Interview. Chirigiu (TPG Romania): We aim to expand in other Romanian cities on the long term

TPG Romania Group, the financial services consultancy, recorded a turnover that exceeded EUR 1 million mark, reaching RON 4.9 million in the fiscal year 2016, showing a growth of 5 percent compared to 2015. The group was founded in 2009 and comprises three entities – TPG Accounting, TPG Advisory and Balan TPG Audit. BR met with Vasileios Voulgaris (right of picture), partner, and Alexandru Chirigiu, coordinator TPG Advisory, in order to find out more about the group’s plans in the next period of time, competition, expertise and the market’s challenges.

Which were the business directions which were the best last year?

Vasileios Voulgaris: 2016 was a good year all round with successes in all our lines of business as we managed to increase our client portfolio and our fees in all areas of activity (Accounting, Tax Advice, Financial Services and Auditing). This was the result of having worked diligently over the last years to build the teams which could handle increasing work load. We have to admit, however, that Accounting is the area that is TPG’s traditional strength and the area which has been used as a spear head for TPG to get a foothold in new clients. Building on this we were successful in convincing our clients to broaden their use of our services in tax advice and management reporting. The latter was also assisted by the fact that an increasing number of our clients realize the need to have meaningful and understandable reports. The regulatory framework of our profession does not allow for cross selling from Accounting to Auditing Services so our Audit practice has had to find new clients based on its (increasing) reputation and this by definition is a slower process.

Which is the strategy of this year?

V.V.: As we published already in the press in the first quarter of 2017, TPG closed the financial year of 2016 with a growth in turnover of 5 percent yoy, and a profit of a bit more than 8 percent computed from the turnover.

Having encountered a growing trend over the last years, at the end of 2016 our set strategy was to continue gaining market share and be more visible on the F&A Romanian market, with a prone focus on Bucharest. Obviously, this strategy implied to continue the turnover growth we had so far.

However, the first months of 2017 confirmed the serious HR difficulties which had started appearing in the second semester of 2016. These difficulties are impacting the whole financial market and are related to the big efforts HR companies and also ourselves are putting together to find the best suited employees. Currently, this year there is a lack of potential candidates for the junior and semi-senior positions. One reason might be the behavior changes of the young generations which are showing an increased mobility between employers with a corresponding decrease in the commitment towards an employer, while another is the increased presence of Shared Service Centers in Romania as a consequence, the staff turnover is increasing impacting the entire F&A industry and also our Company. Due to this HR issue, our strategy for 2017 had to be changed along the way, and TPG is currently focusing in stabilizing the client database and maintaining a proper, modern work environment, while pursuing a developing strategy which is less aggressive than originally planned. Nevertheless, the strategy related to making TPG more visible to our potential clients and partners is ongoing. Moreover, we believe that a strong brand and team backed up by quality and effective services provided are the paramount critical success factors that will help TPG to overcome the HR industry issues, pursue its strategy and to continue gaining market share.

You said your goal is to attract new clients this year. How does this objective go?

V.V.: The short-term strategy of the Company is to stabilize the client portfolio and to improve the current internal environment. So far, this year we tried to be more selective with the new clients in order to adapt to our changed strategy. In this light, in the first six months we consider the objective accomplished by starting the working relationships with a number of new clients, out of which the major ones are: Industrie Ilpea Romania, Skyworth, Kaspersky, Best Foods, and The Refresh.

What are your main competences that make you stand out?

Alexandru Chirigiu: I guess every successful service company has a valuable management base which drive the services provided, the brand name and the results to the planned objectives.

If I would be to make a radiography of the competences system TPG Romania possesses I would say that this is a four-legged system, based on:

1) solid educational background of the entire management team; 2) Extensive experience in big firms which firms based employee promotion on employee goals being achieved; 3) client commitment, paying diligent care to the specific client’s needs and 4) commitment to improving the employees’ knowledge which is seen by TPG as the most important investment in the future of the Company.

What are your professional goals?

A.C.: I would say that the message we are trying to pass among our colleagues is to achieve a satisfactory social work-life balance. Starting from this, the goals of each of the TPG employees are to grow professionally, socially and revenue wise through the development of TPG – and this is what we encourage at every step we do.

How do you see the competition on this (SME) segment?

V.V.: The Romanian F&A market is made up of the usual suspects (Big 4 and tier 2 companies) as well as numerous small bookkeeping/accounting firms. It is a very fragmented market the largest section (in numbers) of which are competing to offer services to SME’s as the large companies are taken by the big players. TPG is therefore faced with a dual challenge:

To ‘educate’ SME’s that the service they require in most cases is not simply bookkeeping but proper financial and tax planning and
To offer that service at a price which is competitive.

A company such as ours which has made the decision to compete on service quality rather than pricing has no choice than to aim at the M of the SME market. To be successful there, it has to invest in the education of the entrepreneurs and to be large enough as to have the economies of scale that will allow it to offer competitive pricing without jeopardizing the quality of its services.

What are the challenges of an entrepreneurial group like yours on this market?

V.V.: There are multiple of challenges we are faced with. I would like to group them in three parts:

Structural challenges: These have to do with the continuous changes in the fiscal and HR environment.

The fiscal changes are imposed on us by the habit of all Romanian Governments to introduce fiscal changes (some of them being improvements and others not) every year. To make things worse some of these changes are not well thought through causing confusion to entrepreneurs and taking a lot of explaining time.

The HR changes are imposed by the market. The brain drain of the last decade is having its effect as the new generation of graduates does not have the patience to build experience but given the demand, are asking for salaries which do not match the value the bring to our company.

Operational Challenges: These have to do with the way the above issues are dealt with internally and how much of the costs which result from them may be passed on to our clients. We believe that the way this is handled, will be the catalyst for our growth as it will define our competitiveness.

New Activities: Romania has become more attractive as spending income increases. We believe that there will be an increasing number of financial transactions that will incur. We intend for TPG to obtain a share of the fees that will be generated out of these transactions.

How do you see this market taken into consideration the frequent changes that happen?

V.V.: One may think that the frequent changes of the financial and fiscal environment are in the advantage of the fiscal consultant because the Companies will constantly need their services. Wrong. In order to plan an investment, you need a stable environment which is able to let you predict your business development over at least 3-5 years. If Romania would have once for all a stable fiscal environment this will turn into creation of a more attractive and competitive investment climate which will in consequence drive to a more stable and sound increase of the financial consulting market as well. Otherwise, the apparent benefit of the need of a consultant due to the frequent changes of the Romanian fiscal code, is only a side effect for our practice, and not a proper use of the capabilities of a financial consultant. More added value would have been created for all the parties, be it the Client, the State and the Consultant, if the knowledge of a financial consultant would be used for long-term planning rather than short-term solutions and adaptive measures caused by the too many changes done by our Government irrespective of which political party is in power.. For a healthy way of doing business and for the financial market to have a sustainable growth, a steady and predictable flow of fiscal policies is mandatory to be in place in Romania. Failing to achieve this stability Romania will also fail to attract more investments and to give to the young Romanian entrepreneurs the chance to grow their businesses. Changing the rules of the game discourages players from participating.

What are the regions in the country targeted by TPG Group Romania and why?

A.C.: The majority of our clients are based in Bucharest, but this fact did not stop us in taking clients from other counties, for audit and accounting services as well. The use of internet technology made us to break the Bucharest boundaries and find clients and business partners outside in the country. For the moment, the main cities we are also present are Constanta (where we are co-operating with a local accounting company) and Sibiu, although we do not have yet office open there.

How do you tackle them?

A.C.: At the moment expanding outside Bucharest is not our top priority. However, our long-term strategy provides opening TPG Offices in the big cities of Romania. We will tackle this move by finding the right persons to lead the regional office(s).

Have you ever thought about going regional?

A.C.: Sure, as mentioned in the above questions this is a secondary priority for the moment. I am sure the market will open up even more and opportunities will drive the opening of new TPG offices in the big cities of the country. But, the priority is to concentrate on the Bucharest market and expansion will come as a result of our diligent work and market growing conditions.

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