T M P

The Impact of Offshoring

To create an effective turnaround it is often necessary to do something really radical. One of the solutions we have utilised is to literally pick the business’s entire, or almost entire, operating cost structure and re-locate it overseas.

Our game plan is very simple. During the restructuring process we re-locate the business to a low cost economy. We have offices in South Africa – in Johannesburg and Cape Town – and we have primarily used South Africa as our outsourcing centre. However, we have been involved in transactions that have moved cost bases to India, China, Austria (not an obvious one – but very effective in the particular circumstances).

To illustrate the South African sourcing, these simple principles explain the opportunity.

Where there is a business that would benefit from a fundamentally lower cost base and

Can be operated entirely over the internet and over the telephone (via dedicated very

low cost leased line) and/or

Can re-locate the manufacturing process overseas.

We have relocated the “manual” part of the overhead overseas and left the “strategic”

part of the overhead in the developed world. In this way, we benefit from the established

intellectual capital in the developed world (and we rarely want to change this) but benefit

from the (much) lower cost base outside the developed world.

By way of an illustration, we show the impact of moving a business to South Africa where the operating costs are approximately 1/3 of the UK (as at January 2007).

If you assume you have a small business turning over £3m this is what happens:

Clearly, there is a massive increase in profitability and a resultant increase in the company’s valuation. So far, (as at January 2007) we have successfully effected this type of change for;

An insurance company in run off (see www.powerplaninadministration.co.uk) with 750,000

individual creditors.

A consumer debt lead generation business (see www.exclusiveleads.co.uk).

An internet search engine marketing consultancy (see www.tamar.com).

A corporate motorsport company which relocated the cost base out of the USA to South Africa -

see www.fantasticracing.com

A consumer debt trading business.

The back office administration of TMP’s personal insolvency business.

The results so far have been radical and pioneering – we want to do much more!!

Links:

www.powerplaninadministration.co.uk

www.exclusiveleads.co.uk