Friday, February 01, 2008

Croatia Online - Doing Business in Croatia

It's nearly a year since we reviewed the business environment and our last report made slightly depressing reading. Today's posting is long overdue and was prompted by a comment from a reader who's thinking of starting up a business here and is looking for ideas.
Thanks to Katherine for her comment, here's our latest thinking, and we hope it helps!
In our household we now have a very clichéd response when people ask us what Croatia is like - "it's a great place to live in but doing business is tough". That one liner saves our audience from a long sigh, our "where do we start syndrome", and the "wish I hadn't asked that" response.
You can read our last posting, on Croatia's place in the Index of Economic Freedom, by linking directly to You will see that it inspired extensive comment from an eminent and eloquent expert. The posting prior to that was our take on doing business at the time.
Not too much has changed and the media is full of reports that Croatia, according to the powers that be in the EU, is not doing enough to modernise its economy and judiciary systems, or deal with extensive red tape.
On an individual level, we're hard pushed to think of any small business we know, Croatian or ex pat, that hasn't had a hard time getting started - red tape, competitive jealousy, undue regulation, frequent inspections and problems in finding good, keen reliable staff are just some of the issues that arise. However, those that have the right idea, a good business model, stick at it (and it takes a lot longer than cosmopolitan England, for example), build up a good network, and don't try to run before they can walk, generally find that it works out fine in the end.
With the benefit of hindsight, the most important aspect can be your network. As elsewhere, there are good lawyers and bad ones, accountants that can cost you a fortune in tax, or at the other extreme, allow you to go off the rails and inadvertently break the regulations. Word of mouth recommendations are vital for all manner of business activities and advisors and also for breaking into new markets.
It may be just as hard for foreigners in other countries - we don't know and can only compare Croatia to our experience of doing business in England. Our view is that if you want to live in Croatia and enjoy an excellent lifestyle in a spectacular natural environment, amongst kind hearted, decent and well mannered people, then the downside is that you'll never get rich but you'll be rich enough. Essentially, making money should not be the primary reason for coming here!
Once you've decided to give it a go, tourism is the obvious industry to go for - restaurants, bars, travel agents, accomodation, etc. Most of the tourism industry used to belong to the state and whilst much has been denationalised there's still a way to go. It's not surprising, given the history of state ownership, intervention and regulation, that many Croatians see the tourism industry as the prerogative of Croatians rather than foreigners. Similarly, particularly in Dalmatia, foreign restaurants and bars are generally treated with cool reserve by the locals. So if your cuisine is a little different from the local norm, don't expect a rush of locals curious to try something new. Restaurants that want to stay open all year need local trade so it's worth trying to entice it in. Price is important, speaking Croatian helps a lot, and listening to advice (whilst not necessarily taking it) is also recommended.
Increasingly we're coming across a number of enlightened businesses in the tourism industry who have identified niche markets and are trying to fill them - ecotourism, well equipped traditional stone villa accomodation, adventure and nature holidays, gastronomy, etc. All of these are aiming at the new breed of travellers now discovering Croatia - Americans and western Europeans with more money to spend than the earlier eastern European mainstream tourists. Budgets are bigger but they demand good service (and perhaps a different style of service than is traditional), value for money, small groups and something a little different. Many are independent travellers and rely on the internet to find what they're looking for so a smart, informative and functional website is paramount as is knowing how to maximise google appeal.
Outside, or on the peripheries of the tourism industry, there are plenty of opportunities but just how far they can be penetrated is an unknown quantity for us. Many organisations could benefit greatly from a little help with their marketing, staff training, business planning, etc. Mentoring from someone outside the domestic environment might unleash huge benefits. However that requires open minds and an awareness/acceptance of change that may not be present in hierarchical organisations that have their roots in communist Yugoslavia. It also requires a budget - certainly not of the massive size that UK companies now seem to devote to endless (and often apparently aimless) consultancy, but adequate to facilitate positive change in a practical and professional way.
In many of the various projects and professions we are involved in, we've often found that we are most appreciated for our abilities to act as "culture neutralisers" and instant networkers between eg foreign investors and skilled local expertise. After five years we've managed to build up a network of reliable Croatians with a wide variety of skills and experience in a number of different industries. That's invaluable to us and impossible to find on the internet. We've also learnt how to do effective business here and that involves a lot of patience, hard work and a thorough understanding of the culture. No doubt it's involved even more patience and hard work from those enlightened Croatians that have helped us along the way and made the effort to embrace hopefully well meaning ex-pats.
I'm not sure if this has helped Katerine and I now remember why it's such a long time since the last posting on business - it's a complex subject to try and pin down. Next time we'll try and boil it down to some bullet points on how to succeed and markets to go for.
Today's photo is of a fisherman in Dugi rat at sunset a couple of weeks ago. He's obviously got the work/life balance right!
And...don't forget to look at our sister site Croatia Cruising Companion for the latest nautical news on Croatia.


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