The 3 Reasons Behind 3E Accounting’s Entry into Hong Kong Amid Covid-19 & Civil Unrest
“Why did you choose to spend HK$3 million to enter into Hong Kong’s market now when other companies are pulling out?” We have been asked frequently about our unusual business decision, so we wrote a blog piece to explain our decision to enter the Hong Kong market. It was not an impulse decision. Our efforts started in January 2019 when the US-China geopolitical tension and mild civil unrest were starting to brew.
We took 18 months to enter the Hong Kong market. We monitored the situation carefully from our global corporate headquarters in Singapore and could have pulled out anytime. We chose not to. After careful consideration, we felt that our original three reasons were still valid despite the addition of Covid-19 to the long list of challenges faced by Hong Kong.
Reason 1: Gateway to Relatively Strong China
Despite the global controversies over China’s National Security Law and Global Taxation of 45%, we remain steadfast in our view that Hong Kong will remain as the Gateway to China. Hong Kong will remain as the best point of entry into China in the eyes of foreign companies and Chinese authorities.
As China has a 1.439 billion population (#1 at 18.47% of global population) with enormous demand and good income, foreign companies will follow in the footstep of Tesla to setup production and sales capacity in Mainland China. Tesla made history by being the first wholly foreign-owned automobile company in China with production, sales and R&D facilities in January 2020.
|Country/Region||Q1/2020 GDP Growth||Q2/2020 GDP Growth|
Looking at the table above, we noticed that China was still growing in Q2/2020 when other major economies were in steep decline due to the economic impact of the coronavirus outbreak. Singapore had experienced the most severe decline over the travel restrictions from Covid-19. This demonstrated China’s relatively strong ability to contain the virus with a large arsenal of effective tools to contain the economic impact of the virus.
All factors considered, it is likely that after Covid-19, China would recover faster than the rest of the world. The impact of Covid-19 is likely to last for the next 10 years and China’s strength would give it a distinct advantage over the rest of the world.
Reason 2: Positioning for Recovery
We believe that the economic cycle had shrunk from 14 to 25 years to around 7.5 years. The best time to enter the market would be just before the market plunge into a deep hole to position for the following upturn. It would be foolish to do the reverse, but we have witnessed it several times.
It is our opinion that the current downturn would probably last for 3 years until end 2022. By then, a vaccine for Covid-19 would have been developed and made widely available to the general public around the world. It took us 18 months to open our office in Hong Kong and we will take the next 42 months to establish ourselves firmly in Hong Kong with 50 employees and annual revenue exceeding HK$100 million.
By entering the Hong Kong market today, we position ourselves for the swift recovery in 2025 to 2028. We believe that we can grow exponentially with total revenue of 3E Accounting International network exceeding HK$1 billion by 2028 by being the most trusted accountancy network outside the Big 4. We will provide extensive one-stop business service to both local and foreign companies in Hong Kong.
Reason 3: Better Processes and Technology Work System
Accountancy graduates are fairly common in Singapore as they are in Hong Kong. Accountancy firms can spring up like mushroom and most ambitious accountants leave their first employers after 5 years of service to start their own practice. The unpleasant truth is that 90% of them close down after 5 years as they can’t cover the operating cost; especially if they try to play the price game.
3E Accounting had been around for 9 years since August 2011. We kept our prices reasonable and chose not to undercut the market as we have to pay our staff fairly and be there for the long run. Instead, we chose actively to develop customized technologies to enable our staff to work more efficiently and effectively.
We dedicate 30 training hours for new staff to ensure that they know how to use our technologies. Even for existing staff, we set aside 10 hours per month to ensure that they are up to date for new technologies update and also new systems which we roll out
|Accounting Systems||Xero, Quickbook, MYOB, Financio||Efficient method of doing accounting|
|Customer Relationship Management System||In-House||Manage customer interaction|
|Robotics||Double Robotics||Virtual Face to Face Meeting and Safe Distancing|
|Digital Marketing||SEMRush||Smart management of digital campaign|
|Enterprise Software||In-House||Human Resource Management|
|Mobile Apps||In-House||Convenience on the move|
We have also empowered our supervisors to make decisions and suggest changes to our system. Our dedicated technology is personally overseen by our Founder Lawrence Chai. He gathers all the operating issues and funnel company resources to make sure that we have long term advantages relative to the competition.
Carefully Considered Decision
3E Accounting had taken a calculated risk to enter into the Hong Kong market amid the coronavirus outbreak and geopolitical tension. We are accountants and corporate financial planners. We did our sums and we are on track to breakeven by the end of this year. The results have been encouraging so far. Due to our strong digital marketing efforts and client referral, 3E Accounting have had paying clients in Hong Kong since the start of the year.
As accountants, we are risk averse and we only take smart risk. We felt that it was too risky not to expand out of our core markets of Singapore and Malaysia. Hong Kong would be a good core market for us by itself and greater China would be the crown jewel. We are committed to stay and prosper in Hong Kong and greater China for the long run. Despite the current challenges, we remain super bullish about our prospects in Hong Kong and will continue to pump in more resources to stay for good.