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Corporate Restructuring | Turnaround Finance | Offshoring | |
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The Impact of Offshoring & Business Turnaround in the UK
To create an effective business turnaround, it is often necessary to do something really radical. One of the solutions we have utilised is offshoring: to literally pick up the business’s entire, or almost entire, operating cost structure and to re-locate it overseas.
Our game plan is very simple. During the corporate 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 and Austria (not an obvious one, but very effective in 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 -
A consumer debt trading business.
The back office administration of TMP’s personal insolvency business.
The business turnaround results from offshoring so far have been radical and pioneering – we want to do much more!
Contact us to find out further information on offshoring.
Links:
www.powerplaninadministration.co.uk