Managing Your Small Business: The Advantages of Outsourcing

Define Outsourcing

Consider the advantages of outsourcing for your small business; define outsourcing needs. The history of outsourcing as a strategy shows that it developed from a need for specialized, lower cost labor; which makes outsourcing a great fit for small businesses who are often short of labor, and need low costs.

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The advantages of outsourcing are significant for small businesses. Most small business owners do not have a large number of employees. Therefore managing your small business with few full time or part time staff can be challenging.

It is even more challenging if you want to manage for small business growth

How do you manage that growth without increasing the number of employees?

And then who will have the time and the ability for recruiting those employees for your business? It's likely to be you; and you'll be busy managing the business (with not enough time for hiring and training new staff).

Keeping your focus on your small business scope and the span of control that's required for managing the many day-to-day business activities takes effort and resources, and often small business owners find that they do not have enough of those two necessities.

Define Outsourcing: What is it?

Outsourcing on a large scale is about large contracts to do large amounts of work; for example, many North American phone companies outsource installation and repair work to outside contractors; particularly during peak busy periods. Outsourcing on a small business scale is typically hiring local services that take time and/or skills that the business doesn't have internally.

Outsourcing is contracting an individual or another organization to do what you can't, or don't want to, do within the business.

There are many advantages of outsourcing for small business owners: contained employee costs; less work in finding in the 'right employees'; less work in managing the employees; better utilization of dollars (often you might have to hire a full time person when you only need a part time person or maybe a couple of part time specialists in their own fields); and higher productivity and efficiency.

Global outsourcing trends include an expansion of services across all functional business areas and across all geography as many business (small, medium and large) discover the advantages of outsourcing. Some very common areas of outsourcing include:

• Accounting, including accounts payable, accounts receivable, invoicing/billing, payroll (the history of outsourcing shows that accounting functions - in service support roles - were early 'adopters');
• Benefits, including administering and managing employee benefits programs;
• Call Centers, this is a traditional outsourced service but it is growing into many new business uses;
• Contact Centers, for queries, assistance, returns;
• Help Desks, for instructions, online training;
• Human Resources, including testing, on-the-job training – which is different than hiring, firing (although if you follow business in the news, you'll see that some companies have hired professionals to handle large-scale lay-off creating job descriptions, researching comparative salaries and wages;
• Information Technology (IT), including outsourcing the hardware and software maintenance, email, internet, and other support;
• Landscaping and/or grounds maintenance;
• Janitorial services for office, store and/or building maintenance;
• Legal, in handling legal work on a global basis (if necessary), also consider hiring different lawyers who specialize in different areas, e.g. partnership agreements, labor law, (the latest trend is to outsource legal research which can take time and resources), and more;
• Management, consider outsourcing experienced management services during your holidays, or business travel, or during longer term absences: such as a part-time Chief Financial Officer or Controller. Also consider outsourcing management or executive level staff for specific projects or developments (e.g. new product development work);
• Manufacturing, consider sub contracting out manufacturing work: for example, if you are a tool maker you might subcontract additional services from another manufacturer;
• Maintenance, including equipment, plant floor, plumbing, lights, etc.;
• Marketing, including planning, segmentation,
  target marketing, marketing mix programs (product management, pricing strategy development, promotional program development (including personal selling, web design, advertising, writing of brochures, web content, guerilla marketing, etc.) and strategizing and delivering your product or service to market);
• Public Relations and Communications: consider hiring a firm to help you with a specific project or keep a firm on retainer to handle your daily, monthly, annual events and internal and external communications (including social media)– use this firm to survey customers, employees and other stakeholders and build your brand and reputation;
• Sales, in an environment of small business sales consider hiring part time sales representatives, or a sales rep who is focused only on launching a particular product or service, or sales agents (some companies have even gone as far as outsourcing the sales force);
• Training, including training employees to be trainers, developing training programs, training customers;
• Transcription services, such as medical, languages, legal, etc.;
• Virtual assistants, this is a growing industry. A virtual assistant can be outsourced for a specific project or for ongoing work, whether it is part-time or full time;
• Warranty Programs and management of those programs;
• Waste removal and environmental services.

Define Outsourcing: Why Outsource?

Because of the advantages of outsourcing for your business. If you are starting a small business or are running a small business, your time is at a premium.

It is important for you to keep doing what you do best: that might be in the creative side of the business, or in the customer side, or in the manufacturing side; wherever and whatever it is focus on what you do best, hire when you have a full time need (perhaps your business has a need for one or more full time sales representatives, for example), then outsource the rest of your needs.

In short, the most significant of the advantages of outsourcing is the cost/benefit relationship: hiring an outsourced, contract worker(s) is often much more cost effective than trying to have your accounts receivable clerk also do your customer service work (typically there are different personalities and skill sets needed in both of those functions).

And, if one of the things you do best is answer phones, or write web content, make sure that you carefully review whether or not you could outsource those tasks so that you can focus on higher impact/higher profit endeavors such as building good customer service and relationships, or focus on developing problem solving techniques for, and/or with, your staff, or on managing change and/or focus on your business plan outline and checklist.

Finally, the decision to outsource needs to be balanced against what you can gain or lose by outsourcing.

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