So many “small business owners” love and live by outsourcing, good for them - “small business” is not what we talk about at this blog. Here, we talk about building a $100 Million business. Bottom line, outsourcing won’t cut it for the long-term. Before I offend anyone I work with…Let me preface that by saying that I currently am working with outsourcing relationships that are AMAZING…but to build a $100M company we will one day have to pool all that talent together under one roof

See I don’t want anyone to get me wrong, my personal business (disclosure: still far from that $100M number) could not be anywhere near where it is today if it were not for outsourcing - actually, a LARGE bulk of our work is still done by outsourcing.

HOWEVER - month by month that is disappearing, we are bringing as much as possible IN-house. So, am I done outsourcing? No way and I’m not sure there is a SINGLE company in the world that does not use outsourcing.

Am I going to re-focus away from outsourcing and focus on building an INTERNAL team? Absolutely…

“Why? You ask…”

Let’s use a few days back as an example. We’ve been slowly “filling in our gaps” and bringing on internal positions and very dedicated, loyal and intelligent personnel who we can trust - however, some positions we still have no choice but to outsource.

Well, it turns out that we’ve been relying on a company (who we’ve worked with for over 3 years) to deliver a critical project that is launching well…NOW. Hickups, problems, hurdles, obstacles - that’s all I’ve heard for the last 2 weeks. Every day it’s something new.

Absolutely NO incentive to just dig their heels in and FIGURE IT OUT.

(By the way, this is not an isolated case, I deal with this all the time in any position that is outsourced).

So, we finally had no choice, we took the work from that company and just assigned it to our internal team (Disclosure: technically, this team is not really internal yet, but we work so well together that we consider them internal until we can make it official)…

Long story short - the same work that took over 2 weeks to get NO where was finished in literally 3 days when all of a sudden we had a team that cared about the project.

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Here are a few reasons outsourcing agents just don’t work out for the long haul:

1. No urgency

Honestly, what do they really care? Worst case, they lose your future business. YOUR worst case, you could lose your entire business.

2. No ownership

Whatever they’re doing, they’re just getting paid for it - they don’t see any long-term impact/effect. They don’t have any stock or ownership to protect - no skin in the game!

3. Other Work

The way outsourcers survive is by having multiple clients right? That means you’re fighting with others for their attention and time. The ONLY time when outsourcing has worked well for us has been when we pay so well, we’re typically the only client.

But, that’s an expensive proposition many times!

4. Their Own Agenda

Let’s face it - you have your wants and needs and they have theirs. If they were IN your company, there is much more chance that there would be overlap in your wants and needs.

5. Their Own Problems

They have their own employee problems, office issues, server problems…you literally DOUBLE the chance of those “things” effecting your business.

I could literally go on forever, but I’m going to stop.

With all of that said, I want to say a few things:

1. I do like outsourcing and think ALL small businesses need to make good use of it (it’s smart business). But any time you start seeing consistent work in a certain area, do what you can to get that position internal…

2. Some outsourcing relationships work out very well (but this is rare). We are currently in relationships that are amazing. But just so you know, one of them took me losing $150,000 with the prior company to find them. The others, we’ve been through multiple agents before we found a good one.

Plus, I’m a lucky guy - what can I say!

For those of you who want to know how I outsource the few things that I do and how I find them, I’ll do a blog post about it one of these days - stay tuned…

Until then, I’ll leave you with this thought:

If you want to build a $100M business, you need to fill in the gaps. Think team building. Get smart people, wrap them around an idea and watch art happen.

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This entry was posted on Friday, February 29th, 2008 at 11:30 am and is filed under Building A Company. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.