A New Spin on Outsourcing

How much work do you farm out? Probably not as much as you should.
FORTUNE SMALL BUSINESS
Saturday, November 27, 2004
By Pat Croce

When I left the Philadelphia 76ers' president's suite three years ago, I lost the invaluable support of my partner, Comcast-Spectacor, and its crack staff of lawyers, accountants, webmasters, graphic designers, and payroll personnel. Clearly it was vital that I secure such expertise for my new small business, a multimedia firm I called Pat Croce & Co. How else could I compete with the same intensity as the big dogs? Also clear was that I couldn't afford to hire a crack staff of my own.

That's when I discovered the joy of outsourcing. Yes, when it came to building the core of my business—giving speeches, writing books, developing TV shows—I'd hire staffers. But if it was a job someone else could do better, I'd outsource it. As a result, Pat Croce & Co. today is a place where the "& Co." consists of more key consultants than core employees.

Most entrepreneurs keep too many functions in-house. In a study of small businesses that outsource, Gartner, a research firm based in Stamford, Conn., found that on average entrepreneurs farm out only 27% of back-office functions such as accounting, legal services, and human resources. The good news, according to Robert Brown, a principal analyst at Gartner, is that "small-business outsourcing is poised to grow appreciably over the next three to five years as chief executives strive to cut costs and raise quality."

In the early days of Pat Croce & Co., I turned to my connections. I was able to tap a team of proven professionals I had worked with over the years to help evaluate my every move. With a great lawyer in Tim Broadt, a fastidious accountant in Andy Zelenkofske, a wise financial manager in Issy Friedman, and a sharp insurance administrator in Jim Gannon, I was ready to leap back into the world of entrepreneurs. They were ready to jump with me because they knew they would reap healthy fees from my new venture. I outsourced a few other services. My payroll and benefits went to Paychex. I hired IDC Partners to administer all my infotech. And finally, Design One Associates got the call to create my marketing material and brand identity.

Small-business owners know that the value of an outstanding outsourced team is greater than the sum of its parts. And whereas saving money may have been my initial motivation, outsourcing services provided (and continues to provide) my business with innovation, expertise, idea sharing, and a world of valuable information I didn't even know I didn't know!

For example, corporate motivational speeches have been the bread and butter of my company's income statement. And my decision three years ago to forgo the hiring of a marketing director in favor of going directly to respected speakers' bureaus has paid off handsomely. Following their advice, I created a videotape of my speaking excerpts to provide their customers with a taste of my style. That made it easier for the bureau's sales reps to sell me to their corporate clients, which made us all financially happier in the end. As the old pirate motto goes, "No prey, no pay!" In other words, by outsourcing my marketing arm, I ensured that all marketing expenses were clearly connected to profits. If no talks were booked, no fees would be due to the bureaus. I've forwarded significant fees to several speakers' bureaus. And I couldn't be happier!