Situation: A company wants to open a satellite office in a lower cost geography where they can provide current services at a reduced cost to improve margins. In doing this, the company wants to maintain the same culture and controls on quality of work that they enjoy in their home office. They also need to accurately forecast revenue for the new office. How do you maintain company culture as you expand, and how would you forecast revenue for the new office?
Advice from the CEOs:
- Maintaining company culture is tricky as a company expands geographically. Assign one of your current managers, someone who buys into the company culture, to head the new office. Also maintain the same hiring and personnel management policies that you have at the home office.
- As the biggest concern is cost efficiency, make sure that the office manager has clear objectives to realize anticipated savings.
- Look for an incubator that can handle all the peripheral office details so your staff can focus on their work instead of managing facilities.
- When it comes to revenue forecasting:
- Given the lower costs associated with the new geography, look for opportunities to trade margin for longer contract commitment windows to improve revenue forecasting.
- Both margin and delivery can be lumpy when opening a new location. Obtain a credit line to help you smooth the rough spots in your revenue stream.
- Investigate deferred revenue options to spread revenue risk – right of first refusal on next generation projects in exchange for a lower cost per project to the customer.