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Making Millions on Russian Freight
9 June 2015
Making Millions on Russian Freight

A student from Saint-Petersburg started with side jobs loading trucks and eventually founded a company that spans Russia.

The following interview was conducted by The Village, a Russian-language publication in MoscowSt. Petersburg, and Kiev that seeks to inform locals about their various cities, upcoming events, urban changes, and history. Translation for USRCCNE was performed for the USRCCNE Newsletter.

 

Making Millions on Russian Freight

A student from Saint-Petersburg started with side jobs loading trucks and eventually founded a company that spans Russia.

While studying at Saint-Petersburg State University, Denis Reshanov tried different ways to make some extra money, including unloading trucks for a supermarket. This side job lead him to an idea of creating an outstaffing company that would provide extra personnel when necessary. His company reached millions in sales volume during the very first year. Later, snow removal and roof repair services joined the loading/unloading. Moreover, Reshanov started selling franchises across Russia. The Village interviewed the entrepreneur to find how he turned a small side job into a successful business with an annual revenue of 90 mln dollars.

 

Denis Reshanov, company founder, Personalnoye Reshenie:

Business enterprise is my lifestyle. Even as a child, I tried selling my old toys at the nearest metro station. Later, together with a friend we came up with another "business" of selling bouquets. Very simple business idea: break off lilacs branches from neighborhood bushes, put it into bunches and sell by the metro station. Lilacs literally flew off our hands, everyone was buying them, young and old.

Later, when I was studying in the Saint-Petersburg State University, with another acquaintance we decided to start fixing computers. Our stipends (an educational allowance in Russia paid by the state) were not enough for us; we needed extra money. Thus, as a 19-year-old I registered a Limited Liability Company. Now it is funny to remember our attempts: we wrote out business proposals that, we believed, would be able to catch clients’ attention. In reality, it was a page of A4 paper filled with motivational text. Moreover, we visited hundreds of offices on foot to offer our services directly. In couple of places, renters even called police to have us removed from their office building. Yet, we did find several clients.

However, when another side job fell in my lap, I did not pass up a chance. The warehouse for Lenta Supermarkets needed workers to unload a transport truck. Eventually we started getting these requests regularly. We completed the work carefully and timely, and the customer wanted to work with us only. He did not want to keep workers on staff due to uneven schedule of deliveries. One truck may get there late today, and several more tomorrow morning. At that time, I came up with an idea to stop working as a loader and, instead, organize crews of workers by offering outstaffing services, so client companies could lease workers as needed.

Our roommates from the student dormitory became our first hired loaders. Later, we developed a website, started internet advertising and cold-calling, and client list began to grow, and we did not have enough workers. We started looking for them using all inexpensive methods: sidewalk and newspaper ads, metro ads. We used Internet as well, but with few results: loaders do not use internet very much.

Our business started to grow and in four months we opened an office of our company: Personalnoye Reshenie (which translates to Personal Solution). By the end of the year our sales volume had reached six million rubles.

A Loader Management System

The implementation of a CRM system allowed us to increase our processing rate and speed of execution of incoming orders. For example, when we receive a new request from a client, we can automatically send a text message to all numbers in our database. Available loaders will call us and we do not need to waste time on phone calls. Our database contains all information about the workers: a photograph, address, contacts, and a rating. The rating is indication of quality of loader’s work at the site. Those who promise and do not show up for work automatically receive low ratings.

Loaders often fail. In most cases, due to alcohol problems. We have our unwritten rule: if a client requests 10 workers, we invite 15. Usually, about five of them will have an excuse for not showing up, and, as a result, client receives what he requested. We try to work only with those who have high ratings.

Our personnel managers meet every loader prior to inviting them to a work site. We want to make sure they are an acceptable and suitable person, ask them a few questions.

Loaders are paid approximately 100 rubles/hour, depending on the difficulty of the work. Unloading in a warm warehouse has one rate, working outside in difficult conditions – another rate. Price for the clients usually ranges between 200-250 rubles for each worker. The number of workers requested by the client also affects it.

Like an Avalanche

In 2009 we experienced a decrease in demand for our services due to the economic crisis. It became clear that we have to start offering some additional services. The answer came from our clients. That winter had more snow fall than usual, and we started receiving regular requests for snow removal services. We purchased the equipment and started taking orders. The next year our loaders participated in the construction of Ohta-Center (a proposed business district in Saint-Petersburg, later the project was shut down). Approximately 150 people from our company worked at the site daily.

Moreover, we added roof repair as another service line. For few years it was our most profitable field of work. In 2011, our revenue reached 30 million rubles, including 15 million rubles coming from roof repairs. Now we stopped developing this service, dedicating most of our efforts towards franchising. This has increased our sales volume even more. Currently Personalnoye Reshenie brings in 90 million rubles in sales. We have over 700 corporate clients, including many well-known companies, such as IKEA, Dixy, McDonald’s, and others. We share one database with all our franchises; therefore, it has over 100,000 workers.

Stolen Franchise

Starting in 2012 I started receiving requests from young entrepreneurs from different regions who wanted to work together with us. At first, I refused, as we did not know how to make it work. Later we developed several franchising options. Basic franchising package is priced at 99,000 rubles. It includes step-by-step instruction for starting and developing an enterprise. Our most popular franchising package costs approximately 250,000 rubles. For those who purchase this option, we develop a corporate identity, build a website and the company can start working under their own brand, without a right to serve as an official representation of our company. The most expensive package is official representation option. It costs up to 800,000 rubles and can only exist as one per city.

Every month we receive approximately 1,000-1,500 franchising applications. About 2% of them culminate in a contract. We are very careful about selecting our partners, therefore we turn down many applicants. Every business owner pays us royalties and monthly fees, in total approximately 15% of sales. Last year, the intellectual property for developing franchises was stolen and the thieves started selling it. A sample purchase confirmed that it was indeed our information. Most likely, it leaked through one of our partners. To avoid it happening in the future, we developed a special software protecting our products from theft.

Altogether, we have 52 official representations and approximately 400 franchises working under their own brand names throughout the country. The most successful companies are in Naberezhnye Chelny and in Novosibirsk. Our central office in Saint-Petersburg has a department dedicated to consulting and supporting our franchises. The department has 40 people, including marketing specialists, sales managers, project managers, personnel specialists. We also have about 10 foremen working alongside loaders at the job sites.

What’s Next

In the summer we are planning to put into operation a mobile office of Personalnoye Reshenie. It will be a brightly colored vehicle visiting all sites where loaders may be working. For example, today it may be parked by a dormitory, and tomorrow downtown, by Sennaya Ploshad, or next to a passport and visas office.

Also, during this year we are planning to start a call-center for all representation offices. We will carry out all processing and send to the regions the completed leads. Our experience shows that our specialists are better than those who are working in regional partner offices. Moreover, it will be an automated process. This innovation will be convenient for franchising owners also, as we will remove from them a burden of processing of incoming calls.

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