Save Time, Improve Focus on Your Business: The Advantages of Outsourcing
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 to manage your small business for business growth without increasing your employees? How to keep focused on your defined business scope and manage the day-to-day business activities? Outsource needs that you can't meet from within the business.
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 benefits include containing and minimizing payroll costs, reducing recruiting efforts, managing fewer direct staff, and improved utilization of money, time and resources. Contracting out specialized services provide strong cost/benefit paybacks.
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.
When the cost of outsourcing grows to be significantly higher than the cost of additional staff, you will need to assess the cost/benefit relationship for outsourcing. If the work you are outsourcing is fairly broad or general, it might be time to hire full time staff. However if the work that you outsource is fairly specialized (for example, legal services, accounting services, IT services) then it might not make sense to hire a generalist to do a little bit of everything rather than a specialist who can do a lot of focused work. Whenever you make the decision to add full time staff you need to ensure that there is a cost, a time, and an effectiveness improvement in bringing the work back in-house.
As a business owner or manager, you will always find a number of good reasons to outsource specific services or support. One of the best reasons is that outsourcing allows you to focus on what you do best and/or what others can't do as well, or as easily as you. Review the strengths and weaknesses of your organization when faced with a resource-constraint. Then assess whether or not hiring or outsourcing is the best decision (remember to look at costs, potential for profit, anticipated results, time required, and more).
How to manage your small business for business growth without increasing your employees? How to keep focused on your defined business scope and manage the day-to-day business activities? Outsource needs that you can't meet from within the business.
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 benefits include containing and minimizing payroll costs, reducing recruiting efforts, managing fewer direct staff, and improved utilization of money, time and resources. Contracting out specialized services provide strong cost/benefit paybacks.
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.
When the cost of outsourcing grows to be significantly higher than the cost of additional staff, you will need to assess the cost/benefit relationship for outsourcing. If the work you are outsourcing is fairly broad or general, it might be time to hire full time staff. However if the work that you outsource is fairly specialized (for example, legal services, accounting services, IT services) then it might not make sense to hire a generalist to do a little bit of everything rather than a specialist who can do a lot of focused work. Whenever you make the decision to add full time staff you need to ensure that there is a cost, a time, and an effectiveness improvement in bringing the work back in-house.
As a business owner or manager, you will always find a number of good reasons to outsource specific services or support. One of the best reasons is that outsourcing allows you to focus on what you do best and/or what others can't do as well, or as easily as you. Review the strengths and weaknesses of your organization when faced with a resource-constraint. Then assess whether or not hiring or outsourcing is the best decision (remember to look at costs, potential for profit, anticipated results, time required, and more).
About the Author:
As a small business owner or manager, your goal is business success. 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.