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Is outsourcing right for your business?

A Guide to Outsourcing

You’ve worked hard to get your business to where it is today. Long days turned into some nights and weekends—maybe even a few all-nighters. But this work wasn’t in vain. You now run a successful business and may have even invested in more equipment and employees. There’s a balance, though. If you want to grow your business, work smarter, not harder. Whether your challenge is achieving growth or getting back your weekends, outsourcing may be a solution for your business.

WHY OUTSOURCING?
Determining whether you should outsource depends on your time, ability, and cash flow. Consider this example: You would like to distribute fliers in the local park during youth sporting events to advertise custom shirts for parents and children. Can you create a flier that reads well and grabs potential customers’ attention? Do you have the necessary equipment to print the fliers? Are you available to sell at these events on weekends?

We now have three possible outsourcing situations: design, print, and labor. Outsourcing each task is the least time consuming, but it comes with a financial burden. Completing the job yourself could lead to a 20-hour project. Conversely, if you’re capable and business is slow, time might be in surplus over money. Each task can be outsourced or completed in-house, so the answer for your business is dependent upon your unique situation. Do what’s best based on your skills, time, and finances.

You could do nothing more than oversee a business and outsource every facet, but that’s not why you got into the apparel decorating industry. Perhaps you’re a designer who enjoys working with customers and becoming involved in a project. Maybe you love turning an idea into a beautifully decorated T-shirt. That’s why you’re in business.

Still, if you want to grow, realize that you can’t do everything. There are always limitations. With this in mind, decide what should be outsourced. Some examples are:

• Digitizing embroidery designs
• Color separation for screen printing
• Vector art conversion
• Large or small production runs
• Custom sewing or garment modification
• Bookkeeping
• Website maintenance and development
• Blogging and social media copywriting
• Equipment maintenance
• Inbound or outbound calls

The cost of outsourcing is determined on a case-by-case basis. If you take on an order in-house for 300 embroidered ball caps, you purchase the supplies wholesale and provide the labor for more profit. However, if you outsource the job, you have to pay a markup from your supplier, which makes it less profitable.

Despite making less profit, outsourcing reduces your labor, which allows you more time to produce or sell products. Where is your time more valuable? The answer isn’t the same week to week. For example, if there’s a huge car show next week, which would give you the opportunity to network for new business, you’re better off there than in your shop.

Now, there are also cases where outsourcing is cheaper than producing in-house. If you sell 500 T-shirts, it might be cheaper for a fulfillment shop to screen the garments than using your own heat transfers and printer. Remember to be malleable when using an outsourced fulfillment company. Some months you might send a lot of business and others none.

PICK THE RIGHT PARTNER
Choose a dependable outsourcing partner that you can trust as it represents your business in one way or another. If you outsource a receptionist service, consider that this is the personality of your company—and first impressions mean a lot. On the back end, if you outsource web hosting, you need a quick website that’s available 24/7.

Use referrals and testimonials when choosing an outsourcing partner. Look for a fantastic reputation that’s more than just promises and a smiling face. There’s no shame in asking for multiple referrals.

Also, if it seems too good to be true, be cautiously optimistic. Ask for work samples or visit the office. On your visit, look for signs of a well-run business. Is the place tidy? Does it look professional? Do you notice weird smells? As funny as any of that might sound, it says a lot about a company.

Ultimately, the decision comes down to numbers. You’re in business to make money and grow. No matter what your goals are, it boils down to being profitable while staying within reasonable weekly work hours. Here are simple equations for determining profit:

(Retail price) – (In-house production cost) = Profit
(Profit) / (Hours of your time) = Your hourly pay

(Retail Price) – (Outsourced production cost) = Profit
(Profit) / (Hours of your time) = Your hourly pay

Let’s work this into an example. Your customer wants 200 embroidered golf shirts that retail for $30 and cost $18 for in-house production and $25 for outsourced production. It takes 30 hours to produce this job in-house and five hours to outsource it.

$30 – $18 = $12 per shirt X 200 shirts = $2,400
$2,400 / 30 = $80 hourly pay

Compared to:
$30 – $25 = $5 per shirt X 200 shirts = $1,000
$1,000 / 5 = $200 hourly pay

The in-house job is $1,400 more profitable. Multiply that by 10 jobs, and that’s $14,000 more income. Conversely, the hourly rate of the outsourced job is significantly greater. What would you have done with those extra 25 hours? The answer isn’t simple, but there’s a solution for each business and situation.

Don’t forget to play to your strengths either. Outsourcing isn’t just about fulfillment. If keeping books and finances isn’t your strong point, pay someone to do it. Don’t go out of business because you didn’t manage finances correctly. If you aren’t a good digitizer, use a digitizing service. This will improve your sew quality and reduce thread breaks. When preparing for digital garment printing, pay a digital artist to clean up messy artwork. If you’re too busy to answer the phone, find someone who can. Remember, you worked hard to start your business—work hard on running it well, too.