Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
In the cycling world, Velofix Holdings Ltd. is gathering speed. Since it launched in late 2012, the Vancouver-based startup has sold seven of its mobile bike pro-shop franchises.
Five brightly painted Velofix vans are on the road in B.C. and Toronto, with two more on the way in Calgary and the United States. Olympic triathlon medalist Simon Whitfield owns two B.C. franchises and serves as strategic adviser to the company.
Velofix offers cyclists the convenience of bike maintenance at their office or home, explains chief executive officer Chris Guillemet, who founded the business with president Davide Xausa and chief operating officer Boris Martin.
"You can go online and book an appointment for 2 o'clock on Friday, and the van rolls up at 2 and you hand them the bike," Mr. Guillemet says.
Velofix, whose Vancouver corporate clients include software developer Hootsuite Media Inc. and clothing company Lululemon Athletica Inc. – who offer bike repair to their employees – charges the same prices as quality brick-and-mortar bike shops, according to Mr. Guillemet. But its vans cost less to run than those inventory-heavy businesses, he notes. "Anything we need for your bike we can get, but we don't carry massive amounts of inventory." Its projected revenue for 2014 is $760,000.
The company has two types of franchisee: owner-operators, and investors who hire a mechanic to run the operation. To dispatch its GPS-enabled vans, Velofix uses cloud-based software that optimizes routes based on postal codes, Mr. Guillemet says. This platform could support thousands of vehicles, he adds. To that end, he thinks Velofix can grow to about 35 vans in Canada and more than 450 in the U.S.
But Mr. Guillemet and his partners can't do it alone. He's in charge of sales, marketing and business development; Mr. Xausa handles finance and operations, and Mr. Martin, who designed the repair van and training programs, works with the mechanics. Their only backup is a part-time employee who recently joined to work on inventory processes and back-end systems.
"We need to hire somebody, but the revenue's not there yet to support it," Mr. Guillemet says. "When do you fill your bench? When do you put people in place maybe before that business is there in front of you?"
One question is what to outsource and keep in-house. Velofix uses a third-party call centre and outsources its accounts payable and receivable. Mr. Guillemet thinks Velofix can delegate sales, marketing and social media, too, and he wonders whether it makes sense to have third parties help with tasks such as training and inventory analysis.
"One of the big things for us as a franchise system is having operational support," he says. "I struggle with how to outsource something like that."
The Velofix founders have also considered hiring a key employee with a variety of skills. "For most of our business right now, we don't need a full-time person in any role," Mr. Guillemet says.
The Challenge: Which roles should Velofix outsource, and which should it keep in-house?
THE EXPERTS WEIGH IN
Tara Landes, founder and president of the management consulting firm Bellrock Benchmarking Inc., Vancouver
Getting to that "big place" isn't about working harder; it's about working differently. If they can start to envision what that looks like, then they can work their way backward to figure out what's okay to outsource, and what's not okay to outsource.
I'm nervous about the idea of outsourcing when there are only three people. If you're growing rapidly, the biggest problem is always cash. So probably what they need is money.
They want to hire a unicorn. A unicorn is the perfect person who's amazing at finance and sales and operations. But I think what they're going to learn is there aren't a lot of unicorns out there, and the unicorns that do exist are probably more interested in starting their own business.
If it's possible for them to take a breath, they should spend a weekend just focused on what the big picture is supposed to be. Then when they're pulled back into the details of the day-to-day, they will have that touchstone. The plan is everything. The plan should have financial hurdles in it, and they should be able to see when they can afford to hire people.
If they find that they can make a profitable business of it with their planning, they can find somebody to finance them. If money is the only thing that's holding them back, there's lots of money out there. And if they can't get that money, then maybe money isn't the only thing that's holding them back.
Monica Beauregard, president at the human resources consulting firm Bridgepoint Inc., Toronto
Lots of companies outsource HR and payroll to us. That makes sense because if you're in the business of scheduling bike fixing and running a franchise, HR isn't your expertise.
The other area where I see outsourcing as really valuable is accounting. You get these experts who stay up-to-date with the legislation and current standards and everything in their field; you don't have to hire a CFO.
But if it's a core competency, you don't want to outsource because you don't have as much control over it anymore. It could also be related to intellectual property. So let's say franchisee training is a core competency because it's their intellectual property that has made the business a success. Do you want a third party involved with that level of information? I don't know.
It depends on how frequently you're doing the franchisee training. If it's happening every month and you're training two to three franchises, and it's longer-term because you're growing, that wouldn't be something I would outsource because it's something you really want control of. The thing that stuck out for me was consistency – the feeling of that company and their passion for helping people with bikes, you want that resonating through all of the franchises.
Matt Young, co-founder of the personal training franchise operator Innovative Fitness Consultants Inc., Vancouver
If you're a small to medium-sized company, you run into the issue of "we don't have enough money to pay for the quality and calibre of person we need." So instead of paying 100 grand once, you spend 40 grand seven times. And it's a pain because you're not getting what you want.
If someone called me and said, "Hey, I need some advice: Do I overpay for that key employee now?" or "We're not really there yet – do I outsource and hire a bunch of people?" my advice would be to overpay now.
In hindsight I would have taken a harder look at the business strategy long-term, like they're doing now, instead of trying to piecemeal it. Small companies say, "Oh, we'll just get this person in," and you spend so much time training that person and then they leave. So instead of looking for that $35,000 competency, pay a little bit more and get a person who can grow with you.
So we outsource our marketing to a local company, and it's been great. We don't inventory apparel anymore; we outsource it to a company that can handle that for us.
THREE THINGS THE COMPANY COULD DO NOW
Make the outsourcing decision part of a long-term plan
Use this blueprint for expansion to secure financing.
Keep control of core competencies
Don't outsource tasks involving intellectual property.
Pay a premium for the right person
Spending a little more today will pay off in the long run.
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Interviews have been edited and condensed.