Bradley Kimberlin, Columnists, V5I2

Outsourced or In-House—Which is Better?

Think with me for a minute about the various aspects of running a shed business. You have production, transportation, on-site construction, sales, marketing, accounting, human resources. and rent to own.

Your business may do all these things, it may do some, or may do just one. How do you decide what to do and which aspects to focus on? Do you outsource some services and not others? Should you try to bring everything in-house? Which way is more profitable? Does the consumer have an opinion?

Let’s explore this topic together.

GOD-GIVEN ABILITY

The first thing to take into consideration is your God-given ability. Sure, you can learn almost anything, and you need to always be learning, but you may be more naturally gifted at some things than others. Personally, I have been in the shed industry since 2005 and have worked in all aspects, but I don’t like pulling trailers. Especially not ones with oversize loads. So, does it make sense for me to be a delivery driver? Absolutely not!

Let’s say you are thinking about doing your own rent to own instead of outsourcing it. Do you enjoy paperwork and legal issues? Do you like sitting in front of a computer and calling people who owe you money? Or are you just tempted by what looks like easy money? 

Knowing what you are good at and what you enjoy doing not only makes your work more of a pleasure, you will actually do a better job. Also, when you are working inside of your natural God-given ability, that’s when you can multiply the results of your time.

TIME 

The second thing I take into consideration is how much available time you have. Believe it or not, businesses and departments don’t manage themselves. Yes, you can hire people to work for you, but if you don’t understand what needs to be done yourself, you are disadvantaged in making sure it’s running as profitably as it could be. 

The time aspect is true for both managers and employees. If you’re a manager and you’re barely getting things done as it is, should you be taking on new responsibilities? Have an open and honest conversation with your boss, keeping the good of the company in focus during the conversation. 

Let’s say you’re in sales and the boss decides you need to start doing marketing as well. After all, corporate speak has coined the phrase “sales and marketing,” so they must be tied together, right? 

When sales are low, you have time to focus on marketing, which creates more leads, which drives sales up. But now that you have more leads, you don’t have time to do marketing (plus why do that? We have plenty of leads …) so you spend time following up on leads and making sales. Then the leads dry up so sales go down, which means you have time to spend on marketing and the whole cycle starts over. Sounds a bit like a yo-yo to me.

Not having enough time leads to doing jobs halfway. Never do two things halfway. Do one thing completely.

FOCUS

The third thing to look at is focus. Closely related to how much time you have is the issue of what you are able to focus on. The things you focus on are the things that improve.

When your focus is on one piece of the business, you can laser in on ways to drive efficiency, increase customer and employee satisfaction, and grow profits. Have you ever looked at another business and wondered how they can do a certain thing so cheaply? The answer is often found in focus. 

When Southwest Airlines came on the scene, they decided they were going to fly one type of airplane: the 737. This focus was one of the reasons behind their pricing abilities. They only had to have pilots certified for one type of aircraft. Their mechanics got really good at fixing planes. They never had to worry about not having those parts on hand. They even designed their routes around the plane’s capacity. In comparison, American uses 17 different types of aircraft. Everything I just mentioned is automatically multiplied by 17, increasing complexity and cost.

At first glance, American’s strategy makes sense. They are in the business of flying airplanes, why not have different planes for different purposes? However, just because something is similar doesn’t mean it won’t divert our focus.

Let’s say you’re a shed builder and you  are considering the idea of building finished out cabins. After all, a cabin is just a shed with interior finish-out, right? Not exactly. Now you need to add inventory items for insulation, plumbing, electrical, wall covering, cabinets, etc., and the process takes weeks instead of days. Framers typically don’t make good finish carpenters either. Is it a fit, or isn’t it?

PROFITABILITY

I’ve already referenced this in the previous point but the fourth thing I would consider is profitability. When something is single focus, you get really good at it and find ways to squeeze out profits. 

My favorite example of this is in transportation. Think about all the shed builders in your area and the number of delivery trucks that leave those shops daily. How many of them are not completely full? Quite frequently, you’ll have two trucks from two different companies headed the same way with partial loads. What would happen to profitability if a trucking company combined those loads?

I’m not talking about your competitor delivering your shed, I mean a true independent, third-party delivery service that treats all manufacturers fairly. Think about UPS and FedEx. We ship packages daily with them and never worry about who else has a box on the truck. Why worry about it on shed deliveries?

Also, in my experience, outsourcing deliveries to a logistics company (as opposed to a single owner-operator) can actually improve the customer experience. Why? Because it’s the only thing that they do, so they get really good at it. They are also able to generally offer comparable or better pricing to the manufacturer for delivering their sheds when you consider the true cost of doing your own trucking.

CONCLUSION

In conclusion, as you consider whether you should outsource something or bring something in-house, remember this: it’s a separate industry. Sure, they are all complementary services, but realistically they are separate industries.

Additionally, if you are a business owner and have multiple industries you work in, think of yourself that way. As you work on your business(es), you’re a “business owner,” not a “shed builder” or a “rent to own company.” However, when you are working in your business, connect to the industry you are in.

I’d love to hear from you on this topic. What have you found to be the most effective in deciding to provide services in-house or outsourced? Feel free to call or email me at the information provided below.

Until next time, Be Excellent!

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