German Endeavour

Famed internationally for its efficiency and engineering expertise, Germany can be a tough nut to crack for the unprepared entrepreneur, says Roger Williams

Organisation – that’s what strikes you about Germany. This does have its downsides. Structurally, you can never forget that it is a federation. There are over 30 states, which impacts on the bureaucracy one sometimes needs to navigate to do business there. This is best illustrated by the fact that five documents need to be prepared by customers who wish to import goods, while exporters need to complete four.

Bureaucracy aside, it is relatively cheap to export to Germany for UK resident companies, and Germany is perfectly located as a drop-off point for countries with which it shares a border: Austria, Belgium, Czech Republic, Denmark, France, Luxembourg, Netherlands, Poland and Switzerland.

Despite receiving 4 per cent of worldwide global inward investment, Germany is not an investor-friendly country. It ranks low on the scale for investor protection and for the ease of starting a business. The World Bank and International Finance Corporation rank Germany outside the top 100 counties for ease of starting a business and worryingly only 100th for strength of investor protection. This latter point is of particular concern due to the interconnected nature of the big banks like Deutsche Bank and Commerz Bank and their relatively weak financial positions. Deutsche Bank failed a recent stress test of capital adequacy.

Businesses are required to liaise with: the local chamber of industry and commerce; the local commercial register; the local office of business and standards; and the professional association of the relevant trade. There are local trade registers that companies are required to list themselves on according to the town of their residence. These registers are open to the public. They can give directors’ personal details and local statutes. Since they are in electronic form, with a little German, you can add to your credit research.

There is also the Federal Gazette, which like the local registers has details of every registered business. The Federal Gazette can be searched by a member of the public and has details of German subsidiaries that are doing business in Germany, even if foreign-owned. The registry has financial statements and again, with some knowledge of German, this can be a great source of credit information, if you’re checking on a potential customer or considering a distributor.

Germany’s fiscal system is complex and demanding. Combined with its bureaucracy, this makes setting up there a time-consuming and potentially expensive option that requires a relatively large scale of operation.

Businesses have to make nine tax payments a year. A study has shown that this alone takes an average of five full weeks of work. The returns for social security contributions can take up to another four weeks of work. Corporate income tax and VAT payments also add to an extremely time consuming process. You can see what drives the decisions of overseas companies to sell directly through distributors.

My experience of distributors is very good. Often, as with many companies in Germany, they are family companies. You are dealing owner-managers and, therefore, the decision-makers. Time spent building a relationship with such companies is seldom wasted, as their staff do not leave or get poached by other businesses. However, I have found you also have to fit your selling and deliveries into an inflexible, established pattern.

In Germany, and in the countries that border on it, the gun trade revolves around the various hunting seasons. Often, distributors produce a catalogue and have one or two sales conferences or open days, when customers are invited to attend a meeting at a company’s HQ or a larger venue; new products are shown and orders are taken. Many companies also participate in IWA in the spring each year.

Regardless of whether the distributor has a website catalogue, there is likely to be a print catalogue. Negotiations for inclusion in both catalogues can involve discussion about discounts and advertising co-payments. This all leads to a need to be well-organised yourself; to be sure you are able to give firm prices many months ahead in Euros. You may wish to consider exchange cover for this.

Lastly, should you be bringing a new product into Germany, remember the German testing houses. Neither you nor your distributor will be able to sell a product without their stamp. The process is efficient and approvals are often obtained only weeks after products are submitted. After approval, any gun will need to carry a stamp. This, combined with the process itself, adds substantially to the preparation needed to introduce a new rifle, shotgun or airgun to the German market.

Germany is efficient. Germany is organised. Germany requires these same qualities from you, whether exporting, importing or setting up business there. There is plenty of information available to help in the process, but do not underestimate the bureaucratic overhead and time you will need to be successful in any German endeavour.