By Nicholas MacDonald;

In coming months, we’ll be featuring interviews with foreign entrepreneurs building businesses in China. Our first is with one of the most successful (and somewhat notorious) young entrepreneurs in Shanghai – Shaun Rein, founder and managing director of China Market Research Consulting.

Shaun Rein, Managing Director of the China Market Research Group (CMR), has built a controversial reputation and a competitive consulting firm in China. CMR, despite being only seven years old and led by a man in his early thirties with no prior consulting experience, manages to beat top international consulting firms like Bain and McKinsey for due diligence and market research projects in China. The company has become recognized for it’s street-level expertise and thorough (if sometimes contrarian) approach to a frequently opaque and baffling market.

I first interviewed Rein last winter, when he was promoting his book, The End of Cheap China (you can view the interview here). This time I visited him in his office overlooking Lujiazui Park in Pudong, where we sat down for a conversation about his experiences as an entrepreneur in Shanghai, developing a consulting practice, and the ins and outs of doing business in China.

Nicholas MacDonald: You started CMR in January 2006, almost seven years ago. How did you first get going?

Shaun Rein: We actually started planning  October of 2005, but January of ’06 is when we went live to the world, so that’s where I usually mark the start of CMR. In April of that year I hired my first employee; more joined in July, including Ben Cavender, who is still with us today and now regularly appears on Bloomberg and CNBC.

In China legally you cannot hire independent consultants or people on a project basis, so that first year I originally used a lot of interns on a project basis to keep costs down as I tried to figure out if CMR had a viable business model.  Sometimes I had four or five interns at a time, but found that trying to rely on interns wasn’t going to work as a long term strategy. They did not have the skill set and the cost of training new ones was too high and more importantly within that first year it become obvious CMR had a bright future,so I switched to hiring more full-time staff.

Today, we have about twenty full-time consultants working here.

NM: What did you do to “learn the ropes” of consulting? I noticed on your CV that you don’t come from a consulting background.

SR: I generally think of myself as more of an entrepreneur than a consultant as I don’t have a traditional consulting background as you point out. Before CMR, I was in venture capital. That said, no one person can build a company. The most important thing I could do wasn’t developing myself but was to build a top-notch team. I looked at my own weaknesses, and sought people whose strengths would complement my own to build a world-class team. I have been very lucky in finding and keeping some great talent over the years which is the key to building a successful business.

I’d also say  another key to building a great company is finding great mentors. I had several: Dean William Kirby of Harvard University; Gregg Stone who is the Managing Partner of the venture capital firm Kestrel and Ambassador Nicholas Platt, former President of the Asia Society. The purpose of having mentors is for advice and information, not money or clients. Gregg warned me that being an entrepreneur can be lonely, and having mentors to talk to is often important for that reason as well.  Sometimes you need a circle of trust, outside of your leadership team or family, that you can talk to for advice.

Another important matter is staying connected to the US [ed: or your home country]. Whatever you do, make sure to build up your relationships there. One way is through organizations like the Asia Society, which focus on relations with China

NM: What have been the most significant challenges you’ve faced here as an entrepreneur?

SR: CMR is my third company. My second was a complete failure, I only made fifty thousand RMB in three years of work. I was living in a $150 USD a month apartment that was disgusting.  But failing as an entrepreneur offers great lessons for your next attempt, and that experience of failing was the best experience I could have gone through.

For instance, I learned that you should never rent an office on the first floor unless you are in a nice building where the developers has connections – the police or gangsters in some cities will often come and demand protection money. Or because of re-zoning laws, the whole area might get knocked down and you lose your upfront investment in decoration. Picking your location is very important. Avoid anything that requires too much startup capital. Hold down costs as much as you can- even if that means keeping the overhead lights turned off. To this day, we keep the lights in our foyer off and  I keep the lights off in my office until night time to save money.

Continue reading at Hypercapitalists in Toyland.

Nicholas has lived in Shanghai since 2008, and has worked in a number of capacities, including stints as an instructor at Shanghai Xingjian College, books editor at China Economic Review, and most recently editor of iTV-Asia.com. He’s currently a 2013 Master’s candidate at the Hult School of International Business.

Featured image by Fantake.