Forbes Interviewed our CEO, György Lovász

Forbes.hu: You have hardly been in the media for the last 10 years. Why is that?

György Lovász: Good question, I don't know. We have not avoided the press directly, but we have not been noticed. We've been so busy with so many things that we haven't had a particularly conscious PR activity in the last decade. Our strategy was personal outreach, not advertising. I believe in going to the client and telling them personally who we are and the quality of service we provide. Traditional accountancy firms tend to spread their reputation by word of mouth or resort to classic advertising. We, on the other hand, approached our clients, which is not usual in our profession, and this was one of the foundations of our success.

Forbes.hu: So it's a tough sale. Are you pushy?

Gy.L.: No question, in business I'm pushy.

But I can be any good at sales, if the service you provide is not the best possible, you won't have any customers.

I always tell my own sales team: we're not selling vacuum cleaners.
We can present a very serious service, with high added value, which then sells itself. I have often found that we introduce ourselves to the customer and later, when they actually get to the point of making a move, they remember who they have been to see in person. And then we were able to deliver what we undertook on a sustained basis.

Forbes.hu: Last fall you left the country for good and moved to the United States. But you've been planning it for a decade. Why did you want to go and why now?

Gy.L.: We planned it so much that my wife and I talked about moving out when we first met, and we spoke English with our children at home to get them used to the language. Now that we're out, it's reversed: when we're at home, we speak Hungarian. On the one hand, I had plenty of exposure to America before. My brothers and sisters live here, I've been there a lot in the past, and I have a strong connection to the country. On the other hand, from a business point of view, it's difficult to know when a group of companies will get to the point where it can buy a foothold in the US market. I feel that we have now reached the point where I can hand over the operational management of the group and not be involved in the day-to-day, just the weekly work and strategy making. And I could move out to lead the US arm of the company.

Forbes.hu: How involved are you in the company affairs back home?

Gy.L.: I'm involved in a lot of phone meetings with people back home, up to 8-10 a week, even several hours long. We've built the company to be permeated by a leadership mindset: the entire management team needs to be aware of corporate issues. This also gives the team flexibility, we can react much faster to new situations.

Forbes.hu: Do you definitely want to keep the domestic group? Are you not planning to sell?

Gy.L.: No plans. Whether we definitely want to keep it for decades, I don't know yet. I think every company has a life cycle. Sooner or later every company will get offers. So, if we get a serious offer, we will decide, but for the time being I am not planning anything like that.

Forbes.hu: When did you arrive in America and how are you acclimatising?

Gy.L.: I moved out at the end of September, it was about three or four months by which time we were over the first tasks: administrative stuff, moving into our own house, enrolling the kids in kindergarten, settling in and so on. I started active work in February.

Forbes.hu: As an accounting firm, entering the country of the big accounting firms, the big four... is it a brave or a bold move?

Gy.L.: We are thinking and working in three directions. One direction is outsourcing in the classic SSC form. We are part of the international network of accountants Russell Bedford Inernational, they have a number of partners in the US, and we have had several inquiries about outsourcing to Hungary. The other is that we help US companies expand into Europe. But the third direction is the one that is of most interest: helping Hungarian companies to enter the US market.

Surprisingly enough, I didn't think this would be our most popular service. And believe me: most Hungarian companies would not ask for the services of the big four in the US market.
They are so expensive to work with, which would be a very serious item for most Hungarian companies. We know the domestic business culture and entrepreneurs, we can simply give you useful advice more easily than an American expert.

Forbes.hu: And the local competition?

Gy.L.: We have a very specific field because of the Hungarian connection.

We mainly help Hungarian companies to enter foreign markets, it's a small, narrow segment. And America is a huge market, incomprehensibly large on a domestic scale.

Forbes.hu: How much capital is required to enter a new market?

Gy.L.: For a company to delegate a senior executive to the US, I would say it costs $120-150,000 per year. After that, the cost of hiring and retaining employees depends largely on their level of seniority. Now, after the epidemic, offices are cheap to maintain, there are a lot of home offices, so you can scale a business on a completely different scale with capital requirements. And in our case, we are fortunate that we don't necessarily have to have all the professionals here with us, we can rely on the home office for a lot of things.

Forbes.hu: How many people did you start the US office with?

Gy.L.: We have five. We also use subcontractors for the specific work, on the legal side and for some kind of local tax advice.

Forbes.hu: And how much growth are you planning?

Gy.L.: Five years out, I'd like to have 20 people working in the US.

Forbes.hu: Which clients are looking to enter the overseas market?

Gy.L.: I can't give you specific companies. But the picture is very mixed in terms of the scope of activities. One group is online sellers: companies that already have $2-3 million a year in annual sales in the US market, but would also like to set up an office. The second group is manufacturing companies: for example, construction suppliers who would like to establish a foothold here. In this group, we are no longer just providing the classic accounting services, but also introducing them to new clients. The third group is complex service providers interested in a complete market entry: packaging manufacturers, digital service providers, marketing companies, system operators, it's a very mixed picture.

Forbes.hu: What are the activities that you would not recommend entering the market at all?

Gy.L.: That's a good question. The US market is huge, not only in size but also in purchasing power. And to be an entrepreneur in the Hungarian market... well, it's a tough road. And it's a very, very good training, so if you've succeeded at home, I think you'll succeed elsewhere.

But if I have to say one thing: the food market and the clothing industry. They're both brutally strong markets, they can be incredibly difficult to get into, I probably wouldn't even recommend it.

Forbes.hu: How many clients do you have heading to America?

Gy.L.: About 25. All Hungarian companies. Pleasing, but also surprising to me: I thought it would be a slower process to grow the overseas branch to this size.

Forbes.hu: How much does a Hungarian accountant has to learn to know all the US accounting rules?

Gy.L.: The fortunate thing is that the US and Hungarian systems are fundamentally and completely different (laughs). But for me, the learning process didn't just start, I had real estate investments in the US before, through companies, I encountered the same accounting requirements that our clients are now facing. And as I said, I've been preparing to come out for 10 years. By the way, it varies a lot in terms of what services clients need, what they need. Obviously our basic services: accounting, payroll, everything accounting. But they also ask us for help with many other things: from visa applications, cash flow and business plans, to which specific state and which city to set up in.

Forbes.hu: Do you have completely different rules in Connecticut than in neighboring New York?

Gy.L.: Obviously, the system is similar, but there can be huge differences in certain rules or, say, tax obligations.

Forbes.hu. Where are the most complex, complicated rules?

Gy.L.: California and New York, perhaps.

Forbes.hu: Seriously? I would think New York is the bastion of entrepreneurship.

Gy.L.: From a business perspective, it is. There is a tremendous concentration of purchasing power in the area from Boston to Washington DC. But taxes are higher and certain activities are much harder to do.

In Florida, for example, they have a conservative business policy, so they try to remove all barriers to business, keep the burden as low as possible and let them grow, which is the most important thing there.
Forbes.hu: From a business point of view, how difficult is it to get used to the American environment?

Obviously: the purchasing power and intensity of this country is difficult to understand from a Hungarian perspective. But what is completely foreign is the business mentality. One example: I was recently talking to a manager of a huge construction multinational in New York. A huge company with a lot of investment, a lot of employees.

Do you know how many people they have working to collect unpaid bills? Nobody. Not one. Because they don't need it. Now, that's a huge difference between the business mentality of the two countries.