How to grow a business by outsourcing

It was in the early stages of establishing my business that I had to decide whether to go down the path of in-house manufacturing, or outsourcing. When I first started producing bircher muesli for Yummia it was all hand produced and packed – by me. At this stage, the manufacturing was fairly easy to manage. Apart from being a little time consuming, there was nothing too technical to the whole process. However, as the company started to grow and our output increased, I knew I had to make a call. I was very fortunate that I had previously worn all the hats, and knew the process from manufacturing, to packing, delivery, branding, and sales, back-to-front for my business. I decided to focus on where I saw my strengths, and outsource the rest.

Outsourcing is certainly not a case of abdicating responsibility; in fact, it can come with its own set of problems.

For instance, in some ways it can be much harder to coordinate a variety of businesses to work fluidly together to bring your products to life than it can be to do it all yourself.

In the case of Yummia, I made the decision to outsource manufacturing, logistics and warehousing. When deciding whether or not to outsource, you need to take a good look at the product or service you want to provide, and ascertain whether or not outsourcing will work, because it’s not a solution that fits every model. From my experience, outsourcing works well for the food industry, as there are lots of specific requirements, in addition to food and safety procedures, that need to be taken care of if you wish to pursue in-house manufacturing. When I made the decision to outsource I was 23 years old, and knew enough to know that I didn’t have the experience or industry knowledge to take on the task of controlling manufacturing. Instead, I looked for partners that had this experience, and worked with them to bring my products to life.

When searching for outsourcing partners, ensure you undertake adequate research and ask lots of questions. It is integral to find people and businesses that you work well with, and that you can trust. The companies you outsource to have a huge influence on your brand’s presence in the marketplace. I’ve learnt – and I’m still learning – some big lessons, which can be very costly and time consuming. To help you avoid making similar mistakes on your journey, here are my top five tips for outsourcing.

Top five tips for outsourcing

1. Don’t try to be all things to all people: Running a business is stressful, exhausting and involves lots of roles. If you can help yourself by outsourcing a few of those roles to relieve pressure on yourself, then it’s definitely something worth pursuing.
2. Be flexible, but firm: You need to be able to work well with other businesses, and be understanding about their limitations and independent business goals. However, you also need to keep an eye on your business, and never ever settle for a second rate product.
3. Ask for production scheduling and forecasting: You need to know that the company you are outsourcing to has the capacity to take your business on. If they are over extending themselves you may be put in a situation where your manufacturer/outsourcer can’t produce on time.
4. Understand what the min-quantities are: Many manufacturers will have min-quantities that they require you to commit to. Do not be lured in by low pricing and overcommit to large quantities of stock too early on, because once you see your product, you will often find things that need to be changed, and it can be a long time before you can implement these changes if you have committed to large quantities of stock.
5. Make the ‘worst case’ pricing scenario work for you: As production increases, hopefully pricing will drop. However you need to make sure that the ‘worst case’ margins are still viable as this gives you a buffer for market fluctuations.