In the 1990s, most budding entrepreneurs would look at the fast-food industry as their dream business. The allure of seeing long queues at the cashier, overflowing capacity, and of course, the constant ringing of the cash register is enough to get an entrepreneur motivated to start a fast-food business.
Although the restaurant business has definitely seen better years than at present, it still continues to thrive. However, another industry has begun to captivate the desire of entrepreneurs. Similar to the fast-food industry, it is labor intensive but requires the latest technology to deliver the best results.
During her term, President Gloria Macapagal Arroyo declared this industry, the “new growth engine of the Philippine economy.” The current Philippine President Benigno S. Aquino III is a strong advocate and continues to promote this industry heavily in his foreign visits.
It is an industry that has been growing at a rate of 46% per annum since 2006. In 2016, it is estimated to generate Php 25 billion in receipts. This industry can tally Php 48 billion in 2020 by assuming a constant growth rate of 12%.
The new engine of growth of the Philippine economy is outsourcing. It is popularly referred to as BPO or business process outsourcing.
For a time, the race for global outsourcing supremacy was between Philippines and India. However, as of 2014, the Philippines has apparently surpassed India as the premiere destination for global outsourcing. The projections have the Philippines on track to account for 20% of the global outsourcing pie, which is valued at US$ 250 billion.
Given such glowing numbers, understanding why many Filipino entrepreneurs want to start an outsourcing company is easy.
However, as with any planned venture, you have to study the numbers carefully. Do not assume that the consistent growth of the BPO industry automatically translates to a highly profitable business.
Outsourcing as a business strategy works because it provides a double-edged sword for businesses. First, it streamlines the cost of operations. Second, the availability of skilled labor and updated technology ensures the quality of work and timely deliverables.
Revenues and expenses are the variables in the profit equation. In theory, you have a sure formula for profit when you have a strategy that lowers expenses while maintaining or improving revenue generation.
The Philippines continues to lead the world in outsourcing because it has a comparative advantage in labor and offers economies of scale.
If you plan to start an outsourcing company in the Philippines, keep the economies of scale in mind.
I’ve been in the BPO industry since 2008. I cofounded a company that started out by managing the outbound requirements of a telecommunications service provider from the United States. Prior to my career in BPO, I was in the fast-food business for 10 years.
Therefore, I am qualified to tell you that profiting from the fast-food business is easier than that from the BPO industry.
In the first six months in the food business, we were generating profit. In the first six months of BPO, we were nearly bankrupt.
I hope that the preceding statement did not douse your plans to start a BPO company. By the second quarter of 2009, our company turned things around and started profiting.
I just want you to keep things in perspective. Despite the attractive figures, risks are prevalent because the industry remains highly competitive.
Many articles on how to start an outsourcing company can be found online. I’ve read quite a few; personally, most are generic. They take the cookie-cutter approach and present BPO as if it were another “by-the-number” enterprise.
This article is written from the perspective of someone who has opened, operated, and in fact, continued to operate a BPO company.
I will not tell you to register your business, build a website, and network because these are the standard procedures to start and manage a business.
Related: 6 Valuable Tips on Setting Up Successful Home-Based Call Centers
Every entrepreneur has solid technical and fundamental competencies. The key differentiator is the behavioral component: are you made of the right stuff to succeed in BPO?
What I will share with you are my experiences, including the successes and failures, in the last six years as a proprietor in BPO. I will give you hindsight, observations, and a few original innovations I’ve undertaken with my new BPO company, Benchmark Global Management Solutions, to thrive despite the presence of several large-scale key players that have dominated the industry for years.
Here are five valuable lessons that you must learn if you want to start a BPO company in the Philippines:
1. Define your personality
Every business is unique simply because YOU are unique. Thus, those online cookie-cutter articles you’ll find online are useless.
The following is a very valuable lesson that I learned late in the industry:
“Who you are is how you should manage your company.”
I learned this lesson from my first client, namely, Light-Core, which is a behavioral leadership consultancy firm from Canada.
They opened my mind to the concept that there should be no distinction as to who you are outside the business and who you are inside the business. You have to manage your business according to what you believe in. Your beliefs are founded in your core values.
In my first BPO company, I accepted the reality that I was new in the industry. Therefore, I should submit myself to its norms and practices.
Here are a few of the “truisms” I learned from the industry:
- Always hire based on experience and curriculum vitae; pirate if you have to.
- If you build your facility, they (the clients) will come.
- If you’re a small BPO company, you should hire a broker to get a client or ask for spill-over campaigns from large companies.
- Scripts are important and agents should strictly abide by them.
- Agents must always hide their true identities and use fake accents.
- If you’re a small BPO company, you should agree to a commission- based payout.
- You can never get pay-per-hour accounts if you’re a small company or new in the industry.
If you follow any of these “truisms,” your venture into BPO will fail miserably. I will discuss these “truisms” as we go along, but I know what I speak of because these were the reasons why the first company I cofounded eventually closed shop in 2013.
By 2011, we were still doing well. However, our investments in the other campaigns were losing badly that they were draining our profits.
I could not fight for my ideas because my fears and self-limiting beliefs were greater than my convictions. As Light-Core surmised, I was afraid to venture outside my comfort zone.
I knew what I had to do but was afraid for fear of being held accountable if the courses of action worsen the situation.
Before you start a BPO company, define your personality by identifying your five nonnegotiable core values. These nonnegotiable core values shall form the cornerstones of your business foundation. Nonnegotiable means that you will not compromise your core values regardless of the situation or condition.
2. Start small
In our first company, we built two private facilities. The second facility was set up to accommodate 100 seats for a lead generation campaign based in Florida. It was formally launched on December 10, 2011.
By March 13, 2012, the client terminated the contract because the US Federal Trade Commission prohibited outbound services to be outsourced from Florida. Millions of pesos were flushed down the toilet in one night.
In addition to the new workstations and computers, we were stuck with a two-year lease on Internet services.
When we first started, we also built a private facility for a US telecommunications account. Although it was only a 20-seater facility, we were also tied down to a two-year lease contract on Internet services. We were fortunate that we landed a 24/7 inbound contract in 2009, which allowed us recover our investment.
The reality of the industry is if you plan to put up a BPO company, you will be swimming among the large predators of these deep but opportunity- filled ocean waters.
The Philippines’ largest BPO companies, such as Convergys, Accenture, and JP Morgan, account for the lion’s share of the industry’s receipts. They have the capacity and economies of scale to build these large-scale facilities that often cover 10 floors in a high-rise building located in prime commercial property.
If you don’t have the capacity or the economies of scale, do not build a private facility unless
- you have an account that guarantees income to justify the investment,
- you have a minimum two-year deal with the client, or
- your client agrees to advance the first month payment or provides “seed money” to capitalize the business.
If you do have a client but the conditions fall short of justifying a private facility, an option that you should explore is managing a campaign with telecommuters.
Telecommuters are alternatively referred to as “home-based workers,” “freelancers,” or “virtual assistants.” As their title implies, they work from a remote location, usually their own homes.
Based on my meetings and discussions with people in the industry, particularly those from the large BPO companies, they remain dismissive of telecommuters; but statistically, they should be worried.
The telecommuting industry in the Philippines has been steadily growing over the last few years. In fact, we have the third highest number of telecommuters in Asia after India and Indonesia.
In 2014, telecommuters quietly contributed $3 billion to the Philippine economy or roughly 20% of the entire BPO industry. Telecommuters also threaten the availability of talent in BPO because much money and minimal inconveniences can be expected from working from home.
In fact, I am dumbfounded at the position of these large BPO companies when several US companies have integrated telecommuters in their workforce since 2011. From 10%–15% in 2011, telecommuters now account for 30%–45% of the US workforce.
Managing campaigns through telecommuters is easy because of the availability of online tools and programs.
I know this for a fact because since 2013, my company has managed more than 30 clients exclusively with telecommuters. Our standard setup is simple:
- Project Management – Asana, Bitrix-24
- Collaboration – DropBox or JustCloudIt!
- Communication – Skype or Slack
- Conference Calls – Skype, WebEx, or GoToMeeting
We have provided a wide range of services for our clients. These include customer support, transcription, appointment setting, website design, digital marketing, and content marketing. We have not encountered any problems, results have been great, and clients are happy!
Of course, when the campaign’s work volume requires additional resources, telecommuting will not suffice. Thus, you must use a facility.
3. Expand according to scale
If you are a start-up, small-scale BPO company, landing a contract longer than six months is next to impossible. Most contracts start out at three months with an option to renew at the end of the term.
If a client offers me a contract period of three months, I respectfully inform him/her that the term is not sufficient to present creditable results. Put simply, a contract of three months is not fair for both parties. It will only succeed in wasting precious time and resources.
Most clients offer a contract term of only three months to minimize their risk. I reason with the client that three months is only enough to accommodate the learning curve.
Many clients disregard the learning curve. They believe that bringing an agent up to speed should not take more than 2 weeks. Being competent in a skill is not the same as being proficient. The length of experience of an agent doesn’t matter. Achieving proficiency to a level where the agent is confident enough to generate consistent results takes time.
I also inform the client that three months may not be enough time to fully test the systems and processes. The adjustments that should be made to make the system more efficient and effective always exist. Progress itself is a process that never stops evolving.
My company’s approach in managing campaigns is to expand according to scale. We want to make sure that we have the capacity and capability to accommodate an expansion in business operations. I have created a four- stage process to guide a campaign along its plan to expand operations.
Clients have to understand that, in outsourcing, every system is theoretical until it is applied in practice. Some will argue these have been tested before. They fail to consider that the most crucial asset in outsourcing is highly unpredictable and subject to error: people.
In the incubation stage, all personnel, frameworks, processes, and systems are closely observed. Strengths, weaknesses, and flaws are noted down and documented for discussion. Management looks for solutions and ways to improve deficiencies in the set up.
At this stage, all courses of action to remedy the problems in the system are implemented. The process of further observation and evaluation continues to track improvements and to identify unresolved areas.
If the improved system holds up and the business starts to gain traction, we assess whether it can accommodate additional work volume. However, the process of increasing the scale of operations begins.
Once the system has been fine-tuned, the revisions are integrated. The personnel who have passed the evaluation process become full-time employees. Yes, we do not hesitate to regularize employees contrary to most Philippine companies.
Good people become great assets to a company and clients. Companies who are afraid to regularize people manage out of fear. Ask yourself: “What is the probability of being infiltrated or regularized?”
Is the probability high enough that you are willing to let go of really good, talented people who can become potential leaders of your company?
At Benchmark, our objective is to build a team for YOU and not set up an employment agency where people go in and out a revolving door.
In my opinion, companies that manage out of fear only see the tree and not the forest. They are only looking out for their best interest and are probably up to no good in the first place.
Finally, we get to this point where the numbers are strong enough that I ask the client, “Are you ready to take your business to the next level?”
An expansion plan requires further investments to be undertaken. Moreover, a client that has been served well and is satisfied with the results will not hesitate to invest in the process.
This stage is where the client and I will discuss the possibility of a long-term agreement. Successful negotiations lead to an evolution of the outsourcing agreement from a client–service provider arrangement to a strategic partnership.
4. Apply the principle of “right-fit.”
In 2011, we acquired an account from another BPO company despite our reservations of handling outbound accounts, the dubious personalities of the other party, and the circumstances surrounding the acquisition.
The offer started out just like any other. It was “too good to be true.” The numbers presented to us were attractive and showed profit. When asked why they were letting go of the account despite the high numbers, their chief executive replied “we’re moving from being a service provider to becoming a leased facility.”
To me, it simply did not add up. Why would you forego of a business that was netting Php 1.4 million per month? With a large facility, you could surely allocate 80 seats for the campaign and lease out the rest.
The meeting took eight hours. It was contentious. For me, there were too many red flags. I told my partners that we should just stand up and leave. We took a break at a nearby coffee shop. My partners felt that if we wanted to expand, this was the only way to go.
An hour later, all pressing issues were resolved and the account was ours. One year later, we were mired in debt and lost millions from running that account. It eventually led to the demise of the company and the end of several friendships.
I blame myself for the debacle. I was the most experienced and seasoned of the group. I wished I had tried harder, but my fears overwhelmed me. Worse, I was blinded by the numbers. Even though there were red flags, greed overcame the rationale that those numbers could have been fudged.
With Benchmark, I do not accept business from clients who I believe are not “right-fit.” Right-fit means adhering to the same values and having aligned purpose and vision. Negotiations are designed to find a common ground or shared interest.
Right-fit clients are those who operate from a “3W” perspective: Win-Win-Win.
A 3W platform guarantees that a proposition protects the interests of the client, the company and its people, and of course the value chain, namely, customers, creditors, and suppliers.
What components make a 3W platform?
- Refuse any campaign or client that only pay you on commission basis. Why should he not pay your costs of operation and some profit? Who is he that you have to bear his risks of funding operation? He would have spent more if he ran the campaign in his own country. Besides, these are factors of production that he is accountable for.
Tell me, when you buy a finished product, do you think the cost does not factor in petroleum, transportation, labor, and other expense items? You should not work for free. Even charity organizations receive funding from donations and philanthropists.
- Preterminate an arrangement with a client who does not pay on time. It should be perfectly acceptable to accommodate the request of a client who informs you he will be delayed in payment. After all, you should always save at least 80% to help cover contingencies.
However, if it becomes frequent to the point that your receivables are mounting, terminate the agreement particularly if the client is not open to any remedy. An option for late-paying clients is to open an escrow.
- Do not hire people based solely on their CV. In 2013, I hired a digital marketer with the best credentials among the candidates. A week into the arrangement, he was trying to steal my client and extort me of Php 150,000.
Remember, anyone can be trained. Anyone can improve. Changing the character of a person is more difficult than developing his/her skill. When you hire people, make sure that they are aligned with your values and acknowledge your purpose and vision.
5. Reputation comes first!
Sometime in 2015, I refused to manage a local account because I could not comply with their requirements.
I was advised I should be ready to assume operations within a week. I said that was impossible because the facility has to be set up and people have to be hired and trained specifically for the account. It is not realistic to expect me to transfer people from other campaigns or hire anyone off the street without the benefit of prequalification.
Second, the CEO told me that I would be paid every nine months. I told him that it was not acceptable because I have to cover my costs. He advised me to take out a business loan and use my receivables as a guarantee. His position was if I wanted their business, this was the only way.
Now he was assuming the role of a financial adviser.
It was obvious to me that this client does not operate on a 3W platform. Not only would I be incapacitated from delivering results under those terms but the welfare of my people would be affected as well.
As mentioned, Benchmark has managed more than 30 clients since 2013. However, we are nowhere near Manulife Data Services, which is at the bottom of the top 36 BPO companies in the Philippines.
Benchmark is still a work in progress, and I am nowhere near living a life of luxury.
However, the clients are happy and our portfolio is growing!
There is no question that BPO presents opportunities to make good money. However, if you operate exclusively from the position of profit, you will not be able to sustain your success.
When you are trying to land that all-important first client, do not expect to make a windfall of profits. On the contrary, you should expect to compromise your expected margins.
I have met many entrepreneurs who feel their success in other businesses merits a premium rate in BPO. However, these are different industries even if the personality is the same. Michael Jordan is superhuman in basketball but an ordinary mortal in baseball.
My advice to you is to first prove yourself:
- Produce results consistently.
- Strive to surpass expectations and metrics.
- Extend your value proposition; if you are contracted to write 800 words do not charge extra if your writing hits 900 words.
- Meet your deadlines consistently.
- Be proactive; if the client asks for advice, give it unconditionally.
When you consistently deliver great results, you will build your reputation through recommendations and referrals.
Swim confidently among the sharks
One of the most inspirational quotes comes from a business leader I highly admire, Sir Richard Branson:
“If someone offers you an amazing opportunity but you are not sure you can do it say ‘Yes’ then learn how to do it later.”
Based on my experiences and values, I interpret this quotation in the following way:
If a client offers me an amazing opportunity to manage his business but I am unsure of my capacity or ability, I will say “yes” because there must have been a reason why the client chose me over others.
If the client subscribes to the same values as I do and is aligned with my purpose and vision, he will be willing to negotiate the terms of the arrangement and the development schedule. There will be a shared interest with both parties fully cognizant of the goals and objectives of the other.
BPO offers you many amazing opportunities to succeed. However, never under any circumstance compromise your values for the sake of profit. Do not let others dictate how you should run or manage your business. It is perfectly fine to take advice but it is up to you whether to take it or leave it.
By staying true to yourself, you can swim confidently among the sharks in this massive ocean of opportunity.
Further reading: 6 Tips to Succeed in Philippine Business Process Outsourcing Industry