Get Offshore Leverage
I used to have infantile levels of financial acumen as a founder. I’ve always been good at making money, not so great at keeping it. Before I learnt Zero-based Budgeting (ZBB), I was guilty of adding people and tools, stacked on top of each other, with no regard for backing up and asking “do I objectively need these expenses”. Let me take you on my ZBB journey and how I leverage it successfully today to evaluate offshore talent.
What will we cover in this newsletter?
- What is Zero-based Budgeting? How will it change profitability in my business?
- Top 3 offshoring myths you and your team will need to overcome.
- Payment Processing options for your offshore team.
What is Zero-based Budgeting? How will it change profitability in my business?
Take an eraser to your Endowment Effect
Imagine you walked into your closet and grabbed that “cool” but rarely worn shirt you’ve had for years. You paid $200 for this shirt and can’t bare parting with it. But if you were to talk into a department story today and I told you that rebuying that shirt would be $50 right now, you wouldn’t buy it. This is the Endowment Effect. The sunk cost of time, money and energy is over-indexed and valued over its actual current value. With talent, we do this all the time. You fret over the committed training time, cultural fit, the “nice guy or gal in the office” when you describe that talent. If you were starting all over again, you also wouldn’t have them on your team. You feel like “their on your team now because they’re on your team now”. Your first step is to print out your Profit & Loss Statement (P&L) or open it in Excel, and place $0 in every line item. Assume nothing exists. There is no legacy, there is no bias. As Kevin O’Leary on the television show Sharks Tank would say “Stop the madness!” Once you have $0 in every expense ledger, you are ready for the next step.
Zero-based Budgeting is a method of budgeting in which all expenses are assumed $0, and must be justified for creation during a time period. In essence, they don’t exist. We sometimes choose to accept the status quo as the only answer, when in fact if we were to choose to start all over again, we may never have had this expense in the first place. And if we are going to have this expense, we have a meriate of options to optimize that expense. I can’t tell you how valuable this has become to my businesses over the last four years in practicing ZBB. Every quarter without fail, expenses like software and people creep into our spending, only for us to really question their need the next quarter. This really prevents us from “getting too far over our skis” and employing people for months and years without questioning the optionality we have for the same talent.
- I want you to picture that you went into the office tomorrow, and no one worked for you. The financial burdens of ALL operational expenses (minus the office you’re sitting in), are gone.
- Let’s start with a department like graphic design. You mentioned “Mike” is a person on your team. He no longer works for you in this game. Answer me these questions:
- Do you need anyone in Mike’s role if you started today – Yes or No
- Assuming Yes, do they NEED to live in Toronto – Yes or No
- Assuming No, can they live in Nova Scotia or anywhere in Canada – Yes or No
- Assuming Yes, since they are already remote, and if they could work the same hours as you do, can they live from a beach or a mountain, as long as they have strong internet – Yes or No
To become truly effective at Zero-based Budgeting, you need to be able to really ask your “WHY?” Why have that spend at all? Can we make due with nothing? Can an existing team member overlap into that task, project or role? Assume nothing. Start with a NO, and argue in YES’ only when necessary. You will find bloat, rot and excess in your business.
Top 3 offshoring myths you and your team will need to overcome.
The myth here is that the time expended to stand up one person, or a team of offshoring talent is not worth it. The juice isn’t worth the squeeze so to speak. Talent Onboarding and Scaling is no more time consuming for any candidate in a virtual environment, thus the real myth must be in Talent Acquisition. I get this. You don’t live in Asia or Latin America. You have no connections there. But the myth isn’t valid that recruiting offshore is too time consuming to find talent, it’s just that you don’t know where to start – yet. Understand that the exact same recruitment options we have here in North America, exist in every country in the world. You just need to find the requirement model and partners that work best for you, just like you did in your local market.
After WW2, America set up military bases in the Philippines. Quickly the Filipino culture embraced America radio and TV, culture, slang, fast food restaurants, etc. In 2023, the millions of knowledge workers in the Philippines talk, think, act, eat – just like we do in North America. Communication is a critical filtering process in the Talent Acquisition phase. Yes, the image of call centers in India is what most North Americans think about communication challenges. But you have the world available to you to find, test, and onboard talent that meets YOUR communication goals. If you want to pay $500/month, you can have the world’s most advanced graphic designer or data analyst in Daka, Bangladesh, but their English will be better suited for non-customer facing roles. Communication skills are like any skill and can vary dramatically around the world. “You are what you tolerate” – Jocko Wilnick. Don’t settle. Balancing your desired internal and external communication needs is absolutely possible with offshoring.“
Typically this myth is correlated with employee turnover. Yes, if you pick apples off the ground you are more than likely to find worms inside. Talent is talent anywhere in the world. You truly do get what you pay for. But there are also cultural nuances that in fact debunk the myth of higher employee turnover offshore, and that’s the employment model, benefits and perks that we’ll explore in a later chapter. There is a saying that “people don’t quit their job, they quit their manager”, and I believe with offshoring that “offshore talent don’t quit their job, they quit their employment situation”. Most of the horror stories you hear about offshoring are told by our fellow founders and CEOs that it “doesn’t work, and that person ABC just left one day and never told us”. Or that they were working 3 jobs at the same time”. Again, people are people around the world. If you give them low hourly wages with no work stability, no perks, treat them like a mushroom (keep them in the dark and feed them shit all day long), you will get what you get. Great employment situations will account for:
- Fair pay
- Benefits and Perks
- Working conditions (hours, work from home, etc.)
- Autonomy and Trust
- Feel like they are on the team.
When you get the employment situation right, you will experience a loyalty that appears to have dissipated in North America. The gratitude and work ethic in countries like Bangladesh, India, Philippines, Brazil are (in my opinion) far greater than the average employee here at home. There is a true sense of community, family, honor in these countries that I sometimes have been lost here in North America.
Payment Processing options for your offshore team.
Something you will encounter as you scale an offshore team is payment processing challenges. Unless you are leveraging UpWorks to contract and manage teammates, you will need a payment processing solution for any direct hires.
Option A – UpWorks has a new solution called “Any Hire” which allows you the functionality to leverage UpWorks as both a payment processor and tax remittance. This could be a strong all-in-one solution for you.
Option B – 3rd party tools:
Option C – Payment Managed Services:
At my company’s Sales for Life and Pipeline Signals, we use VEEM day-to-day, with Payoneer for Bangladesh and Pakistan.
Don’t Forget – Benchmark your team against offshore talent.
- What is the profit increase you could expect?
- What is the sales relief / reprieve you could expect to generate the same profit?
Get ready to be shocked!