Gypsy Camp Blog

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.

Some of the advantages of outsourcing include containing payroll costs, minimizing your recruiting efforts, having fewer internal employees to managing, and improved utilization of dollars (you can hire specialists in the field on short term contracts). Often the most significant advantage is in the cost/benefit relationship. Contracting for a specific service or project is often the most cost effective solution.

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.

There are a number of excellent reasons to outsource. The best reason to outsource is that by outsourcing you can focus on what you do best. Hopefully your best includes running your business; sometimes it doesn’t – if that’s the case recognize what your strengths are and outsource areas where you are weak – you don’t always have time to invest in learning and minimizing weaknesses. Always balance the decision to hire or to outsource against what you might lose or gain (money, results, time, etc.).

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 improving results. Find more proven strategies and resources from the More For Small Business site to better manage your business.

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