While Romania has historically been behind EU 28 averages in terms of economic development, in recent years the country has experienced steady growth, driven mainly by private consumption and partly by investment. However, research and development expenditure in Romania remains lower than in the EU 28 and productivity is also slightly behind that in the region. Romanian small and medium enterprises (SME) rank 75th out of 140 in terms of innovation according to the 2015-2016 World Economic Forum Competitiveness Index and, while they represent 99% of the total number of firms in Romania and employ 65% of the country’s labour force, they only account for 50% of value added/GDP. Overall, while there has been significant progress in its development, the Romanian SME sector has not fully recovered after the economic crisis, and companies continue to operate in a difficult business climate (37th in the 2016 World Bank Doing Business ranking), including transition challenges in access to finance. Specialized skills and knowledge are in high demand and rather scarce supply among Romanian entrepreneurs, indicating a need for professional advisory support.
A vibrant SME sector is a vital ingredient for a healthy market economy, and supporting small enterprises lies at the heart of what the EBRD does. Under its Small Business Initiative (SBI), the EBRD provides finance both directly and through intermediary banks in order to reach more businesses. The Bank has provided over EUR 950 million of dedicated financing to 26 partner financial institutions to support on-lending to SMEs with a particular focus on underserved segments such as energy efficiency and rural areas. In fact, the majority of financing provided by the EBRD to partner financial institutions (banks and leasing companies) was primarily dedicated to SME on-lending. In terms of direct financing, the EBRD has invested over EUR 13 million.
However, finance alone often cannot meet the challenges facing small and medium-sized businesses and SMEs also need access to know-how to improve their performance and grow. The EBRD also recognises the important link between access to finance and access to advice, and places a specific focus on assisting SMEs in improving corporate governance and financial management, which will help them become more attractive for investors.
The EBRD therefore provides advice to SMEs by connecting them to local consultants and international industry advisers on a cost-sharing basis through the Advice for Small Businesses programme. This consultancy has had substantial impact on beneficiary companies. Within a year of a project, 62% of enterprises have increased their turnover, with a median increase of 31%; 55% have increased their productivity as they expanded their business; 52% saw significant job creation and 16% secured external funding to finance their growth, with over EUR 17 million secured so far. In addition to drawing on 10 years of SME development expertise, the beneficiaries of the Advice for Small Businesses programme also have access to grants covering between 45 and 75 per cent of the net cost of a consultancy project.
For small businesses that need specific types of know-how, such as the technical knowledge to build a website, to draft a business plan or a feasibility study, to prepare a marketing strategy or introduce a quality management system, the EBRD will provide business advice delivered by local consultants. Typical projects are implemented over 4 to 6 months, and support one of the following types of advisory service: marketing, strategy, organisation, operations, quality management, information and communications technology, engineering solutions, financial management and reporting, energy/ resource efficiency and environmental management.
While the EBRD supports a wide range of local consultancy projects, marketing is the most common type of business advice delivered to SMEs contacting the Bank. This was the case of Depaco, a producer of roofing systems that wanted to strengthen the image of their Wetterbest product portfolio and build a strong brand for their newest and most innovative product, the Wetterbest Gladiator. Using funds provided by Austria, the EBRD connected Depaco to a local marketing consultant specialising in branding that developed complete identity books for the Wetterbest portfolio and created a brand for Wetterbest Gladiator. With a full set of branding tools, the company’s marketing activities were better structured, helping to increase the company’s client base by 43% and to more than double the national sales coverage. Given the success of this initial project, Depaco and the EBRD decided to work together again, this time using international expertise to optimise operations and help the company launch exporting activities.
When it comes to companies like Depaco – medium-sized with the potential to become market leaders – the EBRD can also provide industry expertise from international advisers. The international adviser transfers their industry expertise and commercial know-how to key managers across the main business functions and provides connections to potential partners in order to open up new markets. Assistance usually covers a range of areas such as organisation and management, operations, finance and sales and marketing. Implementation of projects usually takes place over the duration of approximately 18 months, with visits of the international adviser every 6-8 weeks.
It was one of the EBRD’s international advisers that helped Ciserom, a company that’s been producing quality Romanian socks for almost 90 years, to improve business operations and build an export department that increased international sales by 136%. Ciserom approached the Bank in 2013 for the expertise they needed to compete internationally and, using funding from the EBRD Shareholder Special Fund, the EBRD connected the company to an international adviser with more than 15 years of senior management experience in the textile industry and a vast network of contacts and connections in potential markets. One year after project completion Ciserom more than doubled its exports, reaching 5 new countries and simultaneously increasing turnover by 16%.
While these results are always worth celebrating, 2016 is a special anniversary year the EBRD in Romania. In 2006, the Bank set up an office in Bucharest to launch local advisory for SMEs, after 13 years of successfully delivering international business advice. Now, the EBRD celebrates 10 years of bringing local know-how to SMEs and supporting the development of the Romanian consultancy sector.
‘With anniversary activities and events on the way, we look back fondly on our 10-year work in Romania’, says Daniela Marin, Principal Manager of the EBRD’s Advice for Small Businesses in Romania. ‘We are reaching out to SMEs and consultants to share their stories and, most importantly, to share how they’ve evolved after working with the EBRD. Some of these stories are amazing and it makes us proud to see the boom that came with implementing sound business advice, with getting the right know-how at the right time. We hope to make the next 10 years as successful as those that have gone flying by’.
The EBRD has been helping SMEs access advice successfully for more than twenty years, committing over EUR 300 million of donor funds to assist over 15,000 small and medium-sized businesses in 36 countries, including in Romania since 1993. With the generous support of donors, notably Austria but also the EU, Canada, Luxembourg, Japan and the United Kingdom, the EBRD has gradually expanded its Advice for Small Businesses activities in Romania, using over EUR 8 million in donor funding to enable over 650 SMEs to grow and become more competitive.
The EBRD Advice for Small Businesses programme is currently accepting applications from Romanian SMEs in need of external business advice, as well as from local consultants aiming to deliver advice to the programme’s beneficiaries.
Case study: Ciserom Boost exports? Know how
With funding from the EBRD Shareholder Special Fund, we helped Ciserom (www.ciserom.ro), a socks producer from Romania, to create an investment plan, develop an annual budgeting system and build an export department that helped increase international sales by 136%.
Ciserom was set up in the town of Sebes in 1927 and has experienced many changes in its almost 90-year history. Throughout, the company maintained its status as a premium producer of Romanian quality socks, fighting to preserve its market share under the threat of low-price, low-quality imports. In 2012 the company reinvented itself through a rebranding process, aiming to cater to a premium, modern segment.
With a fresh look and plans to conquer new markets, Ciserom approached us in 2013 for the expertise they needed to compete internationally. We connected Ciserom to Heimo P. Obernosterer, an international adviser with more than 15 years of senior management experience in the textile industry and a vast network of contacts and connections in potential markets.
The adviser helped the company:
• Perform a strategic review of every aspect of the company’s activity
• Prioritise development areas and trace a direction for national and international growth
• Establish an export department and a database of 900 contacts of potential new clients, agents and distributors
• Develop an annual budgeting system to improve cash flow, facilitate investment decisions and set clear marketing and sales targets
• Create an investment plan for updating the company’s production facilities
One year after project completion, the company has more than doubled its exports, simultaneously increasing turnover by 16%. Ciserom has also made good use of its new contact database, launching a large-scale mailing campaign in several EU countries. Furthermore, in 2015, the company invested EUR 600,000 (split evenly between its own contributions and European funding) in new machinery and equipment, aiming to develop new products based on market demand and international trends.
‘We are very happy with the work we have done with EBRD’, said Constantin Ispir, Ciserom’s general manager. ‘Soon we will have more products for new markets, and the means to get them there.’
Thanks to forward thinking, Ciserom’s ‘socks that colour your day’ have reached 5 new countries in the last 2 years (Ireland, Estonia, Finland, Israel and USA) and are expected to reach even more markets in the years to come.
Case study: Depaco Build your brand?Know how
With funding from Austria, we helped Depaco (www.wetterbest.ro), a roofing systems producer from Romania, strengthen each product brand in their portfolio and build a new brand for their latest roof innovation – the best-in-class Wetterbest Gladiator, increasing their client base by 43%.
Established in 1999, Depaco has grown steadily to become one of the key players in the Romanian roofing market thanks to their Wetterbest product portfolio. With EUR 19 million in turnover, 30 modern production lines and 5 production halls already in operation, Depaco went one step further in 2014 and invested EUR 1.2 million in new equipment, including a production line that is unique in Romania and South-East Europe. The company used this innovation to develop a best-in-class roofing system that was to become the star of their portfolio.
In order to ensure a successful launch for their new product, Depaco decided to build a new brand using external marketing advice. Moreover, as they were facing difficulties in handling their existing brand portfolio, they needed to develop identity books for their main brands, and to properly define and differentiate the Wetterbest identity.
We connected Depaco to Zet Communications & Media, a local marketing consultant specialising in branding. The consultant:
• Analysed the company’s overall brand positioning and individual product brands
• Developed complete identity books for three main groups of products
• Created a brand for their new product – the Wetterbest Gladiator – in line with the company’s brand identity
• Developed a full set of branding tools for Gladiator, including identity book and communication routes.
More than one year after completing the project, the company’s marketing activities are better structured and focused on a strong brand direction. Wetterbest has achieved national recognition and customer loyalty has increased. The new identity books have optimised promotion and communications, helping the company stand out among its competitors. As for Wetterbest Gladiator, the product was formally launched in September 2015 and Depaco plans to deliver 200,000 m2 of Gladiator roofing over the next year.
‘By launching this new product we became the only Romanian producer to bring four distinct roofing systems to the market’, said Dragos Irimescu, General Manager. ‘We would like to thank the EBRD for their involvement and for supporting us in this marketing initiative.’
We started a second project with the company in 2015, using the expertise of an international adviser to optimise operations and help the company launch exporting activities.