If you’ve heard the term “outsourcing” before, you might associate it with big corporations. However, outsourcing is becoming more and more common for small businesses. So, is outsourcing a good idea for your business?

Keep reading for more information on:

• What outsourcing is
• Pros and cons
• How to outsource your business

Once you’ve got all the facts, you’ll be able to consider your potential decisions. 

What Is Outsourcing?

Outsourcing refers to finding someone outside your business to provide a specific good or service. As a business owner, you can outsource when you need a particular task done but do not necessarily need to go through the hiring process for a new employee. 

Common areas that business ownersoutsource include:

• Accounting
• Marketing
• Sales
• IT management
• Administrative tasks
• Customer service
• Manufacturing 
• Shipping and logistics
• Research
• Human resources

Now that we’ve covered what outsourcing is, let’s talk about the pros and cons of the process.

The Benefits Of Outsourcing

1. Cost Effective

As a small business owner, money is something you must always keep in mind. A big benefit of outsourcing is that it is a strategy for cost savings. A few ways outsourcing achieves this is by:

• Converting fixed costs into variable costs
• Decreasing training and labor costs
• Negating cost of benefits

2. Increased Efficiency 

Think of outsourcing as a delegation strategy. As a leader, you should not be doing everything yourself. Part of being an effective leader means understanding your strengths and knowing when to hand a task off to someone else. 

With outsourcing, you are purposely hiring someone who is an expert in their field. This means that instead of hiring someone and having to train them in something new, you can bring on an outside party and utilize their skills for the necessary amount of time. 

This will create the space for your business to continue running as usual, with a little extra boost from your new expert. For example, information technology and IT services require a lot of education. IT outsourcing is one of the most common types of outsourcing work because the resources required to educate your work force are incredibly expensive.

3. Core Concentration

With outsourced professionals taking care of their assignments, you can focus more on your job. Again, the person you have outsourced should be an expert in their field, so they should be able to work independently with little guidance from you.

Because you have an extra set of hands taking care of that part of your business, you can continue with your regularly scheduled program of leading your team. You’ll be able to focus your business operationsfull-time on your core competencies and mission.

4. Increase Your Workforce

Bringing on an outsourcing service provider means that you can expand the scope of your business as you lower costs. Instead of training a current employee on something completely new, you can outsource that skill set, so the flow of your company remains intact. 

For example, say you run a barber shop and want to expand your business to a full-service hair salon. Instead of spending time and money training your barbers in full-service, bring on a freelancer who already knows the ropes. It’s a less time consumingbusiness strategy that can help you get the competitive advantage in your community. 

5. Reduce Risk

As a leader, you must create and maintain a safe work environment for your employees. Asking them to do a task they don’t know how to do can be dangerous.

For instance, imagine a minor accident in your storage room where one of the walls is damaged. You might consider asking one of your employees to patch up the damage, even if they don’t have any experience. 

However, you risk the wall looking worse than it did when it was damaged. Instead of asking an inexperienced in-house employee, outsource. Hire an expert in drywall repair to do the job better and faster. Often your dollar will go farther if you simply hire a professional. 

The Cons Of Outsourcing

1. Loss Of Control 

Bringing someone new to your team who isn’t an actual employee will involve a certain level of trust. The whole point of outsourcing is to bring on an expert in their field. This implies that they know what they’re doing, so they will likely not want you hovering over their shoulder.

Before outsourcing, make sure you understand that aspect of it. In addition to that, do your best to vet the professional thoroughly to give yourself more peace of mind. Promote quality control by collecting resumes and referrals, if possible. 

2. Security Risk

Whenever you bring an outsider into your business, there is a level of risk involved. If you are outsourcing an accountant, for example, they will have access to all of your financials and personal information. 

To ensure security for you and your employees, always require necessary licenses and other paperwork to be submitted before bringing in an outsourced individual. 

3. Morale

Small businesses often have a tight-knit community feel. Employees might be protective of their team and less open to new people. As a leader, you must be able to “read the room” and understand what is best for your business. 

When considering outsourcing, make sure it is because your employees are not qualified for that particular service and because it will genuinely benefit your business.

4. Politics

Outsourcing on a larger scale often involves offshoring, or hiring contractors from other countries because wages are much lower. While outsourcing might save you some money, be prepared for any backlash from onshore employees or activists that could come with your decision. 

You might have seen larger corporations receive ridicule in the news for their choices when outsourcing. Some of them have made changes to appease their consumer. However, some have ignored the outcry and are large enough that their revenue and stature have remained relatively unaffected. 

Small businesses are not always in the same boat. Many small businesses pride themselves on being locally sourced and obtaining customers. If that notion is part of your brand, then you might want to think twice about hiring cheap labor just to save a buck.

How Do You Begin Outsourcing Your Business?

You must be prepared if you are considering outsourcing goods or services for your business. Before making your decision, answer the following questions for yourself:

1. Are you financially ready to scale your business?
2. Is the outsourced role essential for your business?
3. Do you have a system of operations in the process of outsourcing?
4. Have you self-examined to see if you’re mentally ready to bring on outside assistance?
5. Have you taken stock of potential employee attitudes towards the change?
6. Does this decision align with your brand and morals?

Once you have thought long and hard about those questions, you can decide whether outsourcing is right for you or not. If outsourcing is the way to go, then:

• Begin identifying the areas of your business you’d like to outsource
• Create goals and outcomes you’d like to see as a result of outsourcing
• Start researching organizations or independent contractors through job sites or referrals
• Interview potential professionals and bring on the right one

Conclusion

Is outsourcing right for you and your small business? Only you know the answer to that. But as you begin the decision-making process, remember:

• Outsourcing refers to bringing an outside professional into your business to perform a specific task or to provide a particular service
• There are pros and cons to outsourcing, so you need to make sure you consider it carefully
• Before deciding to outsource, make sure you are financially prepared and that it will promote success in your business

Are you interested in outsourcing and not sure where to start? At Hoist, we can help provide you with the tools and guidance you need to succeed. Check out our website for more information.

Sources:

10 Small Business Functions That Can Be Easily Outsourced ⎸ Small Business Association

How to Delegate Effectively: 9 Tips for Managers | Harvard Business School

Let It Go: Teaching a Micromanager How to Chill ⎸ Society For Human Resource Management