How and why I outsource

Cameron Malik and David Denholm, co-founders of Freedom Worldwide Ltd, set up their online retail store Real Deal Costumes in March 2008, to serve growing demand for fancy dress outfits. To reduce costs and free them up to do other things, Cameron explains how he and David outsourced some management tasks

“I’d been trialing different products online, including toys, household goods and electrical items, just to gauge demand, before I stumbled upon fancy dress, which seemed to be getting more and more popular. That gave me the idea for the business.

“I tried to do everything in-house at first. David dealt with customer services, until he got so many emails that it was time to involve someone else. I even did the warehousing in-house initially, moving from my living room to a double garage, until I moved to a self-storage unit where I just kept taking more and more space. I also employed my own warehouse staff.

Deciding to outsource

“There were several reasons why I decided to outsource. Moving to a warehouse would mean disruption for many weeks, that’s without the set up and running costs, which would have added significantly to our overheads. Better to leave it all to an existing warehouse and distribution business that already had the experience and facilities we needed.

“We outsource to a warehouse in Swindon, which receives goods from my suppliers around the world and stores them until they’re dispatched. I email orders over to the warehouse and they send them out to customers throughout the UK.

“Sometimes we can be extremely busy, so that would mean I’d have to take on additional staff to fulfill the orders. Because I outsource, I don’t have to think about this; my warehouse and distribution sorts it all out. The same is true of my customer services and bookkeeping, which I also now outsource. My suppliers already have more people to bring in when and if needed, whereas I would have to find staff and train them.

“Outsourcing also grants me greater personal flexibility, because I don’t have to work from specific premises where my staff are based, I can live and work where I want.

Outsourcing overseas

“A friend of ours had outsourced parts of his business, so David and I got tips from him. He used a website called www.elance.com, on which you can post a job and find potential suppliers from all round the world. You can view feedback from previous customers and ask for testimonials.

“Through this, I got in touch with a company based in Kolkata, India, and gave one of their employee’s a small project to try them out. Now, depending on the time of year, they have up to five people working for me. It’s their responsibility to build in contingency, for example, if someone is off sick.

“They provide email support to my customers, upload products to my website and check quality control if a customer comes back with a query about a costume. We didn’t go out there to train them until we had a team of five, when it became more cost-effective.

“A separate division of that company also does my book-keeping. Communication can be a problem, because the person isn’t sitting right next to you, but maintaining regular contact over the phone and by email helps.

Service level agreement

“It all started out very ad hoc with my customer service supplier, but soon I realised it would be better to draw up a service level agreement [SLA] with them, just so they knew exactly what was expected.

“SLAs can be very useful if get into a dispute with a supplier, but I didn’t really know a lot about them until that point. These are the things you learn as your business grows. I had a problem with my previous warehouse supplier not meeting my standards, and having an SLA allowed me to go elsewhere quickly and easily.

“Overall, outsourcing has provided huge cost savings for my business. The money I save outweighs the odd flight here and there to India. The hourly rate in India is significantly less, while my supplier already has ready-made offices, so I don’t have to pay for that.

“I don’t have to directly worry about health and safety regulations, either, although I ensure that my outsourcing suppliers give their staff good working conditions, other wise I wouldn’t give them business.” 

Cameron’s top three tips

• Check out suppliers thoroughly. Get testimonials from other UK businesses that have used them for the same or similar tasks.
• Maintain good communication. Whether by phone or email, the more you talk, the less likely something will go wrong. Give clear and concise instructions, so there’s no confusion about your expectations.
• Draw up a service level agreement. This will protect you if a supplier fails to deliver.