Advantages of Outsourcing: For Small Business
The advantages of outsourcing can be significant for small business owners and for the business. Reviewing the history of outsourcing as a business strategy demonstrates that the need for specialized and low cost labor was a key driver. Small businesses are often constrained by the need to keep costs down and to find competent labor. Many small business owners cannot afford, and do not need, a large number of employees. Yet, small businesses need to grow to survive.
How do you grow your business without increasing your staff? How do you stay focused on your business vision and strategic plan? Managing your every-day business activities can be hard work; adding growth objectives to that day-to-day effort can be overwhelming. Hiring outsourced services can help you meet your business plan.
What is outsourcing? It is hiring outside resources to do what you can’t, or don’t want to, do within the business. Large scale outsourcing is becoming more common on a global basis. Businesses are trying to narrow in on their core competencies and to contract out services that don’t align with their primary business. For example, a number of North American phone companies outsource call center work to India. Law firms outsource legal research to countries with lower labor costs. On a small business scale, outsourcing is about hiring services that a small business owner can’t handle internally.
Outsourcing specialized services can help your business contain and minimize payroll costs, reduce the need to recruit more staff and to manage more staff, and improve your utilization of resources (people, equipment, time and money). There are excellent benefits and paybacks to contracting out services, particularly highly specialized services.
There are many functional services that can be outsourced. Here is a short list of some of the most common ones: human resources support – including recruiting, training, salary surveys, writing of job descriptions, writing of employee policies, payroll and benefits; accounting support – such as accounts receivable, accounts payable, bookkeeping, financial statements; marketing – such as specific direct marketing programs, new product launches, promotional brochures, and email campaigns; information technology support – such as vacation relief, backing up remotely, hardware maintenance, and software analysis; transportation – such as warehousing, inventory, shipping; building and grounds cleaning and maintenance; sales – such as independent sales agents or distributors; management consultants; and more.
Transition from outsourcing services to hiring a full time person when the cost of outsourcing is significantly more than the cost of hiring staff; but make sure that you recognize that outsourced services are often specialized whereas an employee may be more of a generalist. For example, if your accounting outsourcing is costing you 20 percent more than an employee would, hire an employee who can do the accounting (receivables, payables, costing, and financials) and help in the administration of the office.
There are many good reasons to outsource but the best reason is that it allows you to focus on what you do best, and to focus on what’s harder to outsource (your passion for the business). Consider your strengths and weaknesses and focus your efforts on the higher impact and higher profit endeavor. Your decision to outsource needs to be balanced with what you gain or lose by outsourcing.
As a small business owner or manager, your goal is to grow your business. The advantages of outsourcing will help you achieve that goal by saving time and money, focusing on your strengths and weaknesses and achieving your plan. Find more proven strategies and resources from the More For Small Business site to better manage your business.
