How to Build a Small Business in Karaganda?

Coal, mines and Karlag

In the frame of the Real Kazakhstan project launched by Kursiv and Chevron, the Karaganda businessman talked about his own small business and advised what you should be aware of before starting a business and how the state can assist. (spoiler: it doesn’t) 

What are the first associations you think of after hearing the word Karaganda? Probably, these are the coal, mines and Karlag (prominent prison in the Soviet era).
Although it’s true – there are many coal mines here that still operate – the spirit of the town has changed now.

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My name is Alexander Ermakov, I am 39 years old. I was born in Karaganda and have lived here since then. My business is unusual for our town – I make leather bags. This is our new family business called ER Manufactory. We take orders from both individuals and big companies.

Karaganda is not a center of fashion or design. Small and middle-sized businesses here are involved in trading or services for people and big entities. I took a risk and left my post as the head of such a firm but have never been sorry about that decision. Time has shown that I was right, now our product is widely known in Kazakhstan and abroad.

How did I start 

…I’ve just started to do that by myself

It’s common for people to transform their hobbies into businesses, so I did. When I was younger, I had a lot of hobbies and was always trying to make a business out of those hobbies. I worked with various materials and immersed myself in different fields such as photography or international transportation or even the production of fiberglass. One day I was just curious about what the making process of high-end bags looks like and then I started to do this on my own. I searched the internet and examined all pictures and videos I was able to find as a tutorial to learn techniques and materials.

The standard education didn’t fit me because I was an adult with no extra time or money. And I didn’t even know where I could find these classes. The only good courses I knew and would be willing to pay for was an education program at the Italian Marangoni Institute that lasted from two to four years. However, this was very expensive and cost about €50,000 with accommodation. If you are just 18 years old and your parents have this extra money it’s fine, but it was not my case.

On the other hand, plenty of different online courses  also had no efficacy. Another option was to go to Saint Petersburg, Russia for ten-day courses that cost just 40,000 rubles ($504) plus airline tickets and accommodation. It would probably work for somebody, but I preferred not to go. 

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Generally speaking, in this field, I was a pioneer because there was nothing for leather bag-making here in our town. The only shop that offers a small variety of materials and tools is a shoe shop that a local footwear factory owns. However, if you are going to play a serious game, you have to find foreign suppliers. It’s a little bit easier to find what you need in Almaty, but here in Karaganda, we have been forced to buy everything from Moscow.

I tried to learn various techniques and types of materials and initially worked alone when I was free from my other full-time job. When I mustered my courage and published my portfolio on the internet, I started to receive the real orders. At that stage, they were very simple things but I was paid real money and that was mind-blowing. I realized my idea was working and I needed to develop my new business. There was a logo for the company since the very beginning and later my loved ones also began to get into these activities. They are all talented people and aren’t afraid to work with their hands.

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After big companies like The Ritz Carlton, St.Regis, Kingston and Pernod Ricard became interested in our products, it gave us a boost. And I appreciate these brands for their trust and the production experience I have gained. Everything we did, we did for the first time. Because this is not a mass-market, we have to produce one or two pieces but do it well. It requires a different approach to the whole production cycle: division of labor, supply logistics, development and production of packaging and so on.

Interestingly, but in my town, only a few people have had an idea of what we are doing because I have never considered Karaganda as our market and did not seek partners here. My goal was to make an export.

The bulk of the products we send to other parts of Kazakhstan, Russia and even Europe. After various media and websites began to write about us we gained new clients from Karaganda. However, even now I am forced to prove to people that all we are producing we do locally rather than just buying in other countries.

How to start production in Karaganda?

You can rely only on your clients, friends or rich parents, nothing else

This is not new. Money, people and the right place – you would need this anywhere. And this is really challenging. There are no places where you can apply and get some money. So-called “small business support” in our country sounds like a joke because of huge interest rates. Once I tried to take a loan to buy some production equipment within these small business support programs and the bank offered me to use my apartment as a security pawn. 

In my opinion, it’s just wasting time; you should rely only on your clients, friends and rich parents.

I believe there will be no boom in small businesses in Kazakhstan until investors will trust in producers like me. Take a risk and get the result. This is a real business.

If you are going to start your production in Karaganda, be prepared to import everything from abroad. You would be struggling with suppliers and those who provide you with services as outsourcing. Sometimes you have to show in detail what you want to see in the end and do some extra work. To build one mock-up, I spent a long time explaining to the designer how to make a drawing with specific equipment details.

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To achieve solid results, you would have to work for several years just to prove your own competence. At first, people will not take you seriously, then they will laugh or even get angry, but finally offer a partnership. Probably, this is how it works in the real world.

In the age of globalization, it doesn’t really matter where you actually live and Karaganda is not the worst place for sure. However, you can’t rely on somebody else but yourself and please do not listen to skeptics. Just be prepared to fail, it’s normal. For me personally, this is my eighth startup. The previous seven businesses I started had collapsed. However, I learned a lot from these mistakes and they made me stronger.

State support

I just walked past…

There was one “funny” episode when I tried to get a government grant to make my business grow faster. Local officials promised to grant three million tenge ($6940) if our business idea is new for our region, I mean participants had to show some kind of novelty. I used to think that my idea is unique for Karaganda. After all, we are working in such a rare area as leather production; we already ship our products all over the country and receive excellent feedback.

I collected the documents, showed the jury my bag and explained how we will “surge” with the help of this grant. A couple of weeks later, I received an envelope with a refusal. They said my idea “lacks novelty.” Let me remind you, we are talking about Karaganda, which is not the world’s leader in the production of premium leather bags! At the same time, a dozen grants were given to some mediocre projects like saunas or children’s clubs. 

However, the town administration is showing some interest in my company. I had several meetings with local officials and we’ve even been discussing how we can represent our region at the famous Berlin Bazaar exhibition in November this year. The pandemic and quarantine ruined all these plans and I hope we can complete this mission next year.

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Berlin Bazaar is one of the world’s largest trade fairs for design and handicrafts. It has been working for over 50 years. More than 500 manufacturers from 60 countries present their products at this exhibition: jewelry, cosmetics, health and beauty products, textiles and leather goods, clothing, bags, interior items, food and others. Almost everything that craftsmen and small industries produce, you can find right there.

Even though the huge prominence of the exhibition, Kazakhstan never ever participated in contrast with other former Soviet republics. Maybe this information will be noticed by some top officials and next year we will be able to participate?

About the future 

We have really big plans. For instance, recently I registered a new trademark – ALEX HARTUNG. This brand is designed for Europe and other Western countries. We have already prepared about a dozen models of amazing leather bags. By the way, the brand’s name is not fake. This is the surname of my mother. Her family had a long history including revolution, emigration to Chinese Harbin, and then years in Karlag’s prison…

When we make a bag be packaged, we put there a small, old picture from my family’s archive. I hope to create something that will last after me. I believe if you are dreaming about business, do it big. I don’t want to get old with no idea for what I am going to do next. And, as always in Karaganda, I can rely only on myself.
 

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