Outsourcing, Captives, and BOTs, Oh My!

The Challenge:

Skills are critical, capacity is needed, costs are important, but what’s right for your business? There are different models out there that can provide strategic or tactical resources to your company. Depending on your objectives, one model can provide a much better value to your business than others.

So, where should you begin? The first place is get clear on your objectives and desired results. Are you trying to fill skill shortages, improve your capacity, improve your cost base, or all three? Are the resources you seeking part of the core competency you bring to the market? By thinking of these questions as you review the options, the answer will become clear.

Captive or Hybrid:

If the need is strategic and impacts your core competency, it is important that you maintain control over the resources. Partnering with another company may be viable, but you should not partner with another company if it has the same core competency as you. The reason, you invite a possible competitor into your business and customer base.

So what is the alternative? A captive or hybrid captive operations allows you to select and manage a team that will add to your core competency and maintain control. In many if not all respects, the staff are your employees, managed by you.

Hybrid captive models take away many of the traditional risks of going to another country A hybrid model provides the recruiting of talent and other human resource management services, while at a lower cost than an outsourcer or BOT arrangement.

Hybrid captive services include locating or providing facilities and managing them. Often, there is no lease commitment, reducing the risk of being tied to a long term rental agreement. The model typically provide an option to go to a full captive arrangement, setting up your own legal entity, your own lease or purchase of facilities, and the transfer of all employees as part of the process for a fee.

Outsourcing:

If the need is not strategic or it is not part of the core competency of your business, outsourcing may provide a very good alternative. A good example where this has worked for many companies is marketing. Marketing is important to your business, but for many companies, it may not be a core competency or skill within your company. Finding a strong partner could have a very positive impact to your business while not putting your core business, competency or customer base as risk.

Typically, an outsourcer has staff on hand or bench. This provides both a benefit and a cost to you since you pay them to have and maintain extra resources. The model typically does not allow you to have control over which personnel will be assigned to you or how long they will stay working with you.

Like a hybrid captive model, outsourcing does provide the advantages of not having to deal with the human resource risks such as employment laws, benefits, hiring, and firing of employees. It also does not require the need to directly lease or own facilities as all these costs are part of the outsourcer’s fees.

BOT:

If the need is more strategic and the desire is to postpone the management of a team, in theory a BOT may provide a good solution. A BOT is a build, operate, and transfer operation. In many respects, a BOT is an outsourcing relationship, with the intent to transfer the operation as some future time. The idea is to provide you with a choice of the team you will have working with you. It is worth noting that in a very high percentage of the time, the transfer never takes place.

In the case of BOT’s, there are typically more risks that are part of the model. Depending on the approach, you may be required to sign up for facility leases, facilities management and other services.

Keys:

So what is the right choice? It comes back to your needs and objectives. If it is non-strategic or tactical, outsourcing may be a good option. If it is strategic and part of your core competency, a hybrid or captive is the best choice. If it is something in between, a BOT may provide a good alternative.

In all cases, it is important to understand that it will take time and commitment from your team. Using global resources can fill skill shortages, provide capacity, and even lower costs, but it does not come without effort.

Affiliate Marketing – Make Some Great Legal Tender – Here’s How It Works

For everyone who would like to make some cash online, affiliate marketing is one of the best means to get started.

How much would you enjoy picking up a little extra money each month? Or even replace your income, struggling less and making more bread?

Affiliate Marketing: make some great money, here’s how it works

Affiliate marketing is the operation of introducing online shoppers to particular products and grabbing a percentage of the sale for your efforts.

As an affiliate marketer, you are assigned your own links to a product. This is so the seller can tell when a customer that you referred buys their product.

What are the benefits of affiliate marketing?

There’s a whole bunch. For one, this is a very good way to make a passive income, because folks from all over the globe are acquiring stuff online every minute of every day. You don’t need to put forth any of your own products either.

A lot of sellers offer terrific motivators to affiliate marketers, with some offering as much as 50% to 75% in commissions on products that you bring customers to.

It’s really easy to find places in which to insert your links and make great money. As a result, you can earn some cash on the side, or even replace your total salary if you get good at it.

Article writing

Writing articles that relate to the products that you’re making an effort to promote can be hugely beneficial in many ways.

Writing articles on one topic, but with lots of viewpoints will give you a leg up to understand precisely what the product you’re promoting is all about and help you to recognize your target audience.

Also the more articles you write, the more everyone will learn about you. This develops your online presence and your credibility as well. And that will be huge later on down the road, when you’re ready for your own website.

Writing blog articles

Writing blog articles for free as a trade-off for being permitted to place links to your products may quite possibly be helpful because you will have complete access to each blogger’s followers.

Now you don’t need to go out and locate your own prospects. You simply market to people who are already captivated by the idea and are web-savvy. Which by the way, is a must for somebody who is considering paying for merchandise online.

Not to mention, there are also article sites that will enable you to integrate links to your merchandise at the bottom of the article. And better still, there are some sites that may even pay you small fees for your articles.

The secret to drawing as many guests as possible is to compose a terrific article that doesn’t look too much like a sales pitch. And at the same time, enlightens your readers on how their lives can possibly be even more improved if they check out the stuff that you have listed.

Affiliate Marketing: make some great money, here’s how it works

One fine day, you’re eventually going to want to jump in with both feet and get your very own website. This is going to open multiple channels of communication with millions of potential buyers.

Here is where you can manage your own store with links to the assortment of products that you are marketing, as well as develop a customer base through blogging.

It doesn’t need to be something fancy, only something uncomplicated so customers can navigate easily.

Along with using social media marketing as a means to get even more people connected, you can ultimately have tremendous success with affiliate marketing. As long as you single out quality merchandise to market and promote them convincingly.

Using Captive Insurance Companies for Savings

Small companies have been copying a method to control insurance costs and reduce taxes that used to be the domain of large businesses: setting up their own insurance companies to provide coverage when they think that outside insurers are charging too much.

Often, they are starting what is called a “captive insurance company” – an insurer founded to write coverage for the company, companies or founders.

Here’s how captive insurers work.

The parent business (your company) creates a captive so that it has a self-funded option for buying insurance, whereby the parent provides the reserves to back the policies. The captive then either retains that risk or pays re-insures to take it. The price for coverage is set by the parent business; reinsurance costs, if any, are a factor.

In the event of a loss, the business pays claims from its captive, or the re-insurer pays the captive.

Captives are overseen by corporate boards and, to keep costs low, are often based in places where there is favorable tax treatment and less onerous regulation – such as Bermuda and the Cayman Islands, or U.S states like Vermont and South Carolina.

Captives have become very popular risk financing tools that provide maximum flexibility to any risk financing program. And the additional possibility of adding several types of employee benefits is of further strategic value to the owners of captives.

While the employee benefit aspects have not emerged as quickly as had been predicted, there is little doubt that widespread use of captives for employee benefits is just a matter of time. While coverage’s like long term disability and term life insurance typically require Department of Labor approval, other benefit-related coverage’s such as medical stop loss can utilize a captive without the department’s approval.

Additionally, some mid-sized corporate owners also view a captive as an integral part of their asset protection and wealth accumulation plans. The opportunities offered by a captive play a critical role in the strategic planning of many corporations.

A captive insurance company would be an insurance subsidiary that is owned by its parent business (es). There are now nearly 5,000 captive insurers worldwide. Over 80 percent of Fortune 500 Companies take advantage of some sort of captive insurance company arrangement. Now small companies can also.

By sharing a large captive, participants are insured under group policies, which provide for insurance coverage that recognizes superior claims experience in the form of experience-rated refunds of premiums, and other profit-sharing options made available to the insured.

A true captive insurance arrangement is where a parent company or some companies in the same economic family (related parties), pay a subsidiary or another member of the family, established as a licensed type of insurance company, premiums that cover the parent company.

In theory, underwriting profits from the subsidiary are retained by the parent. Single-parent captives allow an organization to cover any risk they wish to fund, and generally eliminate the commission-price component from the premiums. Jurisdictions in the U.S. and in certain parts of the world have adopted a series of laws and regulations that allow small non-life companies, taxed under IRC Section 831(b), or as 831(b) companies.

Try Sharing

There are a number of significant advantages that may be obtained through sharing a large captive with other companies. The most important is that you can significantly decrease the cost of insurance through this arrangement.

The second advantage is that sharing a captive does not require any capital commitment and has very low policy fees. The policy application process is similar to that of any commercial insurance company, is relatively straightforward, and aside from an independent actuarial and underwriting review, bears no additional charges.

By sharing a captive, you only pay a pro rate fee to cover all general and administrative expenses. The cost for administration is very low per insured (historically under 60 basis points annually). By sharing a large captive, loans to its insureds (your company) can be legally made. So you can make a tax deductible contribution, and then take back money tax free. Sharing a large captive requires little or no maintenance by the insured and can be implemented in a fraction of the time required for stand alone captives.

If done correctly, sharing a large captive can yield a small company significant tax and cost savings.

If done incorrectly, the results can be disastrous.

Buyer Beware

Stand alone captives are also likely to draw IRS attention. Another advantage of sharing a captive is that IRS problems are less likely if that path is followed, and they can be entirely eliminated as even a possibility by following the technique of renting a captive, which would involve no ownership interest in the captive on the part of the insured.