Less Work, Higher Profits: Why I Outsourced My Entire Operation

By Andrew Simmons, Owner, ThoughtFish Media, Seattle, Wash.
I launched ThoughtFish Media, an e-commerce company that produces software programs for the arts and crafts industry, in 2002. It quickly became the focal point of my life. Before long, I was managing eight employees and a great deal of overhead costs. I often spent 10 hours a day dealing with order fulfillment and administrative tasks.

Then three years ago, I became the adoptive father of six children, and my priorities shifted wildly. I wanted to spend more time at home, so I began looking for ways to transform my business operations. My plan was to automate and outsource ThoughtFish Media however I could, minimizing my workforce and overhead costs in the process.

A better way to warehouse
My first step was to outsource my warehouse operations. Until that point, I had stored all of my software products in a 3,000 square-foot warehouse here in Seattle. It cost me about $4,000 a month to pay for heat, electricity, and employee salaries. I was also dealing with the usual headaches and politics that come with managing employees. I hired students to pack goods in boxes, but they didn't always care if the boxes were packed correctly. Twice, I had to deal with employees who had drug problems. Sometimes I felt like I was running a daycare for adults instead of a fast, efficient business.

I wanted to get away from running the business out of a physical location and managing employees, so I turned to a company called Shipwire.com. They operate a network of on-demand shipping warehouses throughout the world. I could store products in Shipwire's warehouses and let them manage my shipping needs. I send bulk shipments of my products to whichever Shipwire warehouse I choose, and the products are shipped out from that location whenever a customer orders them.

I now pay just $50 to $150 a month to store my products in Shipwire's warehouses. I still have to pay for the shipping costs to get products to Shipwire's warehouses, but overall the change has brought me significant savings.

Business in the cloud
Next, I decided to move parts of my business into the virtual realm with the help of online small business software and services. I used to have two customer support employees, but now I've outsourced all my customer service to Zendesk, a Web-based help desk software that provides an online interface for all customer communications. A program called Shoeboxed automatically scans my receipts and integrates them into Outright, my virtual-bookkeeping software. For invoices, I use Freshbooks, which I have also integrated with Outright.
My office is now just my desk and my cell phone. Thanks to these timesaving services, I only need to work for two and a half hours each day. The company is so well automated that if something happened to me, the business could run on its own for six months.

The only downside of these changes is the loss of some control. For instance, when I submit a product for fulfillment through the Web portal, I'm at Shipwire's mercy to ship something out quickly. They did a great job through this past Christmas season, but I sometimes miss the feeling of handing off a package personally to a customer.

The payoff
As well as saving time, going virtual has strengthened the business's finances. The economic downturn hurt our sales, but all of the changes I made increased our profit margins.

In 2008, the last year I had a warehouse with employees, we made $434,000 in revenue and $100,000 in profit. In 2009, after I sold an unprofitable part of the business and finished most of the outsourcing and automation, we brought in $200,000 in revenue and $130,000 in profits. That year we had no salaries, no warehouse, and no real overhead except for product purchases.

Restructuring my business has given me ample time to spend with my family. I've also had more time to explore other business ideas. Right now I'm working on a project I'm calling TomatoBuckets.com, which involves producing self-contained, hydroponic, tomato-growing systems. Before I took ThoughtFish Media virtual, I didn't have the mental bandwidth to pursue a creative idea like this. Now I feel like I can't shut the ideas off for new ventures and projects. Automating my business hasn't just made me a better husband and father, but a better businessman, too.

Andrew Simmons is the owner and founder of Thought Fish Media. His first and best-selling product was TileCreator, a program for creating mosaic tile designs.
-- As told to Zack Anchors

Resources:

• Read how to get started in offshore sourcing.
• Browse 10 points to ponder before outsourcing.
• Read how one entrepreneur learned how not to be a slave to day-to-day operations.