Paul Magiatis: How Outsourcing Saved His Business with Lower Costs And Improved Performance

Derek: Hi and welcome to another episode of the Outsource Accelerator podcast.  This is episode number 105 and my name is Derek Gallimore today we are joined by Syria entrepreneur and businessman Paul Magiatis and him amongst other things has an outsourcing service called Eastwest Enterprises.  This was build to scratch his own itch in business, I will let of course let Paul explain his journey and backstory as he does so very well this podcast, we extend the conversation little bit and we talk more broadly about business obviously and of course outsourcing and I’m sure that you’ll learn a lot from this episode I do apologize for the quality of sound it does drop out a couple times because of the internet but stick with it as there is good learnings we had.  If you want any of the show notes or if you want to get in touch with Paul then go to our show notes at outsourceaccelerator.com/105. Enjoy.

Derek:  Thanks very much for joining us Paul and for the audience do you mind just introducing yourself and giving us a bit of background as to your entrepreneurial pursuit but also how you found yourself outsourcing.

Paul: Thanks, Derek loved to just a quick bio and a heads up on me I am predominantly in to properties so back in the late 90’s we had a property business that grew quite well, we were property investors finding properties all the way in Australia every major capital city of Australia of the time and we kind of grew that business from 1 room in our home to 3,4 hundred square meters at the Hyatt hotel in Perth CBD, we had a 102 referrers and 10 Admins staff and they’re punching through few million dollars in sales and times were good during the boom and I think everyone would agree during the boom no one really thinks about cost based, they more thinking about profit and bottom line. I’m doing very well, 2007 if correct started to appear in the markets at that time we sort of saw a change in the mood of the market and the feel of the property market especially in Australia, in fact worldwide  you could see it coming worldwide market started to slow and I think it was September 2008 when they called at the GFC they gave a name in 2008.

Derek: They din Australia,  didn’t they?  They haven’t too much given it that name across the world but GFC for those outside of Australia is the global financial crisis of course.

Paul:  Correct, yes so they gave it a name and that was quite right it was horrific and are too very very capable and smart employees one being my CFO and one was my Operations or Director of Operations looking at the data and they basically said this because we’re fee based sort of tsunami of cash load disappearing and coming towards us at a rapid rate, that point we had to make some pretty tough decisions so you know we had to then take one of our group of companies and put it through voluntary liquidation process we’re voluntary administration process, total the expenses until the tsunami.

Derek: Right, they were sourcing properties and was it like property based it was obviously a very staff intensive aspect of property investment was it?

Paul:  It was various staff intensive, it was quality assured Derek it had the five tics ISO 9001 quality checks, full corporate structure based on quality assurance and a sales machine and I’m very heavy on the administration, very heavy.  Audits everyday on folders people looking at them signing off on them so very heavy but that all came crashing down in 2008 where people were looking at your cash loads disappearing and at that point I looked at the our graph spoke with my management team what we have to change something has to change, we need to very quickly take $800,000 off our bottom line in salaries alone otherwise we are not going to make it and in Australia that’s not a lot of people that’s just a big number so that point in 2008 I have the next 6 7 months, I went in to the Philippines and I flew in to Manila, flew in to Cebu spoke to some BPO’s and started what is now Eastwest Enterprises as our cost avoidance model if you like high value center for us so that we could still operating and at least some of our people could keep their jobs cause if we had it kept going the end other part some of the other companies then they’re all bankrupt and liquidated, everyone would have lost their job so we came out of the other side of that restructured, re engineered with an offshore team taking up probably 6 of those jobs and at least we got to keep the business and we can still trade and keep the money in our own country and then still employ a couple of people here so saved our business and that being said a few of my friend at that time that was struggling some didn’t make it they lost their businesses, some people lost their homes because they tried up late for too long the people that sort of saw what we were doing and approached me and I would then use some of my idle time back then and release that, resell that to them to help their businesses it kind of grew in to this Eastwest Enterprises monster out of default and out of necessity so it just evolved for us, for us it saved our business and then from there we started 3 or 4 other businesses now that are all based here but the back office administration is in the Philippines and it keeps them profitable enough to make it worthwhile as I actually starting these businesses and employing spending money here so evolve as we speak.

Derek: And so we won’t go too much into Eastwest Enterprise in this episode, we’ll get you back to really dig deep in to Eastwest Enterprises but you built this service center obviously to scratch your own itch because you were needing a lower cost infrastructure and you realize that then happened and then which is very common and then we do commonly see this in the Philippines you get sort of encourageable entrepreneurs that as soon as they find the solution they want to scale it out and then they offer to other entrepreneurs and business owners so you do see a lot of BPOs springing up but you know that’s an incredible thing because you are actually a very accomplished and skilled entrepreneur and then as a part of the system and structure that you build to service your companies people can actually buy in to those services for very affordable hourly rat price, in essence, they’re effective buying in to your back end your infrastructure, your few decades of business expertise.

Paul: Yes, absolutely and there’s a lot of value for them where we build our property company was quality assured to go through the quality assurance process in Australia is pretty stringed and everything has to link, everything is measured customers satisfaction and measured everything is ordered the service levels are ordered so it’s all procedures based so we took that kind of that knowledge every time we do a job, we recorded on screen within transcript that we put it on to a software that we use everyone has access to us so there’s always a way to do things that’s written down and in such a way that at average even that person can switch straight in to that job but within half an hour at least learn the basics of it, so we just took the system that we always had and took them overseas.

Derek: When you did this migration over to the Philippines because of your ISO’s and your processes in place, you were actually quite a few steps ahead of most people that begin their outsourcing journey, we find that you know a lot of people a lot of SMEs and even the typecast Silicon Valley startup this in the garage very commonly they’re quite like chaotic aren’t they, there’s a lot of organized chaos within SMEs and when they come over to the Philippines or start their outsourcing journey they realized that actually processes need to be clearly define their need to be mapped and actually there’s a bit of a learning process for a lot of early staged businesses that outsource because they realize they need to form those things did you find that having your ISO and needing to go through that process helped you immensely in affect fully flipping that process being done in the Philippines and then also creating processes so that you could create affect fully of productize service out of Eastwest Enterprises.

Paul: Absolutely, Derek.  When we build the Business Management system, we actually built in India with a friend of mine and cause their IT and the price was obviously a lot less but the IT was a good quality so we built business management system where we added all the procedure to it to actually get the ISO 9001 so to switch their system was easy we’re web-based, we gave logons to our new staff we went through each procedure. taught them the procedure the very specific procedure so you’re quite right well probably well ahead of most SMEs when we went over so our transition was easy, our transition was just finding higher level people with good education that had attention to details skill, law students, accountants that had that kind of attention to details and systematic approach to work and then it was easy they just all got a job each they had a 4 or 5 procedures per job description and they just laid in to that network very well for us but you’re right when other people came to me they had none, so we find now that we replicate that system for them so we’ll just build a procedure for them as they come on board on the task they need doing and we have it on our software so that everyone can get to it and that just makes everyone’s job a lot easier.

Derek:  Yeah, I’ve spoken to a lot of people do outsource and they’ve said that the act of outsourcing for their business actually pushed them through a necessary maturation of their business, it takes kind of a certain amount introspection and analysis and defining and redefining of processes which is ultimately you then have an outsource function of your business which should hope for you to save money and get you good results but also then your company is matured somewhat as a result.

Paul: Absolutely and I think it’s a good exercise to go through because then you will also find the gaps, gap analysis is a great thing to do you think you got procedures until you get someone else to sit in your seat and start doing those jobs and then someone will always ask ‘oh ok so between these procedures and that procedure why are they’re here in the middle and these gaps, gaps everyone in your office knows but if someone had to come in green has no clue.

Derek: And do you think, do you still see signs of you know is it people that turn to outsourcing because they’re desperate they’re hemorrhaging cash and they are about to shut down?  Do people kind of maybe put off outsourcing because it’s a little bit uncertain because there are unknowns until the very end where they almost scratching around and trying anything to try and save a business, do you see common examples?

Paul: There is a little bit of that Derek we try not to go in their past someone comes and then let fire down the track that it just a last to keep the doors open, it’s probably too late, the people we generally get on board the people that are trying to scale low margin and the turnover, they’re trying to scale and lower cost so they can actually make the kind of incomes that they want and these are the people typically their micro businesses 2 or 3 employees and these guys will be up at midnight doing their paperwork and up at 6 in the morning doing their physical life so that’s more of a client that comes to us that says ‘alright I’ve got some general task that we need to take away because I am up all night doing, my wife is up all night doing to outlive our lives, but they’re more that the people that we’ve got, the micro business the one man shows that are desperately throwing their in the air it is too late but people that can see that their revenue is low, that their margins are thin and they need to scale, that’s more the people that we see coming to us and then with that we can actually take away those back office task that they’re up all night doing.  I’ve got an example for you if you want to hear it, Derek.  A friend of mine runs a gym a high end bodybuilder so it’s a shed with lots of weight in that really and he runs some programs of fairly large companies on the Health and Wellness based so he’d be up all night with his database of people that are signed in during the day sending them all the text or giving them a call to bring them for a free session and try to fill his pipeline, so he was up doing that so we try to experiment with him I basically said to him look at the end of the day these people will come to you they’ll sign in to your workshop or your training session, you’ll have all these names photograph it email it to my PA, she’ll put it all in your CRM while your actually doing the sessions and she will send out all those SMS’s in one hit with an SMS message for instance and you only have to do the responses how do you like the sound of that it’s skeptical the whole thing and we did that before he took on a virtual assistant now he has some of his life back so little things that take your not do you can scale back break up the task give it to simple simple thing give it to someone else then you’re only dealing with the actual sale and that’s where your time is best spent to that a real example from a guy up the road that I worked with who is so grateful that someone introduced him to outsourcing cause to get someone else to do that was going to cost him up with the $66 an hour.

Derek: And again it’s a you know I preach this a little bit as well its outsourcing is one thing but it’s actually about changing the mindset of the client you know as in the example you use it’s about showing the possibilities if you introduce a little bit of systematization then you can really harness fantastic increases in productivity because it’s about almost educating the client and changing their mindset and introducing them to systems and structures which can then 10x their personal productivity.

Paul: Absolutely, Derek, you’re quite right and in fact a lot of the time when I’m talking outsourcing people would automatically think offshoring, that’s not always the case when people start to talk about offshoring when I’m talking about outsourcing I just remind them that outsourcing just means you take a process and you give it to someone else it can be in country, it can be out of the country so can you do that with your business and the answer is always yes but it’s too expensive what if I could make expensive for you, would that help? then we could look in offshoring, so outsourcing and offshoring are way too different things but you need to be able to in a position where you can outsource and if that’s the case then it becomes a price issue then you can look elsewhere so there’s 2 steps of the process first you need to take some of these work loads off otherwise you won’t scale, you won’t grow, you need the outsource from somewhere weather your need to employ someone or have a contract to do it if price is in an issue where it’s worth more to do it than it’s worth need to  offshored because there is not value in doing it here.

Derek:  Absolutely there is some criteria to assess the best application of outsourcing isn’t there and when you setup your Eastwest Enterprises which is affect fully kind of a back office infrastructure and virtual assistant infrastructure for initially to scratch your own itch was it affinity moment when you came over here and realize just quite how cheap things can be and the quality of output that you can generate?

Paul: I landed in Cebu visited some BPOs and chatted to some team members that I wanted to put on and the level of VA or Virtual Assistant I’ve got a Personal Assistant at the time was high, my first assistant who was with me for 6 years up to recently spread the wings and go travel overseas, she’s a law graduate, 4th year law graduate, amazing young lady and to do that here and I have done that here, hired to PA in my property business at $75,000 AUD each plus on cost to replace that 75% less to replace that with a higher level of qualifications so I would get my deeds of understanding pre written by my PA which is something it’s going to cost you a lot more than $40 or $50 if you do that in Australia and Real Estate contracts were all giving written and closes were  getting rid at in the Philippines and I would check them here if need to be we would have our lawyers looked at them but save a lot of time having the draft done first up so the high level of education is outstanding really is and there also a safe place for your IP we have an office in China probably not the place we would send something if we have copyright issues or if IP issues for at least Filipino law gives us some protection and that very important when you’re offshoring to look at the judicial system and does that protect your business.

Derek: Yeah absolutely and the government really is behind all thorns of outsourcing in the Philippines isn’t it really is trying to give it the support in every respect that it need so that it can become or certainly so that can be the world leading outsourcing destination.

Paul: And i think it’s an 80 billion dollar industry over there at the moment is it am I right? Am I close?

Derek: Well I believe it’s about 10% GDP and I think the GDP of out 300 billion, so I think it’s about 30 Billion but they’re the figures that I’m working to at the moment and I think their protecting by about 20 25 20 well I think about 20 25 that’ll be about 50 billion so they’re expecting considerable growth it’s certainly a big industry certainly for the Philippines, it’s a big one. Great.  Well, thank you so much and we will get you back to discuss Eastwest Enterprises shortly.

Paul:   Thanks, Derek.  Thank you.

Derek:  And if people want to get in touch with you how can they do that?

Paul:  Easiest way to get in touch with me is on the website www.eastwestenterprises.com.au there’s a phone number on there, there’s an email inquiry, either of the 2 will get to me if you just put my name in the subject line I will get that.

Derek:   Look at that, that’s a good hack isn’t it.  That’s fantastic.  Thank you so much, Paul.

Paul:  Excellent, thank you.

Derek: Okay that was Paul,  I hope you enjoyed that, if you want to get in touch with him at all then go to our show notes at outsourceaccelerator.com/105 and of course if you want to ask us anything then send us an email to [email protected]. See you next time.