical assistance projects completed advocacy and more. Depending on the level of * More than 100 business plans and 115 service requested, fees can range from as little as market research studies completed $I0 (an entrepreneur's cost of attending a half- * $1) million in new financing raised day marketing seminar) to $2,000 (preparation of for SMEs all over Ukraine a rigorous business plan over several months). Affordable in the local context, this pricing struc- ture also allows the centers to cover all costs and make a small profit. companies. Typically, the UCN's centers are located in towns and cities where no such inte- r ro grated business services provider exists, giving a Consulting Centerfbr in-depth management train- strong stimulus tothedevelopmentofalocalpro- ing in modern business methods. In addition to fessionag consulting industry,o the training, the consulting center assisted it devel- op a new marketing strategy. As a result, companv profits have improved dramatically and the prod- lFC has successfully established the Ukraineucraghsexnddfo5to1bad. Consulting Network of sustainable business con- ' sulting centers that provide consulting, training and information services to Ukrainian SMEs on a commercial basis. UCN's mission is to help Ukrainian companies grow and develop by providing high quality, specialized consulting services and affordable training in a variety of business and management topics. Consulting centers also serve as a central source of business information and assist clients in attracting necded investment. The Khmelnitsky Consulting Center helped a local iron forging factory write a new business plan and prepare for expansion and moderniza- tion of 'its production process. With this new plan, Commercial Footing: Started with donor the Center was able to help the factory secure a support, most UCN centers now stand on DMI.8 million loan/from a German bank to obtain their own feet. 2 The key to achieving the self-sus- vtaining goal of this project is the up-front understanding among local staff that they are creating their own songoing business, with IFCs role of facilitating the initial start-up phase. ins!tEach center's array of services varies, based on its own market research and the capacity of its con- sulting team. An IFC consultant lAlte uiuIi, lluk(manager) is responsible for manag- YHM7P HCORSORIDINCIRTH fDII COh ing the center for the first 9 to 12 months, sometimes with help from either a US Peace Corps or an MBA Corps volunteer. Profit orientation is a key underlying factor for During this period the employee-owners of the the success of the consulting centers. IFC's center develop a local client base, complete a project managers hire local consultants only after business plan for the center, market the center's an intensive screening process, and on the under- products and services, acquire local SMEs as cus- standing that they will be not just employees, but tomers (on a full fee-paying basis), and develop a also the owners of their newly created consulting strategy for the further sustainability of the center. companies. IFC then provides interest-free loans to allow the local consultants to become share- A Crimean fish cannery approached the holders in their consulting company, and contin- Simferopol Consulting Center for help in solving ues providing management and financial support a number of serious problems including massive for about two years to each center. IFC provides wage arrears, growing debt, and shrinking sales. continuous coordination across centers through After conducting a thorough situational analysis, the UCN, which now has a total staff of 55-all the local consulting center created a new business of them Ukrainian nationals. strategy which helped the firm reduce debts and arrears and sell to new markets. Moreover, it is now expanding into new lines of production with the help of the center Eight of the eleven centers are fully sustainable and have operated without donor funding for sev- .- Wi_ a i - _ eral years. The later centers, while still not fully sustainable, are addressing the needs and increas- ingly gaining the confidence of local SMEs. This is very important in a frontier market such as Ukraine, where the absence of a commercial busi- ness culture and an often-hostile business environ- Integrated Package: UCN centers provide ment leave many SME managers and entrepre- advice on business plans, marketing, and neurs reluctant to seek outside help, rarely appre- other key needs. ciating the value of such services. 3 Business Culture: Ukraine's private sector development happens from the bottom up. A Jormer military plant that faced dijficulties and continue collaboration and networking with adapting to modern business conditions referred other organizations. Together with the UCN, IFC to the Cernigiv Consulting Center for assistance. will start to provide more targeted assistance to The consulting center undertook a complete selected industries by fostering international financial analysis, competitor and market analy- linkages, trade and investment opportunities, sis, helped re-orient the business and developed export promotion, as well as intensifying IFC's a comprehensive marketing strategy and business work locally on improving the enabling environ- plan. As a result, the plant received $2 million ment for Ukrainian SMEs. EF firom a Canadian investor One of the most important benefits a consulting center brings to the local business community is Contact: Maxim Yacoub in persuading local companies to accept expert Ukraine Consulting Network advice, business planning, training, and strategy 5th Floor, 4th Bohomoltsya St., development. Kyiv, Ukraine Tel.: 38-044- 293-2954 or 38-044 293-4287 By April 2001 all 11I UCN centers will be fully Fax: 38-044-297-3630 sustainable. Donor funding of the last centers will E-mail: UBDPpifc.org cease. After this date the network will continue to Web:iwww.colting a improve services, facilitate best practice transfer. w cov ievua 4