Pros and Cons of Outsourcing
Whether you’re new to the sign shop business or you’re a sign shop veteran with decades of experience under your belt, it’s important to know about the pros and cons of outsourcing.
Outsourcing jobs to vendors is a staple in the sign-making industry, and for one very good reason: it works. There’s a lot to keep in mind when outsourcing, though, and even more to keep track of, when outsourcing.
Designed to streamline and simplify every aspect of running your business, there’s plenty to learn about shopVOX sign software and what it can do for you. But what if the questions you have aren’t about shopVOX, but about outsourcing itself.
If you don’t have a lot of experience outsourcing, you may be wondering what the point of outsourcing is? When should you outsource and when should you keep jobs in-house? How much should you upcharge for outsourced work?
Below, we’ve put together a quick guide that will hopefully answer all your questions.
Why Do Sign Shops Outsource?
In the sign-making industry, not every shop is equal in terms of capacity. For example, if you’re a vinyl shop and your current set-up is geared primarily towards producing interior decor, graphics, vehicle lettering, and wraps, you may not have the expertise or resources necessary for metal fabrication and welding.
That means you’ll need to outsource these items in order to complete them. Don’t worry; this is normal. Just about every sign shop today outsources some portion of their business to some other sign wholesaler in some way, shape, or form. Very few sign shops can do everything on their own, and it’s rarely economical to try.
How to Get Started Outsourcing
If you’re interested in outsourcing but don’t know how to go about it, your best bet is probably to start by creating a unique vendor list. You can actually create easily accessible vendor lists right in shopVOX. You can then assign different products to individual vendors, eliminating any confusion over which vendors you should contact for help completing certain products in the future.
Building a vendor list that your entire team can refer back to helps communicate who your preferred vendors are and what jobs should be outsourced to them. In the process, your employees can rest assured that the vendors they’re working with offer the best balance of quality, affordability, and fast turnaround.
Benefits of Sign Shop Outsourcing
A great way to make the most out of a vendor list is to actually meet with your vendors to see if they’re willing to share their wholesale pricing formulas with you. If so, you can actually use shopVOX to program your vendor’s prices into your own product and service pricing system. This makes it easier than ever to create fast and accurate estimates, allowing you to see what your expenses and profit margins will be right at the point of sale.
Another thing you should consider doing is requesting samples from each of your vendors. Having samples in your shop gives you a point of reference that you can show potential customers so they can get an idea of what their finished product will look like. Samples help set expectations.
Outsourcing is a way of providing high-quality products to customers in a timely manner, and it also allows you to work on a variety of different products at the same time. Outsourcing makes it possible for a sign shop to handle a larger number of clients without sacrificing speed or quality.
Potential Pitfalls of Outsourcing
Outsourcing offers a lot of advantages, but that doesn’t mean there are no downsides. The most obvious drawback to outsourcing is the margins you give up by essentially sharing your profits with another vendor. This makes it doubly important to master the balancing act of upcharging; you have to charge your customers enough to cover your expenses while still making a profit, but you also don’t want to charge too much and lose clients as a result.
If you poll a dozen different sign shops, you’ll likely see a multiplier of about 1.5 or 1.8 multiplier on anything that is outsourced to a wholesaler for electrical signage (channel letters, lightboxes, etc.). For digital printing products (banners, adhesive prints, etc.), that multiplier goes up to anywhere from a 3x to a 6x multiplier. For vehicle wraps, the multiplier tends to be within 2.1 to 2.7 range. Keep in mind, though, that these suggestions are just that: suggestions.
With that in mind, when should you think about cutting back on your outsourcing?
In general, it’s a good idea to stop outsourcing when the volume of the customers you’re bringing is such that it allows you to stop outsourcing. In other words, outsourcing is ideal for the types of jobs that your shop doesn’t do very often, but if you have a lot of customers interested in a certain product or service, you’re better off investing in the equipment and staffing necessary to do that job in-house.
Whether Outsourced or In-House, shopVOX Can Help
From pricing formulas to vendor lists and everything in between, when it comes to outsourcing, there’s no shortage of data you need to stay on top of. At shopVOX, our goal is to make doing that as painless as possible. Our print shop software comes with a number of useful features, including easy-to-access databases, cost calculators, workflow monitoring, and more.
With shopVOX, you’re in control of every aspect of your business, even when you outsource jobs to other vendors. Take your sign shop business to a whole new level. Try shopVOX today!