My Biggest Mistake: Ernest Smith

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The Independent Online
MY biggest mistake was believing that we were operating in an integrated European Union. It has ended up costing me a great deal of money.

At National Breakdown we have been operating breakdown services for more than 20 years and have around 2.5 million members. We specialise in breakdown and assistance for cars and trucks.

Back in the late 1980s we decided that, given all the hype about Europe and 1992, we should start thinking about continental Europe.

We recognised that manufacturers and insurers were looking for a pan-European service, and that if you couldn't offer it there was a danger that you would be left behind.

So in 1990 we thought we were anticipating things nicely when we opened a new operation in Strasbourg. We employed 50 staff, who were all multilingual, and I spent every other week over there, which was valuable time away from our main office in Leeds.

The idea was to use the outlet in France to extend our business across the whole of Western Europe. But four years later, we are only now starting to make real headway.

We recognised that there would be cultural differences, but we badly underestimated the number of different rules and regulations in each country and how hard it was to get started. Of course we took professional advice, but our advisers seemed to underestimate the problems, too.

For example, in France we had to have the business established and operating before the authorities would grant us authorisation. We were able to sell policies but not settle claims.

In the end it was another 18 months before the authorisation came through. We had one big cost centre with no sales to set against it.

We also had problems in Germany, where the regulations stipulated that if you wanted to sell insurance products you had to publish the information, so all other insurers were informed of what you were doing. That does make market entry a bit difficult.

In the end it was 1992 before we really started to get going. We had lost two years and France was in the depths of recession, so our timing wasn't good either.

I am very keen on classic cars, and the one high note was that I took a Bentley over to Strasbourg so that at least I had a toy I could play with there. I also used to charter a small plane and fly colleagues over to France myself to save time.

Things are now improving. Our sales in Europe are around pounds 9m a year. The European business is still running at a loss, but things are heading in the right direction and we expect it to break even next year.

We now have a number of substantial customers in Europe, such as Iveco trucks. Any of their drivers can call our office in Strasbourg where the staff speak 14 languages. The call is answered in the driver's language on Freefone lines. We are also in negotiation with several other large companies.

I do feel bruised by the experience, but am comfortable that we have got through it and that we have started to understand more of the way the European Union works.

I don't regret moving into Europe but you can't expect too much too soon.