10 Benefits of Outsourcing
As a small business owner I am often called upon to design, construct, finish and install custom bookcases, cabinets and fireplace mantles. I’ve realized that selling outsourcing is a realistic way to stay competitive and profitable in an environment where folks are constantly tire kicking and researching prices.
Should you outsource business functions or is it better to keep them in-house? I feel strongly you should consider outsourcing, read this article to see how I use it to make me money.
The simple answer is time, outsourcing saves you time. Outsourcing can save you a time and make you money if done right.
Many of the companies that make the components that I would outsource have mill shops, CNC machines, and spray booths outfitted to do exactly what I need, and they can do it faster and often times better than I can. Typically, it is what these folks do day in and day out, such as my dovetail drawer manufacturer, and they’re pros at it.
Quality is another reason to outsourcing. By pre ordering cabinet doors, dovetail drawers or fireplace mantles from specialty mill shops, I can obtain high quality products, often constructed better than I can do, certainly for less money.
When I look at the methods, procedures and time it take me to a complete some custom projects, I weigh the time it takes to create these a custom applications, plus my hourly rate.
Often times, the result is outsourcing costs less than half to when compared to doing it myself.
Sometimes were not experienced enough or our employees are not skilled enough to handle some tasks – outsourcing those functions or projects may make sense.
Outsourcing can also help you solve problems. When I was offered a once-in-lifetime opportunity to remodel a highly visibly, historic cupola in my town I almost did not bid the job. I was intimidated about how I was going to access this difficult to reach cupola as well as how to custom build two side flanking half round vents to replace the old historic ones.
Instead of walking away I reached out to a staging company to price staging for safe access and sidewalk pedestrian safety and I located a company in Vermont that specialized in making high-end, wood, half-round, louvered vents and wood shutters. These companies provided my company the missing links to bid this job, and make a huge profit.
When you think about getting high quality products for half of what you can make it for, that begs the question, of why didn’t I think of this before.
If you’re not looking for ways to improve quality, cut costs, increase efficiency and be more profitable then you should not be in business for yourself.
Small shops that outsource can also save you from having to invest in other machinery, employees or a larger shop. Mill shops all have specialty machinery set up for one production task, they also have the benefits of precision with CAD capabilities and CNC routing options that my shop simply does not have.
This also saves shop space, as you do not have to procure and store stock in your shop.
Many shops are equipped with spray booths and offer upgrades such as lacquered drawers. This is an option and benefit I use when I market my drawers on my projects. Once I figured this out I started offering these upgrades to my customer. They love it!
Simple Math – Be Profitable
It’s simple math. A pair of dovetail drawers takes me all day to purchase material, mill, assemble and finish with two coats of lacquer. At $75.00 per hour plus materials that gets me to $650.00. Now how much can I mark this up for profit before I start to lose my competitive edge? Not much.
I can order a pair of drawers from a local, custom drawer company and ship them to my shop for $250.00. At 100% markup, $500.00 still leaves me below my cost to make them myself in my shop. Make sense yet?
Smart Business Decision: Using your saved time wisely
So if you buy my argument, that it’s more profitable to outsource some items, let’s talk about time savings.
The time saved from setting up machinery, jigs, glue up, time and space to wait for glue ups, sanding and finishing can now be focused selling more work and promoting your business.
Outsourcing will allow you to do a job faster and make more money so why not take on another job the same way? Or work less for more money. Outsourcing projects means less work, and more productivity to your bottom line.
Less work and a higher mark up equals a win in my-book.
How To Outsource
Outsourcing allows a small shop owner to utilize CNC technology and problem solving solutions, to stay competitive and profitable.
If I’ve convinced you to consider outsourcing here’s how to do it. Decide what you are good at and outsource everything else, focus your company on your core competency, and let someone else do the rest.
The biggest benefit of outsourcing is its ability to save you money, I predict this trend is here to stay.