3 Build, Buy, or Partner? Anytime you look to expand, you should evaluate all of your options and factor in considerations of both time and money (which impact one another). Of your three options, namely to build a new facility, rent or buy an existing facility, or outsource operations to a 3PL partner, each requires a different mixture of resources. -How quickly do you need the extra space? -How much is the lack of space costing you both in revenue and in customer satisfaction? -Do you have money set aside to invest, or will you have to borrow? -How does the interest expense compare with the monthly cost due to lack of space? -What spaces are available in the geography you need? -Do you have the right expertise in-house to build out and manage your facility? The decision to partner with a 3PL may look more and more attractive as you weigh in these complications. Create a Timeline • Building your own space — This requires the most significant time investment and cost outlay. Excluding time to evaluate, negotiate, and purchase suitable property depending on your area, it will take approximately 6 months for construction, 1-3 months to set up the warehouse • Rent/buy — Allow for time to evaluate and search for property and time to negotiate the lease or purchase. Once complete, it will often take 1-3 months to set up the warehouse for fulfillment activities, plus time for equipment purchases and delivery. • Partnering with 3PL — Definitely the fastest of the options, partnering with a 3PL can take as little as a month to be up and running after finding and selecting your partner. In many cases, selection and evaluation can happen in less than a month as well if you leverage a marketplace with pre-vetted partners. Run the Finances 1. Add up the costs of the expansion itself. Include outlays for research, planning, moving, infrastructure, tenant improvements, interruption of operations, commissions, additional technology, interest on borrowed money, consultants, hiring fees, etc. 2. Estimate the increased net profits you anticipate from the new warehouse space each month. This will be additional revenue minus expenses (labor, rent, utilities, insurance, transportation, maintenance, upkeep, etc.) per month. If selecting to partner with a 3PL, factor in cost savings from shipping and any potential savings driven by paying by volume and activity versus up front investments. Do not include existing revenue or expenses unless it will be offset by your investment. 3. Divide the total investment (#1) by anticipated net profits (#2). This will give you a rough idea of how long it may take for the expansion to pay for itself. Of course, we’re dealing with a lot of unknowns here. At best we’re arriving at a guestimate. Time to Expand Your Ecommerce Warehouse? A Guide from Extensiv 7