Outsourced professionals can be a great resource when you require additional assistance to successfully complete a project. Read more to learn everything you need to know about outsourcing.
If you have heard of 'outsourcing' before, you might associate it with big corporations. However, outsourcing is becoming more and more common for small businesses. Nearly 300,000 jobs are outsourced every year in the United States.
So, what is outsourcing, and how can you determine if it is a good idea for your business? Keep reading to find out:
Once you have all the facts, you can consider your potential decisions.
Outsourcing refers to finding someone outside your business to provide a service. As a business owner, you might not always want to go through the hiring process for non-core tasks. This is when you can outsource your in-house work to a third-party provider.
When companies outsource jobs, they employ the services of independent individuals or agencies. These can be providers within the same country or in remote locations (offshore). Traditionally, outsourcing was thought of as an option for large MNCs. But thanks to the digital age, small businesses are also using outsourcing as an efficient tool.
Businesses are increasingly using outsourcing to keep overhead or payroll costs low. When a job is outsourced, the third party has its own internal compensation methods. This allows the first company to access the services at a significantly lower cost than an in-house expert.
It also enables them to get routine or niche tasks done quickly. This reduces the need to spend much energy on training their staff. So, startups can focus on core competencies without huge investments or hassles.
Your financial team can make or break your business. But sometimes, you might not have the resources to spring for an accounting team. In such cases, you can outsource tasks like bookkeeping, account payables, tax compliance, etc.
From digital to traditional marketing, businesses are outsourcing several functions to third-party experts. This includes SEO services, paid marketing, social media planning, website creation, and more.
Some commonly outsourced tasks include lead generation, outbound cold calling, and after-sales support. Outsourcing this function additionally brings in new tech advances and niche expertise.
IT specialists are sometimes hired to install, support, and maintain the IT requirements of a company. They can also be given the task of handling the entire IT network. Or you can only outsource niche tasks like software development, network services, or QA testing.
As administrative work falls under non-core tasks, you can outsource it to other professionals. Freelancers can handle schedule management, report writing, transcription, and many other low-value jobs. You can even hire a virtual assistant for this role. There is a vast market of individuals who offer these services, and it is said to grow to $25.6 billion by 2025.
When it comes to tasks that can successfully be outsourced, customer service is a no-brainer. In startups, this activity does not only reduce efforts in training a team. It even empowers companies to offer dedicated, 24/7 support to customers.
Companies outsource the manufacturing process for one main reason - cost reduction. Equipment for manufacturing can alone lead to massive costs. Outsourced jobs range from product designing to execution or even packaging.
Storing, shipping, packing, or order fulfillment are logistic tasks that can be outsourced. It is also a great way to cater to global markets without having to bear the cost in-house.
Being a niche skill, research specialists are not always easy to hire. Hence, several individuals are offering these skills on a contract basis. Competitor analysis, pharmaceutical research, legal process research, and more can be outsourced.
For small businesses, some HR tasks do not occur frequently. It becomes easier and more cost-effective to outsource these as and when they occur. Consider hiring an HR agency for recruiting, payroll processing, employee relations, and more.
As a small business owner, money is always on your mind. And that means looking for ways to save more while driving up profits. A significant benefit of outsourcing is that it is a cost-saving strategy. In fact, 70% of employers state that they outsource to decrease overhead expenses.
From hiring new talent to manufacturing processes, several expenses can be reduced. A few ways outsourcing achieves this is by:
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 weaknesses. Knowing when to hand a task off to someone else can greatly improve internal operations.
With outsourcing, you are purposely hiring someone who is an expert in their field. You don’t have to utilize your resources in hiring and training someone new. Instead, you can get the job done seamlessly by someone who is already an expert in their field. This will create the space for you to even tackle specialized tasks at a lower cost.
For example, you might not always need someone who can write press releases for your company. Simply outsource this work to an experienced freelancer whenever the need arises.
With external professionals taking care of specific tasks, you can focus more on your job. When you hire these individuals, they will work independently with little guidance from you. Because you have an extra set of hands, you can continue focusing on leading your team. You’ll be able to put your complete attention on your core competencies and mission.
As an example, consider that you're a painting business owner who is just starting out. It will be difficult to manage both internal operations and client satisfaction alone. You can focus on getting new leads and ensuring all jobs are completed with the highest quality. And administrative tasks like schedule management or recruiting can be outsourced.
Hiring an outsourced service provider means you can expand the scope of your business while lowering costs. How does this help?
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 further if you simply hire a professional.
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 hire an expert in the 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 this aspect of the role. In addition, 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.
Whenever you bring an outsider into your business, there is a level of risk involved. For example, you might want to outsource an accountant. Keep in mind that they will have access to all your financials and personal information.
To maintain security, ensure that the individual has all necessary licenses and paperwork. Have an intellectual property and privacy policy in place. Additionally, take the necessary steps to keep all sensitive data safe.
Small businesses often have a tight-knit community in their teams. 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 will genuinely benefit your business. Convey to your team the reason for outsourcing certain functions. This way, you are not leaving your employees with the fear of being replaced.
Outsourcing often involves offshoring or hiring contractors from other countries at lower wages. True, offshoring can save you some money. But be prepared for any backlash from onshore employees or activists.
You might see larger corporations land in controversy for their choices when outsourcing. Some of them have made changes to appease their consumer. Even for those that haven’t, their revenue has 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, you might want to think twice about hiring cheap labor just to save a buck.
On the flip side, if you are paying offshored employees fair wages, you are also supporting the labor market in developing nations. This can reduce the revenue gap in these low-economy nations. All in all, understand your motivations for offshoring your tasks. Modern consumers are becoming increasingly conscious of brands and the practices they adopt.
With the pros and cons in mind, you might be wondering if outsourcing is the right move for you. Before making your decision, answer the following questions and assess for yourself:
Once you have thought long and hard about these questions, you can decide if outsourcing is right for you. If outsourcing is the way to go, then:
Almost every industry these days sees a high amount of competition. Small businesses need to stay on their toes to be able to survive and grow in the market. One of the best ways for them to scale up profitably is by outsourcing. On average, outsourcing can save you up to 60% of your business costs. But is it right for you and your small business? Only you know the answer to that. Be sure to go over the pro/con list as well as the questions outlined above before deciding.
Remember that outsourcing is just one of the tools in your kit for successful growth. You will need a marketing plan, lead gen strategy, and other policies implemented. We at Hoist can provide you with the tools and guidance you need to succeed. Check out our blog for informative pieces, listicles, and more from business specialists.
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