Turbulent times require an international solution

Global Access of Service and Technology Solutions System
Nationalism is resurgent. Brexit continues to be the known unknown, but is looming. The pound has fallen and shows no sign of recovering much. Inflation has started to rise. So have business insolvencies. We’re heading into the unknown of Brexit. We’re in the throes of an election that is at best diversionary.
All the indicators are scary, but despite them, much of British Business is doing what it does best. Keeping calm and carrying on. Waiting for “clarity” before taking any new action or making any investments or changes. Which is, of course, courting disaster.
As you’d expect me to say, the current uncertainties make internationalisation a top priority for businesses, especially those in the services sector. However, I’m coming from a different angle here.
The Brexit priority seems to be cutting immigration. Potential European immigrants, however, aren’t waiting for a change of policy – they’re already going somewhere else – and many who are already in the UK are looking for opportunities to leave. This is a problem for almost all businesses, even those that don’t currently employ any (and it’s not just the health service that’s dependent on foreign labour).
Fewer immigrants means it will be more difficult to hire. Some politicians seem to think that there is a vast pool of domestic labour that is being neglected by employers who would rather hire foreigners. Any business person could tell them that there is no prejudice against nationals in any company here – the vast majority of that pool of unemployed Britons either can’t work, won’t work or are unemployable. To solve the problem, we welcome and hire young, talented and hard working people from Europe and the wider world.
Following basic economic rules, a reduction in the supply of such people will increase the cost of all labour, as employers are forced to offer higher salaries to attract the staff they need from a scarcer offering. Deliberate cuts to profitability are limited, so, coupled with the higher prices now seeping through from exchange rate changes in 2016, we are bound to see an accelerating inflationary spiral.
One solution is to hire abroad, in countries where the skills you need are more plentiful and costs are lower. I’m not advising outsourcing – that takes away your control and generally increases costs – but setting up a subsidiary operation.
Entrepreneurs in the services sectors tend to shy away from this idea, or limit their interest to offshoring back office jobs. But why? The businesses that they serve, especially the younger and more dynamic ones, don’t expect local friendly face-to-face chats with their solicitor or accountant. In the modern world, everyone’s used to online access and video conference calls, and is happy if it means the service costs less or has other advantages such as 24/7 service.
Moving a lot of the work offshore to your very own subsidiary, retaining the core skills and entrepreneurship here, can ensure sustainability for the business and increase profitability.
Making new sales to an international market from that base can also guard against currency fluctuations. Companies already exporting services can, by moving the centre of delivery away from their home country, avoid any new trade barriers and guard against negative and nationalistic sentiments that may arise in their existing markets (think “America First”). Similar benefits can be had by manufacturers moving final assembly abroad.
Done the right way, creating a new overseas subsidiary can be quick and cheap to set up. In most cases, it could be trading within 6 months and be self-financing in the first year. Come on, small UK businesses, what are you waiting for?

Starting up in the UK

The ultimate step by step guide

 

Probably one of the most asked questions during the 65, 619 new company incorporations in the UK (according to the latest statistics for April 2016) was “how much?”. Well not a lot to register it… but quite a bit to set up and  maintain it.

There are definitely some factors to take into account that, if overlooked, can be deadly for your business, even before you start trading.

Yes, the idea motivates you, and your will is stronger than ever, but how solid are your finances and how long can your business survive without profit? It is vital that you think  through all the potential costs properly, and include a contingency plan. There are always unexpected expenses. Those, along with poor budgeting are the most common reasons for start-up failure.

Once the money is sorted and your idea is finally turning into reality, you should be able to answer these basic questions and include them in your business plan along with all projected costs.

  • What is your market?
  • Who are your competitors?
  • How useful is your product and how will you position it?
  • What is your Unique Selling Point?
  • Are you going solo or setting up a limited liability company?

Now, all you’ve got to do  is make sure you include all these costs before you get started:

  • Business premises: after staff salaries, probably the biggest operating cost. Whether you use serviced offices or retail business premises, bear in mind that normally these come with agency fees and service charges. You may also have to pay a big sum upfront on your lease, as some landlords and agencies operate on a quarterly rather than monthly basis.
  • Professional advice: Include these services in your budget. The planning stage is one of the most important. It’s OK if you are not an expert, but find some legal and financial advisors to help you with your plan. Keep these contacts for future occasions – when you employ staff or have questions or on projected costs and profits, taxes… Then you’ll definitely need an accountant, payroll agent, lawyer or solicitor.
  • Business travel: when starting a new business, you’ll probably have to attend meetings outside the office. Have some budget allocated to travel, either by public transport or using your own vehicle.
  • Stock, tools and equipment: if you’re not operating a service this can also mean a significant upfront cost. You need to make sure that you’ve got all the material needed to carry out your work smoothly from the start.
  • Insurance: this should be done straight away. It’s important that you protect yourself and keep your company from any type of liability. Insurance is not that expensive but it is important to get the right type of cover. The most common (and essential) is Employer’s Liability Insurance. The certificate should be displayed in your office along with the Certificate of Incorporation or Business Name Registration. Don’t make your business vulnerable.
  • Marketing: as you’re starting a new business, you need to make people aware of its existence! Include events and networking on your budget as part of your awareness strategy. You can opt by traditional methods such as direct mail or spend a small amount in ensuring your website is well placed in search engine results. Invest some time and money in creating your brand: leaflets, logo, corporate brand sheet, business cards, etc. Create an identity that makes your company unforgettable!
  • Staffing and employment: refer to your professional advisers to have guidance on recruiting new employees, wages, tax, National Insurance or any other payroll or HR matters – again, no need to be an expert, just seek some help to save time and effort and ensure you “do it right”. Companies nowadays tend to outsource these services, and there are various packages sold depending on the size of the company.
  • Other expenses normally overlooked:
    • IT and other equipment- computers, printers, toners
    • Office furniture
    • Business stationery and office supplies
    • Website development
    • Postage
    • Utilities – electricity, water
    • Phone and internet charges

Go ahead!

  • Choose your business structure
  • Find a location
  • Register your company with Companies House
  • Register for tax and national insurance
  • License your business (if applicable)
  • Get a website
  • Good luck!

Any questions? We’d be happy to help – get in touch with me or any of my colleagues at ICC -International Corporate Creations.

 

by Joana Miranda, Admin and Finance at ICC – International Corporate Creations

 

10 questions to ask when locating your overseas SSC or insourcing operation

by Oliver Dowson, CEO, ICC – International Corporate Creations

Great, so you’ve decided that you can both save money and improve business efficiency by setting up a Shared Services Centre or “Insourcing” (wholly-owned Outsourcing) operation abroad.  Excellent.  Now where?   There are hundreds of possible destinations.  You’ll naturally be putting cost evaluation at the top of your checklist, but there are lots of other considerations.  Leaving aside the financial, legal and technical matters that everyone thinks about, there are some others that frequently get neglected or overlooked:

  1. Does the time zone work?

How much real-time communication is needed with your other offices?  Whilst it’s usually possible to hire staff who work nights or non-standard shifts, it’s much more difficult to retain them, and it’s especially difficult to get good management.  If it’s data processing work, then work on the other side of the planet where the time difference will help (they work while you sleep), if it’s high-contact, think North-South.

  1. Will the team have the right language skills?

While you may assume the staff you’ll hire will speak and write English, it’ll be their second language in almost all countries, and there are many kinds of English, not just British and American!  Think carefully about what communications you will need, written and spoken.

  1. How easy will it be to hire and retain staff in the future?

Even if it looks easy to hire the staff you need now, think ahead.  If you’ve picked a location which other multinationals are planning to set up in, it’s likely that the competition for skilled staff will drive wage inflation and increase employee turnover.

  1. Will applicants be right for the job?

There’s probably nothing that gets lost in translation more than a job description!  Straight translations hardly ever work, even for defined qualifications – advertising needs to be drafted in consultation with local HR specialists to ensure the right cultural angles are considered.

  1. What other skill sets are readily available?

You’ll know exactly what operations you want performed now, and the skill sets you need for those, but again, think ahead.  Most businesses setting up abroad only think about moving specific tasks.  However, once it’s successful, you should want your SSC to take on a wider scope and responsibility – and remember that the higher-skilled the job, the bigger the saving by doing it overseas instead of back home.

  1. How fast are wages likely to rise?

Salaries in developing countries almost always rise faster than back home – annual rates of 8-15% are common.  In some countries, wage rises are government mandated.  And, of course, any merit increases go on top!  You need to plan costs for 5 years ahead and plan to stay on top of achieving productivity improvements year after year.

  1. How easy is it to get to?

With good local management, you won’t need to rely on expats located there – but to be fully successful, you will need a lot of regular visits from the mother ship, both by those who can give training and support and by some of the top CXO team.  Enthusiasm for travel quickly wears thin if it’s a horrible journey – you and your colleagues will need to travel there year after year.  Also, when things go wrong, you may need to get people there in a hurry.  So don’t only look for locations with daily direct flights, but consider the door-to-door journey time and the jetlag effect.

  1. Is it a nice place to visit?

OK, you’ll only ever be going on business – but let’s face it, you and your colleagues are much more likely to visit frequently (and thereby help develop the operation) if you enjoy going there – so this really is a critical consideration.  Good weather, tourist attractions, food that you like and a happy culture all help.

  1. How will your staff commute to and from work?

Understanding this can be critical to staff retention and operational management.  If the only way home is by bus, and the last one leaves at 18:30, they won’t ever stay late.  If they have a 2-hour commute each way by train, any new job offer that comes along with a shorter commute could be very tempting!  These aren’t exaggerations, but true examples applying to many staff in two common outsourcing locations.

  1. How useful will it be as a base to develop new regional business?

You might only be interested in setting up a SSC today, but, depending on your Company’s business, it’s well worth thinking about how the operation could serve as a future sales and marketing hub for the country or region where you are setting up.  Setting up the initial operation can be costly, but adding functionality later is usually straightforward and cheap.

 

The Elusive Prize – achieving a Common Corporate Identity when expanding overseas

by Oliver Dowson, CEO, International Corporate Creations Ltd

When expanding abroad – especially when setting up operations like Shared Service Centres that will take over work previously done in-country – there’s always an aspiration to achieve and maintain a common “Company Culture”. Unfortunately, many companies fail. I’ve met with management of many international subsidiaries of multinationals all around the world – and conclude that finding common corporate identity at the human level is disappointingly rare. Often it feels like the only thing that’s common is the logo over the reception desk!
This is nothing new. On my first day at work for a US multinational in London, long ago, I received a telex from my new opposite number in Minneapolis welcoming me and asking me to send him some stats for the UK company. I asked my boss how I should reply, and he screwed up the paper and threw it in the bin. Stunned, I asked “and?”. “And you wait and see if he remembers to ask again. If you get a third reminder, I’ll explain what to do” came the answer. I found out that the London management mantra was that “the money might be American, but here it’s a British company”.
Years later, in a new job, I was reminded of this at the German HQ of a US car manufacturer. Waiting in the lobby for a meeting, I watched a workman put up a new corporate poster – and then carefully stick the German company’s logo over the corporate one. Reversing nationalities, I’ve had executives of the US subsidiaries of two of the biggest German companies tell me that they try to ignore anything coming from Frankfurt or Munich.
Therefore, when I started to take my own businesses abroad, I resolved to make it a priority from the outset to try for “one company thinking”, for which the key is to get everyone respecting each other and working together.
It’s not so hard where the new overseas operation is a sales office, or is dedicated to expand the business with a new market, product or service. The real challenge comes where work is being transferred abroad – for example, taking accounts processing or customer call centres to a lower cost economy. Whilst most companies dedicate effort to inspiring the new overseas workforce with the corporate identity and values, many pay scant attention to staff in existing operations, except those destined to lose their jobs as a result of the change.
Overseas expansion and business change is actually a great opportunity to build global corporate identity at all levels. Staff at the new overseas operation can probably be enthused quite easily, but the home office always needs great care. Even those not affected directly may have negative feelings, perhaps because they have friends in an affected department, perhaps because they fear they “will be next”, perhaps because they think they will end up with more work to do – or perhaps simply just because they are prejudiced (almost certainly unjustifiably) against the country in question.
The approach I’ve used and recommend has several elements. Fundamentally, you need to make your management teams understand that the move will not only make the company stronger, it will make their jobs easier, and they will be able to deliver better results, making them look good.
• When you set up a new overseas operation, don’t just use it to transfer work abroad. Add a small number of staff that will work on exploiting the new base to expand your company’s market, or to deliver extra services back to the home base that are new and valuable.
• In conjunction with that, establish people in both operations – home and abroad – who will need to depend on and communicate with each other every day. Pick individuals who are likely to build a rapport and share a little social chit-chat (this can dictate who you hire for the new overseas operation).
• Hire better-educated staff for your new operation than you actually need
• Consult your management team about the job functions that you may have previously cut out in your home country to make savings, and that have loaded extra work onto them – then re-staff them in the new overseas operation.
• Educate the home office staff (all of them) about the country and city where you’re establishing your new operation, and the people you’re hiring. Admit to making efficiency savings, but also make it clear that your company is deliberately trying to help the development of the country you are moving work to. Give as many of them as possible the opportunity of visiting the new operation – but only once it is up and running smoothly.
• Don’t switch over operations until you have fully QA’d the entire operation. If it doesn’t work perfectly from Day One, you’ll have to climb the mountain again.
• Never forget time differences! Don’t expect overseas staff to always have to work unsocial hours to fit in with the home office – try to compromise on scheduling.
• At least for the first year, directors or senior management should play the role of Company Evangelists, visiting the overseas operation regularly, and spending at least a few days each time getting into details and meeting all the staff – and then spend time reporting back to the home office team when they return.
There’s never a single solution, of course – but all of these ideas have been proven to work. Another set of ideas apply to how you should manage corporate identity in your new overseas operation – but that’s a subject that needs another article!