Many variables to consider.
By Marty McGhie
When considering the various products and services we can offer our customers, most, if not all, of us utilize some outside help in the form of specialized vendors or subcontractors. One of the more difficult challenges in business is deciding when to stop spending your money on an outside service and move the work in-house.
When facing this decision, most companies make the mistake of just looking at the cost of what they are currently paying and comparing it to the anticipated cost of providing that product or service themselves. Cost is certainly the primary consideration, but because there are so many other factors to consider, making a decision without considering all the ramifications is risky and can lead to a poor decision. Over the past year and a half, our company has undergone this process with regards to our installation services. It may be worthwhile to share some of the key factors that we considered before moving away from subcontractors and setting up our own installation division.
Consider your manpower
One important factor is personnel. Before you take on a new service or product line, ask yourself if you actually have the people to pull it off. It may seem like a simple problem to resolve, but having qualified personnel to build a new line of business can be challenging. In the case of our installation department, we had to make sure our team was trained in multiple areas, including vehicle wraps, point-of-purchase displays, wall murals, fixtures, exterior signage, pole banners, window displays, and others. Getting a team fully trained in these areas is very difficult and requires extensive field experience to really get the hang of it. We were fortunate enough to have a couple of men who had done some installation at prior companies and had some of those skills.
Regardless of the line of work, building a team with the necessary capabilities requires some patience, an excellent training program, and great management. Your people will ultimately be the key to your success or failure when providing new services to your customers.
Create a business plan
Another key consideration is the logistics of your new line of business. Before you jump into something new, put together a business plan that outlines some of the issues you can anticipate. What about the required space in your building? Will you need to allocate some of that? Will you need to add additional equipment? I know when we started up our installation department, we certainly underestimated the amount of money that was required in just equipment, tools, and supplies.
What about insurance needs—both worker’s compensation and general liability? Will there be outside training costs for your employees? If you are offering a new product line, you will need to address the amount of inventory or raw materials that you will be required to purchase and stock.
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