Particularly relevant in a downturn.
One of the unusual things about RE development is that the number of employees in a firm don’t necessarily scale with the amount of work the firm does. Sometimes they do, but often they don’t. If you’re, say, a restaurateur, you’ll have about twice as many employees if your restaurant gets twice as big, and twice as many again if you open a second restaurant. A lot of businesses are like that.
RE development is different because the actual development teams tend to be very lean, and the ancillary positions can be either in-house or third parties. That includes accounting, bookkeeping, property management, leasing, sales, marketing, construction, etc. A marginal efficiency leads an employer to build internal capabilities in some area, like property management, and the number of employees balloons far beyond the actual core of the business.
I see some pluses and minuses in each approach. To some extent, the different approaches probably reflect different personality types in the principals. Some people love having tons of employees, having an audience, giving boozy speeches at the Christmas party, and so on. Others are comfortable working alone, and see employees as sources of distractions and drama.
And the efficiency of bringing things in-house can be offset by the problems that creates in a downturn. To a non-sociopath, hiring an employee is in some sense taking responsibility for his livelihood and that of his family. A asshole will cut people loose at the first hint of trouble (which doesn’t do wonders for morale in the long term) but others will try to make it work. At a certain point they have to “feed the beast”, and the internal need to keep people busy can lead them to take marginal deals that don’t entirely pencil out. Which increases risk.
So, to take it to an extreme- how much development could you do alone? Assuming you’re wired to be okay with that. Any good anecdotes about people who have outsourced everything and done well?
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