The Ukrainian-Canadian firm provides full-fledged business consulting focused on foreign investors.
Just six years ago ,the Big Five accounting firms were the only companies to offer consulting services in Ukraine. There were no specialized agencies to offer consulting to investors.
The first one appeared in 1997, when Canadian Lenna Koszarny, a chartered accountant, and Ukrainian Helen Volska, a finance specialist, and two Canadian partners established Emergex Business Consulting, a full‑fledged consulting firm focused on providing services to foreign investors.
But Emergex has also found plenty of local clients. The company says its main areas of expertise are financial management, strategic development, accounting outsourcing, corporate trans‑ formation and restructuring, system implementation, and production training and seminars. Of these, Koszarny said that financial management is the most lucrative.
“I have worked as a chief financial officer and I know what a CFO wants,” she said. “We helped companies to transform their ‘bukhhalteriya’ into what I would call a Western finance organization, responsible for accounting and tax issues, financial reporting systems and internal control.”
Before founding EBS in 1997, both Koszarny and Volska worked as financial and accounting specialists at Coopers & Lybrand (which later merged with Price Waterhouse to become PricewaterhouseCoopers).
During the past several years, Emergex, which was formed with foreign investors in mind, has started to work with a greater number of Ukrainian clients. Today, Ukrainian firms constitute a third of the firm’s client base.
Koszarny said that working with Ukrainian companies required a different approach.
“Foreign investors seek us out. They want their problems solved, and they need the expertise we have,” she said. “Ukrainian investors are unlikely to start contacting consultants, so we need to make the first move and show them what we have done,” Koszarny said.
For many Ukrainian executives, the standard approach to problem‑solving was simply to do nothing. There is no interest in this approach anymore, Koszarny said, as businesses are much more likely to recognize the need for consulting services.
Still, some Ukrainian executives perceive consulting as inefficient.
“There is a lot of truth behind this negative image,” Koszarny said. “Some firms simply talk to a company’s management and staff, write down what they said and then report back to the management the things they already know. The company paid money but didn’t get results. They don’t want to do it again.”
Effective consulting requires more, Koszarny said. The firm tries to match clients with specialists who have worked in the client’s industry.
Then the information gathering begins.
“We identify the problems that are bugging management,” Koszarny said. A company’s hot‑button issue “is usually a barrier that prevents increasing revenues, or an area where the company is bleeding money,” Koszarny said.
Every company wants to increase revenues, lower costs, increase the value of assets and decrease liabilities, but the single most important element varies by company.
“It depends on the industry what takes importance in terms of assets, revenues or lowering costs,” Koszarny said. “It also depends on the company’s stage of development. If the company is starved for resources and cash flows are extremely critical, we would look to optimize cash flows to get the revenues going earlier. Waiting a year is not an option for them, because they might be dead in a year.”
Priorities are completely different for companies that rack up sales of tens of millions of dollars, only to realize that 70 percent of that revenue has been spent on overhead.
“For such companies, the issue really is how to get the costs down,” Koszarny said.
Many Ukrainian firms suffer from what Volska called “the growth disease,” a malady afflicting firms that quickly expand from small businesses into large corporations without making fundamental changes in their management structure.
In many cases, this creates a situation where the company director receives little information from the staff and leads by intuition.
That’s very risky, Koszarny said. But so is the opposite case, where directors have too much information at their disposal. Problems with information, data collection, analysis and reporting are common in Ukrainian companies, she said.
Ukrainian companies often have not developed strategies or set goals, Koszarny said. Instead, she said, managers are constantly putting out fires.
“They’re just reacting to their environment. The managers of these companies say they can’t plan in Ukraine because everything – inflation, prices and the cost of imports – is always changing,” Koszarny said.
“But that’s the whole beauty – to build a company that is easily changed, where assumptions are flexible and separate,” she said. “Systems are only tools used to realize goals. If a company has no plan, no strategy, no goal, then no tool will help them.”
Koszarny said that companies seeking improvement should look first to their people, then to their financial systems, quality control, data management systems and business procedures. Companies are highly dependent on competent and adequate personnel.
“We often have to say to an investor that his managers are not progressive, do not want change, are entrenched in old ideas and block transformation, and that therefore we cannot work with them,” Koszarny said. In some situations, to restore proper operation of a company about 50 to 80 percent of the management team has to be replaced.
The company’s fees for consulting depend on the scope of work and the resources the company can commit. For some clients, spending as little as $2,000 on consulting services can make a difference. For larger companies with more complex issues, fees can amount to $50,000 or more.
Emergex has acquired most of its clients by referral, though the company has done some advertising, Koszarny said.
“We will continue to get most of our clients through referrals, but a certain level of product awareness is also important for us, and we plan to do more advertising for services that are simple to explain, such as payroll and accounting outsourcing,” Koszarny said.
Koszarny said that these two service areas are ripe for development. While accounting outsourcing has become popular with foreign companies in Ukraine, payroll outsourcing is still very rare here.
But that situation may change. Koszarny cited confidentiality as one of the reasons.
“The information on salaries and bonus packages is the most secret in the West. Here the secretary knows exactly how much the general director is making,” she said.
Koszarny sees a future for business consulting in Ukraine.
“The potential is huge. But it is hard to estimate the real size of the consulting market at this stage. We have not yet seen any of the large worldwide consulting firms such as McKinsey, Boston Consulting Group or Bain set up shop in Ukraine,” she said.
“It will be better for everyone when this happens,” she said. “This will help create better market awareness, and competition is always good.”
