For over 20 years of being a start-up entrepreneur, we enjoyed a constant profitable year on year growth. From a humble investment of $200, we managed to bootstrap to $30 million in
revenue with 500 employees. All was well until – the Global Financial Crisis.
The GFC caused 60% reduction in our market activity. It was also around the time that our market buying behaviour changed. The Yellow Pages book was replaced with Mr Google.
Within a few months, we hit a serious red ink. We bailed as fast as we could – we trimmed by over 300 employees. If it didn’t add directly to the bottom-line we cut it. The mood of the company started changing from fun to terrible. My emotions started to kick in and fear diverted my attention.
It took me a while to muster the courage and decide to face the situation head-on and stop cutting. A small part of me said there was hope – most of me said this was bankruptcy. My EO mates helped me reduce my “planning the bankruptcy” time and divert my attention to analysing the situation from different angles and opening my mind to possible solutions.
I know I needed to reduce my business expenses. If I could reduce my overhead expenses while keeping efficiency and productivity. There’s a possibility of saving my company from bankruptcy.
Outsourcing jobs to low-cost countries became an attractive solution. For many years, I’ve had a Filipino personal assistant whom I employed full-time through oDesk. I was well aware that the cost of labour in the Philippines is lower than in Australia, with wages grossing at about $120 a week. Education in this country was on par, better than Australia, and Filipinos speak good English.
But, I stayed away from outsourcing because I heard from many sources that outsourcing had problems. I have asked business owners who have tried it and they swore that they’d never do that again.
It was by accident that I discovered an alternative solution: “staff leasing”. Staff leasing, also known as co-managing, is different from outsourcing. Outsourcing is the handing of a business process to the third party company. And Staff-leasing is a low-cost, low-risk way of developing your team in your space with your culture in a different country. It allows the team to develop and share tacit knowledge. Virtual home based teams lacked this vital ingredient. It has low initial capital requirement and is cash-flow friendly; this model could be started with one worker and ramped up and down with ease.
I decided to move my back office processes, particularly finance, to Manila Philippines. Within a few days, I hired one “all-rounder” employee. Her experience was in general office work. By Skype we introduced the work flows. Within Months she was doing the work of 6 Aussie staff members. So we added another two All-Rounders.
Within months my red ink had disappeared although profit margins were still flat.
I then decided to move my sales department to Manila. After training, we exposed the Filipino sales team to our customers. I listened to horrible sales pitches and at the start, I had to admit I am worried it might not work. Nothing could describe my amazement when I am told that the Philippine sales team was out-converting our Australian sales team. From then on, better training became our primary focus and we an Australian to Manila.
Marketing became my next target. At the time the GFC hit, there was a large change in consumer service purchasing habits. The old and trusted Yellow Pages stopped working as consumers turned to search engines like Google. I noticed there was a rise in the process called lead generation or “leadgen”. My access to diligent workers for low wages meant we could easily develop efficient manual processes. We found clever ways of finding our customers before their buying decision was made. Today, we run a team of “data miners” with serious data bases. We produce 1500 leads a day which are all contacted in various ways, depending on the type of lead. The A$1.2 million annual spend in advertising in Yellow Pages has been replaced with a $140K a year data mining spend.
As the size of my team grew, tacit knowledge accrued and they started driving their own business processes. Because of my Manila operation we turned a $1.4M loss into a +$1M profit. The bank is off my back and the jobs of 200 Australians were saved. Today, we continue to grow and keep employing more Aussies.
Two years ago, I am asked to share what works and doesn’t work when offshoring. I invited a group to the Philippines, showed them around and discussed what we were witnessing. It has developed into a strong learning experience. Out of this grew a business learning tour known today as MikesManilaTours.
Now every two to three weeks I personally show ‘first hand’ why early outsourcing turned sour for so many businesses and how offshoring can create opportunities. We educate “How to adjust differently to the culture and maximise productivity from $120 a week workers” and how it works.