Role

Planning &
Preparation
Strategy Team
March
2023
Case Studies

• Business Process Outsourcing Strategic Project

Business Process Outsourcing Strategic Project
Pinhome is trying to empower the property ecosystem and its auxiliaries stakeholders.
One of the aspects is providing support for mortgage disbursement and property leads processing.
Once of the important aspects in property and mortgage is leads generating and processing for people who
are looking for mortgage.

In practice, banking/fintech/other companies usually outsource the business process through BPO
companies.
Hence, Pinhome’s potential ownership of a BPO company to support internal usage and external value-add
to property ecosystem.

Given that context, please make a case to answer whether it’s a viable business for Pinhome to explore
and how is the best to go about it.

In answering please consider the following:

1. What are factors / key metrics that Pinhome needs to see before making decision to acquire the
company?
Answer to Business Process Outsourcing Strategic Project

I think it's viable for Pinhome to choose this strategy because innovative services such as mortgage disbursements and home
loans can be more easily accessed by customers in today's ever-changing and very competitive business climate. Pinhome can
adopt BPO practices in the front office area covering customer-related services such as technical support, sales, and home
marketing as well. Outsourcing offers startups the flexibility to easily scale up or downgrade their business operations. As
Pinhome grows and demand for certain services increases, it can quickly engage additional resources from outsourced partners,
avoiding wasted investment in underutilized resources. Pinhome can also focus on their core business activities, such as product
development, marketing, and customer engagement.

But before Pinhome selects a viable BPO company to acquire, the company's management needs to plan for their own unique
needs and goals by consulting with professionals before taking any real steps. Collaboration between companies and BPOs can
be involved with violations of company data privacy. Therefore, there must be a clear agreement to prevent this from happening.
Agreements or work contracts between companies and vendors must be relatively long to avoid inconvenience for companies
that have to carry out the process of transferring tasks and recruiting outsourcing employees. Understanding what legality and
BPO compliance look like, rather there is no damage in the field of legality. Having the next BPO service is comparing its services
and experience with other providers. The things to pay attention to are technical ability, access to the latest technology,
problem-solving skills, and flexibility in emergency situations. Companies can also increase efficiency in their business by saving
time and money in conducting training for new employees.
Financial Projection

1 year after the acquisition was done, Pinhome’s management would like to review financial performance
this BPO company.
Refer to this sheet, can you provide :

1. What are financial information you want to inform to Pinhome’s management ?

2. We have target to achieve profitability by the end of 2024. Please give recommendation (inc
the calculation) to achieve the target
3. At the end of 2023, you found that we cannot achieve profitability by the end of 2024. What do
you do ?
Answer to Financial Projection (Question 1)

a) The impact of acquisitions on its liquidity has not been seen and changed significantly
in the first year. But, the liquidity ratio in the first year started to increase. It can be
predicted that acquisitions can increase the companies’ liquidity ratio but it needs a longer
time to see the results. The current ratio remained higher since there were additional FMS
from acquisitions from 2021 to 2020 but total asset turnover and net profit margin resulted
in decreasing value at the time of acquisitions since revenue rises lower than asset rises in
percentage.
Current Ratio 2021 : 4.771.850.000/1.323.850.000 = 3.6
Current Ratio 2022: 10.678.333.333/2.827.833.333 = 3.8

Asset turnover 2021: 17,000,000,000/5,851,850,000 = 2.9

Asset turnover 2022: 25,000,000,000/12,818,333,333 = 1.95
b) The leverage ratio changed significantly in the first year. The debt ratio value increases
one year after acquisitions more than the previous year which means that companies may
have borrowed more money for acquisition resulting in additional interest expense but still
less than 1.0 which is relatively safe.

Debt to equity 2021: 1,323,850,000/4,528,000,000 = 0.29

Debt to equity 2022: 4,827,833,333/7,990,500,000 = 0.60
c) The impact of acquisitions on its profitability ratio is the net profit margin, the return
on asset, and the return on equity decrease in value at the time of company loss. The
return on equity of performance after acquisitions approaches to a minus number which
means it is getting worse than the previous year. Negative Net Profit Margin after
Acquisition suggests it may indicate the need for operational improvements, cost-cutting
measures, or revenue enhancement strategies in the acquired business to align it with the
company's overall profitability goals.

ROE 2021: 528,000,000 / 4,528,000,000 = 11.7%

ROE 2022: (1,537,500,000)/7,990,500,000 = (19%)

ROA 2021: 538.000.000 / 5.851.850.000 = 9.2%

ROA 2022: (1.252.500.000) / 12.818.333.333 = (9,8%)

NPM 2021: 3.11%

NPM 2022: -6.15%
Answer to Financial Projection (Question 2)
As the company matures, the growth rate slows usually down and falls into the 15% to 45% year-to-year growth
range with this seeming over expectation with Pinhome which has 47% growth after acquisition. But sometimes
this number is misleading since it's likely that they will see exponential growth at the beginning when in reality
the growth rate often decreases as the the company matures. To maintain growth, Pinhome can improve profit
margins by carefully managing costs but remember not to cut business costs at the expense of the quality. One
way to do it is to gradually update the market price if demand goes up then you can consider increasing the
rental price. After outsourcing, Pinhome can also boost revenue through third-party platforms, new service lines,
and improved payment methods. Moreover, encourage sales teams to focus on the profitability of sales, rather
than just turnover. By rewarding only production staff who can suggest more efficient ways of doing things. To
achieve profitability in 2024, Pinhome needs to get at least 10% revenue growth with 5% max cos and operating
expense increases while other things stay constant to achieve profit in 2024:

2023 Revenue Growth: 25.000.000.000- 17.000.000.000 = 8.000.000.000/17.000.000.000= 47%

Total Cos 2023: 19.687.500.000

EBITDA 2023: 921.875.000
Net Profit 2023: (303.125.000)

Total Cos 2024: 20.671.875.000

EBITDA 2024: 2.342.968.750
Net Profit 2024: 1.657.968.750
Answer to Financial Projection (3)

a. Review payroll expenses and cut some unnecessary roll in the future by focusing more on advertising and
marketing expenses to improve product recognition.

Reach out to new client and Identify if current target audience is approached and accurate.

Increasing market exposure by Conducting an online reputation management research, this would ensure that all
articles, posts, videos and comments out there present company brand in a positive manner.

Develop a compelling value proposition by focus more on core offering and make sure it's the best it can be.
Reevaluate the Business Model and analyses about customer and market demands.

Check Profit per Client that are more profitable than other. The clients who seem the most profitable, who pay big
fees, may not be. Even if you’re charging these clients more, you could also incur more expenses. Sometimes
smaller clients may be more profitable because the revenue-to-expenses ratio is better.

Line up new projects, Keep a list of potential new projects to attract new business. Profitable businesses are
growing, not stagnant, businesses.
Business and Finance Strategy
1. You are leading a project to invest in a new facility. How would you work with the BD/Strategy team
to execute the project?
Answer to Business and Finance Strategy

- Discuss with the BD team what’s the pros and cons of investing in this new facility, as in what this facility can give to
Pinhome and how it can help Pinhome customers from their perspective (what’s the benefit for them and is it
essential) by having this facility. Moreover, considering what’s the issues are, is it minor issues that can be fix within
time with bearable cost or a major one that need lots of time also very costly overall

- Is this new facility being in accordance with Pinhome objective and goals, it should be still focusing and supporting
on the main core of the business

- Setting target and do forecasting for numbers whether its worth it or not to invest in this new facility (Positive NPV)
and how is the ROI

- Analyzing the risk and opportunities by investing in this new facility, for example what is the operational risk of this
new facility

- Assessing the strength and weakness on this new facility related to the customers and the industry

- How is the growth rate for this new facility (the prospective), will it be profitable in the future
THANKYOU