The Wize Way

Episode 79: Managing a High-Performing Offshore Team

• Wize Mentoring for Accountants and Bookkeepers • Season 1 • Episode 79

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In this week's episode of The Wize Guys Podcast,  Ed Chan, Jamie Johns, and Brenton Ward explore offshoring team members as one of the growth strategies for your accounting or bookkeeping business.

Outsourcing isn't just about cost-effectiveness, it's a strategy that requires thoughtful execution. We walk you through how to manage your offshore teams effectively, looking closely at roles, communication, and traffic flow. Listen to how Ed and Jamie implemented this in their firms through a checklist-driven approach to streamline production processes. 

Discover how managers and firm owners can effectively manage offshore staff and how to keep them productive even if you don't get to see them every day. Also, we jump into why it would be a great strategy to implement offshore staffing and the type of positions that you can delegate to your offshore staff. When it comes to offshore recruitment, the key is an extraordinary system that will allow you to hire the right people.  Tune in to this episode to learn more!

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Ed Chan:

You've got to master leading yourself. So that's about self-discipline, that's about experience, that's about controlling your feelings. So you've got to lead yourself.

Brenton Ward:

From Wize Mentoring is The Wize Guys Podcast, a show about accounting and bookkeeping practice owners and the many stories, lessons, and tips from their experience of transitioning from a time-pull practice to a business that runs without them. I hope you enjoy and subscribe. There's still a big argument for and a big argument against offshoring, so I'd love to get your views on it and your experience with it today.

Ed Chan:

Yeah, sure. Thanks, Brenton. I guess it's a question around. It covers a lot of things. I guess it's obvious we do it because it's cheaper because it's a lot cheaper to offshore. There is a money issue involved as well. There's also a social responsibility issue.

Ed Chan:

There are a lot of different angles you can look at it, but the way I look at it is that in our business, being the owners of the business, we're pressured by the clients asking the fees to be kept low and the staff wanting wage increase, so we're sort of squeezed in the middle. The money is going to come from somewhere to be able to do that, and I see outsourcing as a win-win for everybody. And often the challenge that I was having in the beginning was the staff would push back, saying that it was going to risk their jobs. But actually, it's the opposite. And if they wanted to keep their jobs and wanted to get a pay rise, the only way that they're going to get a pay rise is if we save the money from somewhere else, because money doesn't grow in trees, and then the clients are pushing to keep the fees low. So in order to be able to help everybody keep the fees competitive to the clients, be in a position to be able to give pay rises to your local staff, then if we save the money from somewhere, which is often outsourcing, then we also help another country. And some of the countries are in poverty and it warms my heart when I see how we've helped them get out of poverty and improve their own standard of living and their family's standard of living. And then the question of yes, but we should be giving jobs to Australians In our industry.

Ed Chan:

I'm 61. I've been here all my life and I've seen the unemployment rate go up and down, but it's averaged always at around 5%, and 5% is for employment, and we've always struggled to find people in our industry. And then there's an argument around immigration. Some people don't want immigration. Well, outsourcing is great. We keep them over there and they don't come over here, but they do help. So for all those reasons, I truly believe it's a win-win for everybody. We help our clients to keep our prices competitive, we can help improve our wages for the staff that we hire, and we help another country who's in our case. We go to the Philippines, so it's helping them get out of poverty and unemployment's always been around 5%. So I just don't see a negative to it.

Brenton Ward:

Yeah, that's an interesting one. Even 12 months on, the conversation has changed around the strategy and there's certainly more a pro for it. As part of the growth strategy in any firm, we want to open up to the team, so this is the team clinic this month because I think that message needs to get across as well. Coming from a team side of things is seeing where the balance is and where the strategy fits in with the overall growth of the firm. Jamie, you early adopter of this strategy, Can you talk to us a little bit about how important it has been, and what role it's played in the growth of Sky over the last what? 8 years, 10 years?

Jamie Johns:

Yeah, look, it's been one of the biggest single innovative strategies that we've done at Sky it's. You know, to say it, it's been massive, it would be an understatement. We've got 10 full-time people in the Philippines and it's been fantastic for capacity, just actually getting the production work done. You know I've been down the track now 8 years on it. You know we've got team members that have been with us, you know, coming up 6, 7 years. So it's just been fantastic, Brenton, because we've developed those relationships. Those people have been with us long-term and in that journey, we've educated them.

Jamie Johns:

As Ed said, it's been a total win-win. You know, really, I would say up to the point just recently, accumulating to the point where one of our senior accountants got mentioned in the annual report of the client that you know that the contribution that that person and you know happy to say it was Sharmaine got mentioned in the annual report of the client, that she's contributing to their organization and helping it grow, helping it expand and just as an important team member. And that gives you some insight, Brenton, into how important these people are. And I'm speaking to accountants all the time, and even in the US and wherever else, who have never done offshoring and you know it's such a game-changing insight that if you can build an offshore team, it really changes your whole firm. You know it's a win-win for everyone. It really is. As Ed said, it's a win-win for everyone.

Brenton Ward:

In terms of embracing this as the leader of the firm, what are some of the things you had to reflect back on since you started to commence the strategy all those years ago? What are some of the big standout things that you can reflect on in terms of embracing it and getting it firmly embraced by the firm itself?

Jamie Johns:

Yeah, the biggest thing that I found, and also just with working with firms is existing team members. So if you've got existing employees or existing clients, the biggest thing is change management. It's just simply that fear Well, maybe from the existing team members that someone's going to potentially take my job. That's the first thing. The second thing is working with your clients and offshoring and how all that plays out and how that works as well. Security concerns all sorts of concerns that you'll have.

Jamie Johns:

With new team members that you get on board and they understand that you have an offshore workforce or team or even new clients, their resistance is so much lower because they're open to change. They're open to new ways of doing things and, whether it's a new team member, we just recently hired an assistant client manager and the fact that we had offshore team members to help that assistant point manager to do his work was just fantastic to him. And these people have been with us for years. They're experienced and payroll technically competent and that person just thought that was fantastic. When you introduce new clients, you can simply say to them we have offshore team members that have been with us X amount of years. This is how our business works and you'll find that 99% of people are fine with that. If they don't want their work done offshore for some reason, you can simply say we'll do it here.

Jamie Johns:

Just to recap, it's really the change management. When people have a fixed mindset and think that, oh, that's not possible or whatever, that's more of the challenge. But when you've got new team members and new clients, they're open to change, they're open to innovative ways of doing things, and so that's been my experience for him, the offshoring experience, the offshoring team members. It's not just one point to cut costs, of course. That's why we do it. But from me down, everyone believes in the ability of teamwork, both with the onshore team and the offshore team, and it, in effect, will become part of your values. And so if you meet clients who don't embrace that local view or work together in that way to the betterment of everyone, even in the clients, and get the work done, then sometimes you're gonna use this question whether they need to be part of your organization. So it's about your ideal client. What's your ideal client?

Brenton Ward:

Yeah, that makes a lot of sense. Anything to add there in terms of embracing the strategy before we get into some of the nuts and bolts of it?

Ed Chan:

Yeah, I think there's confusion around outsourcing or offshoring. There are different types, so you've got to get the right type and we spent quite a few years doing the wrong type of outsourcing. If you like you can take up an outsourcing offering that you pay an hourly rate for, so you just buy what you need, so to speak. And we spent quite a few years doing that and we found that that wasn't very good. So there's a lot of trial and error going on and made lots of mistakes. The problem is that kind of outsourcing only works for a certain type of work, SMSFs seem to work okay with that kind of outsourcing where you're buying the hours, and the reason why the SMSFs work better is because the SMSFs are pretty much the same you invest in shares, you invest in property and the parameters is pretty easy.

Ed Chan:

But when you start doing SMEs, the SMEs work a lot more complicated in that each client is slightly different, and if you use an hourly rate basis because it's the first time they've done that job you've still got to train them.

Ed Chan:

So you put in the hours to train them and then next year you get someone completely different and you got to train them again. So we found that it didn't work so well with SMEs. So the better way with SMEs was to hire your own staff over there. When you hire your own staff, the training you put into them, you'll get the benefit of that training the next year because they can do the work much quicker and faster. So that was the first thing just getting confused as to what kind of outsourcing is it offshoring, is it outsourcing and what type is it? And so that took us quite a few years to work out. And then the second thing is obviously the staff. So there was a lot of pushback because they thought it was a threat, but when they realized it wasn't a threat, it was actually helping them get through the work.

Brenton Ward:

And just what were some of the things that you needed to do in order to disarm that threat within the onshore team?

Ed Chan:

Well, firstly it was an attitude. So we had to change the attitude, because if someone doesn't wanna do something, you know they'll find every reason not to do it. So they'll cherry pick, you know, they'll say the quality is no good and then they'll blame it on outsourcing, whereas it was just either poor training and there are times you do hire the wrong person and that's the wrong person and they're not very good but then most of what I found was that because there was a reluctance to embrace it, there was a reluctance to take ownership of that person and train them properly, and because they're overseas, it is harder. It's obviously easier to train someone that's right next to you than it is to train someone that's. You know you gotta do it by Zoom, or the distance does make it harder. So the staff would gravitate obviously to the easy solution rather than the harder solution. So they ended up being an orphan and being left alone and no one directed them and taking ownership of them.

Ed Chan:

It also had to do with the team structure, you know, because if you run a narrow and deep structure, the leader of that team, usually the senior client manager, will take ownership of the team, whereas if you run a flat structure, nobody takes ownership.

Ed Chan:

And if you share staff and often the mistake we made initially was to share staff across you know three teams and then nobody took ownership of that person and nobody wanted to train that person, simply because the attitude was if I spend all these hours training them, they'll just go work for the other team and it's just wasting my time. So you've got to work through all those things and so eventually we ended up having, you know, an outsourced person per team and you know that team took responsibility for that person and things like. You know, we made sure we had our daily huddles. So you're always including them with your team as though they're there. But you're just going to make sure that they are part of your team, they are part of your organization, and just because they're working over there, not here, doesn't mean that they're not. So you got to treat them like they're part of the team. So management meetings, the daily huddles you just got to involve them.

Brenton Ward:

Yeah, what are your thoughts about using centers that train their staff? Must they be on your payroll? So I guess that comes back to the outsourcing versus offshoring conversation debate and I think, at the end of the day, by the sound of things, you get a much better return on your investment when you do the offshoring strategy and employ staff, as opposed to taking staff who are paid and trained and managed by another outsourcing agency.

Ed Chan:

Yeah, absolutely. It's what I said earlier that you know, with SMEs is particularly difficult because each SME is different. They got their own IDS increases. So if you do use the Albu rate basis then, no matter how experienced they are, you've still got to spend time with them to explain the IDS increases of this particular client and then next year they give you a different person to do the work and then you've got to train that person and you never retain the training for your particular client, whereas when you hire around staff, the training you put into that staff. If they took three hours to do it the first year, the next year they'll take two hours to do it and it gets more efficient the years they stay with you.

Ed Chan:

So you know it took us a long time to identify what the problem was, because often you know you confuse the problem with the symptoms and it's really difficult to separate out what is a symptom and what is a problem because the staff will put it down to oh, it's just outsourcing, it doesn't work. But it wasn't. The outsourcing wasn't working, it was just doing it at an hourly rate. That didn't work. On the flip side, it worked quite well with SMSFs, and with super funds, it worked quite well. So we had to, through all of this, through trial and error, to work out what the problem was, as opposed to what the symptoms were.

Brenton Ward:

Okay, that makes sense. So I want to talk to you about the roles, ideally, that offshore team members can successfully fulfill, because if we look at the deep and narrow structure finest minus grinders there's going to be a natural inclination to fulfilling these roles for offshore. So I'll let you explain that.

Ed Chan:

Sure, for those of you who understand our deep, narrow teams, we understand that when we service the clients, we break it into managing the traffic flow into two categories, because what kills an accountancy firm is the amount of traffic that comes through and the inability or the inefficiencies of managing that traffic. And if you can get the management of that traffic efficiently and effectively then it goes a long way to increasing productivity. And all that. The traffic flow is broken up into communication traffic and production traffic. The orange people represent the people who handle the communication traffic and the green person who's the senior production manager, handles the production traffic. That senior production manager, the green avatar, delegates the work down to the accountants and bookkeepers below him or her.

Ed Chan:

So obviously the jobs that are most suited to outsourcing the accountants, the bookkeepers, and intermediate accountants because they're overseas and there's very little ability to be able to communicate with the clients. Now the only communication that the grinders, if you like, in this picture, does with the clients' communication around. You know I've got a missing bank statement page, for 49 is missing, or can you send through the dividend statement that's missing? So it's more production orientated the senior client manager and the assistant client manager the the avatar, handles all the really high- level communication. So when a client comes in and says you say I've got $100,000 profit and you say my taxes are 30 grand, but I've got no money in the bank, how can I have made 100 grand profit?

Ed Chan:

So you got to have a person that has the ability to be able to explain difficult technical situations in very simple language to clients, and not everybody can do that. So it's a bit of a skill and that skill is learned. Yes, but it's also quite instinctive that I found the two types of distinct people that handle those two types of communication. So, with respect to the overseas staff, they fit the role of the grinders and the councils. The people doing the work are much, much better and the communication is generally done by the local people who've got a fairly good command of English. I'm not talking about being able to speak English, I'm talking about being able to convert very difficult technical information into very simple layman's terms.

Brenton Ward:

Jamie, this question is probably more triggered for you. The team at Sky in the Philippines. Do they have contact with clients? Are they allowed to email clients? What's your policy?

Jamie Johns:

around that. Yes, so that's determined by the senior client manager. So as a firm, we allow it 100%. We've had our team members from the Philippines come to Australia at various times and the senior client manager and myself when pre-COVID, we would get to the Philippines once a year as well to catch up with them.

Jamie Johns:

So, yeah, most definitely, particularly the more experienced team members in the Philippines. Absolutely they do have contact with them. For example, the person I mentioned earlier who got mentioned in the annual report when that lead came in originally and we worked out that they wanted all their bookkeeping done in their payroll, they met that person as part of the sales process up front. So that's a really good point to note if you want your clients to deal with your offshore team, introduce them to the particularly right up front from the word go in terms of what their role is, what they'll be doing, how they'll help. So be very, very clear, have a lot of clarity on what their role is, what they do, and where they sit on its knees to deliver the service, and that's equal.

Brenton Ward:

And Jamie, you mentioned there that Dunedra is a senior production manager, which would be fairly uncommon in terms of a deep and narrow team structure to have a senior production manager in your offshore team. Talk to us a little bit about that now. Did you hire Dunedra as a senior production manager? Has that been her career progression?

Jamie Johns:

No, that was just her career progression. So once that particular team grew, we needed that person. So you can either hire externally or, better still, you can hire internally. So we looked at a review, we looked at her skills, her technical capability, her experience over the four years, and at the end of the day she could fill the role. And then she had people underneath her as well that she would just review the work, check it, review it, and the whole point of the senior production manager is getting the work to a standard 80, 90% done, where the senior manager assistant coordinator can just fine-tune it and finish it off. It was just a promotion we promoted within and Danita had the skills to do that and the years of experience.

Jamie Johns:

So we all know, once an accountant gets 3, 4, 5 years of experience they're doing the same jobs every year, year in, year out. Our industry is like that the same tax returns, the same bookkeeping. It's over and over. And that's the beauty of the work and the industry it's just the same thing over and over. We're highly checklist-driven, at Sky as well. The senior client managers, all have their idiotic synchrosies, but some of them have an excellent checklist to follow. It might be 30 checklists, but what you've got to realize once you've been through your checklist is that might have 30 or 40 tick items on it. Once you've been through that 10 times, it just becomes a habit and they don't miss it. It's just like brushing your teeth every day.

Brenton Ward:

Absolutely, and Danita's team and the grinding team is her grinding team solely offshore? Does she have a mix of grinders onshore and offshore?

Jamie Johns:

No, solely offshore Brenton. So at Sky, for some years now, the strategy has been to have all our production team offshore, and if you do it right, your price at right. You know wanting to buy that. With the way that you roll it out, you can get fantastic profitability and you'll pay. You know you'll pay your offshore team members handsomely and they'll be paid really well in terms of their country. Again, that creates a margin. You know a sector that's set up to 90% gross profit margin and that then helps you reward your local team. So it's as it said, it's a win-win. The firm owner gets pushed down from the top. We've got to keep your prices competitive. At the same time, we've got to pay everyone fairly and it just is a win-win because we can do that and keep the same margin and that's what it's about.

Brenton Ward:

Yeah, absolutely so. Let's get into some of the finer details of the changed environment and how offshoring looks now as a result of what we've been through over the last couple But months. ut the new norm of doing business at the moment. The first question off the rank in terms of recruitment, is now for offshoring. So for anyone wanting to expand their team or anyone looking to get into offshoring, what are the recruitment options, Jamie, that we have available to us? Typically, a traditional one was BPOs, but now you've also explored hiring directly, so talk to us a bit about that recruitment phase.

Jamie Johns:

Yeah, there are probably two or three options Ed touched on earlier where you could buy blocks of time. Your offshoring experience could be like blocks of time that you could get the work done. The other option is going via a BPO or business process outsourcing as they call it. And then the third option really is hiring directly. So with COVID and the concerns about travelling and people's health and social distancing that's been the firms that I've been working with that's been a really big issue as well. People, whether it's in Australia or overseas, have just been concerned for their health, and having the ability to work from home has been massive.

Jamie Johns:

And, yeah, like you said, it's all like the new norm.

Jamie Johns:

So for us, all of our team members have laptops. They're just little subtle things but if your firm's paperless I've been dealing with firms who aren't paperless and then they've got to move to paperless so having a document management system is paperless, having the correct security protocols in place. So we always promote practices to protect, for example, keeping your antivirus, hiring an IT company to make sure that your antivirus software is up to date, and making sure your critical Windows patches are up to date All these things are in the vice-evolve but they're all critical 1% as that you need to put together making sure that your rhythm of your meetings, your daily huddles and your weekly catch ups, making sure you have them, and also the software too. Make sure you've got a job management system so that everyone knows where the jobs at, whether you've got an office in Melbourne, Sydney, India, or the Philippines. Everyone needs to be on the same page and aligned, and all these things are important. They need to come together so that you can run the firm successfully.

Brenton Ward:

I'm just going to come back to the recruitment phase in terms of deciding whether to go down the BPO route or hire directly. Do you have any comments as to whether a firm should go a particular route based on their experience with offshoring to date, like should you hire directly if you haven't done it before, or what are your thoughts on that?

Jamie Johns:

Yeah, look, it's probably a controversial topic in a way. Some people have different opinions. Look, in my opinion, and given my experience, and I think if you've got wise mentoring as a mentor or who can guide you, then in my particular case, and with the environment, with COVID, I would say hire directly from home. And that might be the experience of people who are quite good with IT, for example, knowing how to check the internet speed. But if you do want to take things really slow and you find that you don't have time to do the recruiting, because whether you recruit in Australia or whether you recruit overseas, you still have to go through a recruiting process and that can take time. So if you're quite fearful of some of those things or you don't have time to do those things, then use like a BPO and there's any number of them, we all know.

Jamie Johns:

There are two ways, I started out with, and in the early days when I had no idea what I was doing, I used Towa. Back in those days, I didn't have a mentor to go to, I didn't have anyone that said oh, this is how you hire from home and this is a recruit overseas. So you know, that was just the natural step for me. So you've got those options. You've definitely got those options. Brendan and a BPO will hire or go through the recruiting process for you. They'll hire the person for you. They will give them an internet connection, security, and offers. They'll give them forms of training as well. So, yeah, you do have those two options and I think people just need to make an informed decision and once you've got all the facts, you can decide which way you go and what's best for your firm.

Brenton Ward:

Ed, do you have any comments on that, as to which option should be taken based on the experience of the firm with offshore?

Ed Chan:

Obviously, it's going to be a lot more expensive going through a BPO because their fees are pretty much double the wage costs, but it is an easier route. If it's the first one that you're doing, you can engage their help. They do a lot of the screening before they submit the candidates to you for selection. They also do a lot of the training. It's in an office environment, so some staff prefer to work in an office environment rather than from home and other staff prefer to work from home.

Ed Chan:

We went through exactly what Jamie did. We started off with a BPO because we didn't know what we were doing. As we got more experience we hired directly. Now In any WizeV ault, it's got the ad you put in where you go to advertise what kind of computer speed they need. Just everything is there in the vault. On hiring directly, the difference in the costs can actually allow you to hire another person. Often, if you don't know what you're doing, then the easiest route is to engage somebody else to do it for you. If it's your first one, then that's probably the safest and the easiest route to follow. Just depends on yourself.

Brenton Ward:

That makes sense, Jamie, when you were looking at offshoring, you obviously started with the Philippines. That was a natural route. Certainly at the time in the profession, in that early adopter phase. The whole strategy itself has really grown lakes over the last 10 years. In that time have you or yourself had, have you, looked at any other countries outside the Philippines for your offshore strategy?

Jamie Johns:

If I can just comment, Brenton, when I first started out we started in Sri Lanka. We started in Sri Lanka with a BPO who had staff members there. What we found and this is a bit like Ed said was Trial and Error back eight years ago For us. We weren't aware of the Philippines back then, but it was just the time zone with our team members who seemed to play a little bit of a habit. Then again, other firms that I speak to they're hundreds of different firms.

Jamie Johns:

Over the years They've got substantial team members in India. I know a firm has got a large team in India. I know other firms have got more than large teams from Vietnam. Then of course there's the Philippines and all the other countries. That was just my experience for us at Sky. The Philippines ended up landing on that because the time zone was just one of the things that really I think supported my team implementing the offshore team. That was my experience at Sky Accountants. As I said, there are other people with team members that actually I was dealing with a chap the other day and he's got team members in Sri Lanka in auditing. It's what works for you and what rhythm, routine, and structure works for you. It's not just one size fits all. There are various options that you've got.

Brenton Ward:

What you'll find in the Philippines is a lot of the culture. There is a preference to work towards the afternoon, into the evening sometimes, to avoid travel congestion and things like that. I know certainly for our own wise team. Don't let that be a deterrent straight away until you've been able to have a conversation with some of those candidates.

Ed Chan:

Brenton just wanted to add that one extra bit of information on BPO versus hiring from home. If you hire through a BPO, they generally go by the Philippines holidays. When we hire them directly, we get them to follow Australian holidays. That fits in a lot better. Australian holidays aren't as many as Philippine holidays, but more so from a work environment point of view. We're working while they're working and then when we're on holiday they're on holiday and seems to work a lot better.

Ed Chan:

I, like Jamie, outsourced around the world to Vietnam, India, and so forth. We settled on the Philippines because the people there they've got an American education system, they've got an American accent, so it's easy to understand them. Their education system is quite good. But also I think they're about two or three hours off from where we are. It's not that far apart. But obviously, if you're in a different part of the world, like if you're in Canada or America, it's different again. But often when we have staff in Vietnam who have completely different hours, we just work in. Sometimes they start early and they finish later. Often they've got enough work on to keep working. It's nighttime over here or whilst we're asleep and they're just working because there's enough work to keep them going. You tend to work it out. It's not that hard.

Brenton Ward:

It's not something that we talk too much about in the WizeT ribe that I've seen so far, but from some discussions with firms in the Northern Hemisphere, there are some hotspots in more developed countries in Eastern Europe now, such as Sofia and Bulgaria and Croatia, where there seems to be quite a large talent pool but similar circumstances to the likes of the Philippines or countries like that. That may be worth a look as well. Just to get through a couple of the questions coming through here, guys, if you don't mind, Carla said she's just recently promoted an offshore team member to an assistant production lead and has them currently going through bass agent training, expected to be registered by December. What are your thoughts on this model and this move?

Jamie Johns:

Yeah, if it's in production, fantastic. We're in two of our teams. We've got team members in the Philippines that are senior production managers, so don't have a problem with it at all. I think it's fantastic to promote your team members to that level and you're providing the training, you're providing the skills, you're providing the experience. I think it's fantastic. You know, I think the model works well. As we said, win-win. As long as the training is there and the leadership that we're showing, that's great.

Jamie Johns:

And then in Australia, as we say, the finders or the orange avatars you know they do all the client-facing work, so it's also for courses. That's the right people in the right seats. And you know, often that's a lot of the time that Ed and I spend is getting the right people in the right seat when we're consulting to firms, and you know you're dealing with humans and you can't just say that everyone's the same and so everyone's going to do everything the same, and that's what we don't do. What we work out is the right people and put them in the right seat, the team, and so they're building these teams and all the firms listening, building your teams, putting the people in the right seat. That's the most, one of the most critical things that you can do to help grow your firm, because if you get people in the wrong seat, as Ed says, you'll set them up to fail, and you don't want that.

Brenton Ward:

So yeah, based on your experience with your offshore team, what should be the minimum margin on your offshore team she's got to suggest that out of six times, what would your suggestion be?

Jamie Johns:

Yeah, look, your minimum margin should be we always go with the KPI or 40% of our cost of goods, right, or gross profit of 60%. So with your offshore team, you're not confined to that, you're going to get much better than that. So you might get up to depending on how you price your jobs and depending on your specialty and your niche marketing and how good you're at sales we get up to 90% gross profit. So you might even get sort of six, seven, eight times. It just depends. But I just give you the minimum there. So you'll get much better than 60% GP or 40% cost of goods. So that would be the minimum. But I can tell you now you'll get much better than that with your offshore team. Okay.

Ed Chan:

Yeah, it should be based on the market price. So whatever the market price is that you're charging out for. So if it's bookkeeping and the market price is $80 an hour, then you should charge out $80 an hour. If you're outsourcing, then it's like 10 times the cost, the hourly cost.

Jamie Johns:

Another way to look at it. Just because you've invested in a really, really efficient factory, it doesn't mean that you have to be the cheapest, Although if for being a very price-sensitive very job, you probably have the ability to drop the price lower than another firm that doesn't offshore. So, as you said, Ed, it should be just more market value. Just because you've got a really efficient factory, it doesn't mean you have to be the cheapest or go under market value.

Ed Chan:

If you're after market share, you might have to. There are different ways to win market share. You can drop your prices to win market share or you can improve your turnaround times. There are different ways to win market share if you're after market share. So often people are not after market share. They're after making a decent profit, giving very good service. So it just depends on what your drivers are as to how you price it. But the normal cost is three times your costs or three and a half times your costs, but when you outsource you can get up to 10 or 11 times your costs. It's quite profitable and it obviously gives you the opportunity to compete at a better price to win market share, if that's what your goal is.

Brenton Ward:

That makes sense. We want to touch on the topic of the technology and the security piece from working from home, because when we're talking about working directly and working from home as opposed to a BPO or an office, certainly one of the biggest questions we normally get and it's obviously one of the biggest risks. So, Jamie, can you just touch on a couple of different layers to that and how you've protected yourselves against that?

Jamie Johns:

Yes. So over the years of doing it myself and then talking to other firms, there are probably three or four main points. One is you need to cover all these things. If you're hiring from home, for example, like a not-vary BPO, you should download the contractor's agreement that we have in the WizeV ault, and in that agreement, it'll cover a lot of the main things around security and cyber security issues. And if I quickly listen to one, you need to make sure that all your antivirus and anti-peaglogger software is kept continually up to date.

Jamie Johns:

So we pay our IT firm to do that, and that includes all your critical Windows patches, because people are always trying to work out and they have figured out how to get into a computer, how to hack it or whatever it may be, and it's a continuous battle. And then you have your software companies, whether it's Apple or Microsoft, always updating and putting critical patches on security. There's no way you would just let a computer sit there and not have the patches updated. So you must have that in a contract with your IT company to keep those patches up to date. Now, thirdly, you should have a system there are different systems that are like the LastP ass. There's Practice Protect that we've used for years, which just gives you one password, and into a portal where all the other passwords aren't known. So Practice Protect is another one.

Jamie Johns:

The other thing that you should have in the contract or spell out is that if the offshore team members use a computer, it's just for work purposes, it's just for their job. You don't have the kids coming in or the husband or wife all come in and use that computer. So that's another thing that I've learned from experience as well is just that the computer should be solely dedicated to the team member for the purposes of your work. There are some of the main things, Brenton, but certainly the IT side of it, the things that I mentioned, is critical. Then there's just the practical things. Another thing that we include in the contract is that all the offshore team members. They are not allowed to preach. We just blatantly say in there that you can't bring things off and have papal anger. So we just work in a papal environment.

Brenton Ward:

Any comments on how to best ingrain the official strategy into the culture and for the leadership team to drive this forward?

Ed Chan:

There's just no question that working from home or working overseas brings up with it a different challenge, keeping an eye, and making sure productivity is out and so forth. But in our environment of time sheets and the checks and balances and software like Terramind and a whole lot of different other software that you can implement, that's minimal. But overwriting all of that is that you've got to teach the staff a sense of leadership. I put that down to a sense of responsibility doing the right thing and taking responsibility for their actions, whether it's mistakes or other matters. But you've got to always drive this leadership aspect through your teams and take responsibility.

Ed Chan:

No blame, don't blame people for making mistakes. Focus on solutions, focus on fixing the problem, and this sort of culture needs to go through the organization so you have an abundant environment, not a scarcity environment, and everybody's worked towards the same goal. And if people do make mistakes, just focus on fixing the problem, looking for a solution, rather than blaming people, so that all comes down under leadership. So you need to make sure that they understand that, right from the first time that you employ them. Your culture is about working together to solve problems and find solutions.

Brenton Ward:

Okay, Jamie, final points on leadership and really making this strategy work for a firm.

Jamie Johns:

Yeah, I think the main thing is that you don't just leave people sitting there. I've spoken to other firms over the years where the leadership of the firm might want to embrace offshoring, but then the second layer of management whether it's the senior production manager or even the senior client manager just go and embrace it. So while the owners of the firm or the partners might embrace it I've seen that happen but then I've seen the next level or the level under that not embrace it and then they'll say why didn't it work? Or I couldn't get the accountants, or I couldn't get the associates, or I couldn't get the managers to do it, and so it can become sort of an attitudinal point that I just don't want to get on Zoom or I don't want to get on Microsoft Teams and call the person. So I've seen that more than a few times and I think that's more of just having a fixed mindset that offshoring just doesn't work, whereas if people have the right attitude and they give it a fair go, it can work.

Jamie Johns:

So I think leadership in terms of designing a firm and leading the firm the right way you can never understate that it's just. This is the strategy. This is why I would like to do it. It's a win-win. It does work. You might get pushback from your team members, but, as it always comes back to it, you've got to lead Because otherwise, if you don't lead, your firm will end up like what all your clients want and it'll end up like what all individual team members want. As the leader, you've got to do your best. Concern for everyone and not just one person. So do your best to bring everyone on the journey, but you might find it might be someone who doesn't like it, and it's just the difference of values.

Brenton Ward:

Thanks, Jamie. If you liked this episode, please remember to subscribe and leave us a five-star review For more practical wise tips on how to build a business that runs without you, head over to wizementoring. com/ podcast to download a free copy of The Accountants 20- hour Workweek Playbook. We've included a link in the show notes below. See you on the next episode.!