Summary of the video:
Tell us about your business
I purchased the business about 3 or 4 years ago and have turned it into something where we've spread the market a little bit in terms of handling a lot more furniture restoration, and a lot more furniture design and new furnitures - sort of modern furniture with the old manufacturing techniques.
So, still handmade, no mass production happens here, but a real niche-set clients who appreciate quality and are prepared to pay for it.
Why did you decide to outsource?
There's a couple of things.
Manufacturing furniture in Australia, certainly the high end furniture, is probably a dying art. Margins are tight, and to remain variable at all, we do have to mind our margins and focus on cost. By the time you start buying fine timbers from some of the high end timber suppliers and people like them, before you know it you've pushed yourself off the market.
A lot of small businesses like ours in the furniture making industry have folded over in the last 5 - 10 years, and we're one of the few left in Brisbane (there's not too many of us around).
There are plenty of people who could make kitchen furniture and cabinet train joiner and things like that, but once you get up into the high end you can count them into one or two hands.
I did have somebody here that was a qualified young lady with admin experience. She was looking after the books - and that's not an arduous task as there's not a lot of transactions. So, ultimately we were looking for her to attempt some marketing and broaden our client base, but to be honest, we were out of ideas.
When you look at the overheads of the business, you've got somebody running administration, you've got myself running the business from a more 30,000 foot level, you've got all your other fixed overheads. Before you know it, everything's hanging off a couple craftsman building furniture, and it doesn't take long to realize that someone's got to give. So, we started to look at the possibility of outsourcing.
Do you think it's important to trust the business you choose and why?
Well, I guess, it's extremely important. I mean, you're talking about your intellectual property, so that is ultimately your goodwill, and your IP is the value of your business, so you are ultimately putting the family jewels on the line to a certain extent and taking a leap of faith. But in all honesty, you are doing the same thing when you employ an Australian.
You know, there are people here that go on tomorrow and there are people that jump from opposition companies on an annual basis. There are government officials that strategically join corporations, and goodness knows what, so reality is, you have to look at things at face value and take a step.
What limitations have you found with outsourcing?
The reason I got into outsourcing was purely to broaden our client base; to make connections out there in the world in industries such as architecture, interior design, and so on.
There's really not much point from my perspective, especially with a business this size trying the shotgun marketing approach, which is a 5000aud weekly or monthly ad in a local magazine, or wherever else.
There's about a thousand magazines you can choose from, so how are you going to manage your marketing budget? It's just a minefield. Probably be different if I were a multinational; we'd be sitting there and talking to all these people negotiating rates, and so on.
Gaining connections is really a fairly laborious work. It's pretty much getting down, getting on to Google and doing a whole lot of research and starting to make those connections. So paying somebody in a small business like this between 25 and 30 aud to do that is simply not viable, and paying a magazine maybe is not viable either.
So, where do you go from there? We've got a good client base, we've got good word of mouth, huge amount of repeat business, but you're going to get those clients in the first place.
What does your industry think about outsourcing?
I would imagine they are probably a little bit 50-50 about it to be honest. Our industry is fairly small, if you narrow down specifically what it is that Renowned Furniture does. There's only a handful of us, and it's a very traditional industry, so you know, I'm probably one of the young guns in our industry, which is saying something.
And from that point of view, I would imagine that a lot of people probably look at it as risky, as something that you can't control, whereas from my perspective, it is quite the contrary. I can ramp it up, I can scale it back, I can make contact, I can voice face to face talk and call if I wish at any point.
You know, I understand in the early days when you and I were chatting that there are all sorts of things when you were starting out. There’s this specific software where you can track and trace keystrokes and URLs that your employees are on and all sorts of other things. So, that's all great; that's your internal issue. You manage that and you provide me with an end product that is fine; easy to manage. And I really like the fact that you can ramp it up, scale it back.
How do you see the future of outsourcing?
There's a lot of things that are out of balance in Australia when you look at the world stage. The simple fact is, if you compare house prices or wages or anything to north America or lots of countries in Europe, we're out of kilter, and consequently as outsourcing grows, which it inevitable will, some of these things are going to come back into line.
I don't want to see wages just suddenly crash. I don't want to see house prices suddenly crash, but I do want to see a little bit of an equilibrium and a softening where we can catch up a little bit because the internet grows, and as connections and networks grow, the world becomes a smaller place.
Those comparisons are going to become more and more prevalent until we go in full cycle and things equal out.
That cycle that I've just talked about, it could be 10, it could be 50 years. So right now if you have a 5-year business plan in outsourcing, it's gonna look like that (upwards). And so from my perspective, I see it growing and continuing to grow until we get a little more balance.
What would you say to a person looking at outsourcing?
I think my actions probably speak louder than words. I've been through my own friends, colleagues.
I've sung the praises of David's business for quite some time now. I was probably a little bit skeptical at the front end in terms of how quickly I would take up the technology; my computer skills whether they are up to task, but I fairly quickly learned that it's an easy flow, it's an easy thing to use -- it can be on a number of different software platforms, so one that you are more familiar with, it will work.
I like to pretend that a lot of the marketing strategies that were unfolding were fundamentally my idea. In so far as I could go out and do a mass marketing campaign, grab a very, very large level of enquiry, not for a particular thing, just adwords and services, and pluck the good bearing fruit out of that, not necessarily the low hanging fruit.
I had choices. And our pricing structure started to go up, up into a level where for our humble little industry, I was starting to command margins that I'd say are much higher than industry standard.
The reason was I was picking the clients based on the jobs, putting the price forward, and if the client accepted that price, great. And if they didn't, they could go somewhere else. I would be happy to let them go purely because of the level of enquiry I was receiving.
Whereas the year before, I was desperate and dateless. There's absolutely no doubt about it. Everytime the phone rang, or an enquiry came in, I was all over it like a rash, and I think I frightened half of them off.
I'm starting to see that in some of my opposition companies. I was starting to see that desperate and dateless sort of behaviour in some of their quotes, and the reason I'm getting to see those is because from time to time when we're establishing good friendship with a client they would make some mention of the two or three other quotes and how they compared and things like that. These days I'm a lot more relaxed and things seem to be going along much nicely.