Unless your business is a legal practice I’ll bet that you do not plan to have a full-time solicitor on your staff. How do I know that? Because you have insufficient legal work to keep a solicitor busy all the time.
Further, if you do need a solicitor you will need a specialist to deal with different aspects of the law – employment law, property, litigation, contracts and so on. You would have to employ about five lawyers at a cost of £500,000. That’s why you contract out to instead of keeping it in house.
The same rule can be applied to other aspects of your business. If you make only a few deliveries per month you don’t need to own a delivery vehicle, with all the attendant costs. Just hire a vehicle when you need it or contract it out to a delivery service.
Likewise, if you receive few telephone calls you can contract it out to a remote receptionist, a virtual assistant (VA), which will cost less than keeping the function in house. You can also contract out your payroll to a specialist; I would recommend that keep it contracted until you employ a full-time accountant. Even then, it may be wise to keep it contracted out.
Create your website from a template offered by a company who will register your domain and host your site so that it is always available. The one I use also provide website statistics such as number of hits, with information as to where they came from. You can edit your text, upload photos and graphics at any time. Contact me for further information.
At start up you will have very few employees, probably just yourself, so why lease an office? Instead, start at home or rent some space in somebody else’s office. Tom Davies, a designer of specialist spectacles and a client of mine, manufactures in Japan and contracts out the logistics to a specialist warehouse. The warehouse takes in bulk deliveries, picks, packs, delivers to, and invoices the customer. He has only one full-time employee and rents two desks in an architect’s office, with internet facilities available. There is no cost to the architects for Tom’s use of their internet – it’s already a sunk cost. Tom can terminate the contract at a month’s notice if he decides he needs more space. If you have one or more employees contract out your payroll, it’s astonishingly cost- effective. I recommend Wendy Gyles
If your sales turnover is seasonal or fluctuates throughout the year, or if you are unsure of future sales, it is better to contract out the logistics as Tom Davies has done. If you need sales people, consider contracting out to self-employed agents, paid on a commission basis.
Another client of mine designs specialist lighting, contracts out the manufacture to several Chinese factories; they contract out the shipping to a shipping company. The bulk goods are delivered to a contracted-out warehouse, where they pick, pack, and deliver to retail customers.
Having worked with the client, as a business adviser for five years, I saw them grow from £800,000 annual sales to £5,000,000. Even at this level they directly employed only 10 people. That’s £500,000 sales revenue for each of the employees.
Another client of mine designs bedroom linens, from nightdresses to quilts, and contracts out the manufacture to India. As the sales grew, they signed a 21 year lease on a very large warehouse. The director knew, from past experience, that all swans are white. But a black swan turned up unexpectedly – they lost their two largest customers. They went bust shortly afterwards, owing the lessor of the warehouse a huge amount of money.
Had they contracted out their warehousing and logistics, they would probably have survived. The most important thing is to avoid signing long-term contracts which you can’t get out of quickly.
Make sure that you can terminate contracts easily when you reach a stage when it is cheaper to employ a part-time or full-time employee.
Remember that direct employees all have contracts, written or not, which can be difficult to terminate. So use freelancers with very short termination clauses.
Use a virtual assistant for secretarial stuff. Some will also do your book-keeping and even manage your events. I recommend Wendy Manister at Zest Concierge.
If your company has sales revenues of over £1 million you can contract out your buying function to Auditel, who will find you better prices on a host of purchases.
These include gas, electricity, business consumables, fleet purchase and management and many, many other purchases. Contact mike.keig@auditel.co.uk
When contacting links from this blog, I would be grateful if you would mention Ciaran Walsh as the source.
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