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Cost Concerns Lead Small Business to Embrace Insourcing

 

This article originally appeared in The Huffington Post and received such a good reception that I wanted to make sure all Business Unplugged readers were aware of it.

For a while, the mantra in small and medium sized business was that ‘time is money’. However, with tough economic times continuing, that has changed to ‘money is money’, leading businesses that previously looked for outsourcing opportunities to now bring some of those business functions back in house.  It’s a reversal of the ‘D-I-F-M’ (or do-it-for-me) trend back to ‘D-I-Y’ (do-it-yourself).

This shift from D-I-F-M to D-I-Y is precisely what Craig Wolfe, CEO of Celebriducks, made when he recently brought a number of financial and accounting functions, including bookkeeping, invoicing and royalty reporting back in-house. In dealing with the challenging economic environment, Craig said this switch to D-I-Y, “…was simple for us…  It’s a long term investment. To make (our business) work meant cutting all unnecessary expenses that we could easily do in-house and find ways to stream line here to be more cost effective.”  Wolfe estimates that he is saving $5,000 to $6,000 annually from this change.

The switch back to D-I-Y is a trend that Hunter Rich, VP and General Manager of Bankers® Boxes at Fellowes started to see accelerate over the past few years.  “What we’re seeing in today’s environment with the economy being as tough as it is, businesses are focused on reducing costs and being more efficient by bringing services in-house”, said Rich.  He also says that even if some of the functions aren’t core competencies, that a big expense often comes along with outsourcing, especially for service industry businesses like law practices, healthcare companies and financial services firms.

Nick Harrison, who runs a creative agency, agrees.  At Dashal, they took the approach of self-education and investment to change from an outsourced payroll service to providing that function in house using Quickbooks. He said that they made the change both for cost and control reasons. “We were spending a significant amount to cut each employee’s paycheck and sometimes, when the payroll service mailed the checks, they didn’t arrive on time.  Now, we can print them on demand to ensure that our employees get paid when they are supposed to. Plus, we have saved thousands of dollars.”

So, how does a business evaluate if D-I-Y is the best strategy for them?  Fellowes, who’s a client of mine, came up with a nifty cost calculator tool for analyzing the potential savings from an insourcing switch for certain functions like records storage, shredding, binding and laminating.  The tool, called the Saving Analyzer, can be found at savingsanalyzer.fellowes.com, and allows you to type in how much you are currently spending on core functions and get a reading on how much you can potentially save a year by bringing these functions in house.  At the site, they also let you request a consultation for further analysis.  When a tool or quote isn’t available, other entrepreneurs are using a back of the envelope evaluation to compare how much they spend on a function each year and evaluating whether they can assign that to someone already working in their business or make a small upfront capital investment in a piece of office equipment that will save them money over the course of the year.

Will we see this D-I-Y trend continue? Hunter Rich thinks yes.  He estimates that only around 7% of all small and medium size businesses are aware of the benefits that are associated with moving back to a D-I-Y model.  Rich says that it’s not just dollars, which is the top driver of the trend, but also convenience and control that are driving this industry shift.  He said that it is often inconvenient to wait to locate records when they are off-site or to go to a copy location instead of being able to bind and finish a presentation in-house. Also, with information security being an issue, having control over shredding desk-side can be more secure than using a central bin and having shredding done offsite.

Has your business moved functions from Do-It-For-Me to Do-It-Yourself?  Share your stories below.

Article written by
Carol Roth is a national media personality, ‘recovering’ investment banker, investor, speaker and author of the New York Times bestselling book, The Entrepreneur Equation. She is currently an on-air contributor for the national cable television station CNBC, the pre-eminent name in business news. Previously, Carol was the host and co-producer of The Noon Show, a current events talk show on WGN Radio, one of the top stations in the country, and a frequent guest on Fox News, CNN, Fox Business and other stations. Carol's multimedia commentary covers business and the economy, current events, politics and pop culture topics. Carol has helped her clients complete more than $2 billion in capital raising and M&A transactions. She is a Top 100 Small Business Influencer (2011, 2012 & 2013) and has her own action figure. Twitter: @CarolJSRoth
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