Small business owners typically work long hours, particularly if they’re just getting a company started. It’s common to take on most, if not all, of the work required to keep things running, even when doing so encroaches on the owner’s personal life and down time. Hiring employees is expensive, but that’s where small business outsourcing comes in.
At Select Funding, we believe in small business owners and we recognize how difficult it can be to take on employees. We often discuss the issue of small business outsourcing with our clients. With that in mind, here is what you need to know about outsourcing for your small business plus seven benefits of outsourcing.
What is Outsourcing for Small Businesses?
Outsourcing is the process of hiring a third party—someone outside of your business—to do work related to your business. The common perception of outsourcing is that it is only a cost-cutting measure, and while it certainly can help small businesses save money, it’s more than simply an affordable way to get work done.
There are many small businesses that need expert work done but don’t have enough work to justify hiring an employee to do it. Bookkeeping and accounting are two examples of areas where small businesses frequently rely on outsourcing, but they can also outsource someone to act as Chief Financial Officer or to handle human resources.
Outsourcing may be done on a position basis, as in the examples we have noted above, or on a project basis. Many businesses, small and large, hire freelance writers to write web content or blog posts and freelance designers to create logos, infographics, and other visual content.
Small business outsourcing makes it possible for small companies to access experienced professionals to do important work to help the company meet its growth goals.
Which Small Business Functions Can Be Outsourced?
It’s possible to outsource many essential functions and tasks for a small business. Here are some to consider:
- Accounting & Bookkeeping. Most small businesses don’t need a full-time accountant or bookkeeper, making these tasks some of the easiest to outsource. It’s also rare for small business owners to have accounting experience and, considering how essential it is to maintain accurate financial records, it’s wise to outsource.
- IT & Systems Management. Every business needs working computers and systems, but having an IT person or team on site isn’t necessarily a requirement. Many small businesses contract with IT service companies to have an on-call resource to address issues as they arise.
- Human Resources. It’s common for small business owners to take on human resources responsibilities, but outsourcing is preferable because it allows the owner to maintain some distance.
- Marketing. Marketing is often outsourced because it’s a specialized function that requires training and experience. In many cases, the cost of outsourcing marketing can pay for itself by generating leads and helping businesses close deals.
- Research. Competitor, market, and product research are all essential, particularly when a business is launching a new product or expanding its operations. Outsourcing to a research firm can save time and money.
- Shipping & Logistics. Many small businesses outsource their shipping and logistics, engaging a company to drop-ship purchases from a warehouse.
- Customer Service. Customer service is one of the easiest functions to outsource because it’s work that can be done remotely and from anywhere in the world.
- Administrative Tasks. Some administrative tasks may need to be done on site, but many can be done remotely by anybody with a computer and a web connection. Hiring a virtual assistant can be one of the most cost-effective ways to get the administrative help you need.
As you can see, there are many tasks that can be outsourced. You might not need to outsource all of these, but in many cases, the cost of outsourcing will save you enough time to pay for itself quickly.
Should You Outsource Work for Your Small Business?
How can small business owners know if they should outsource work? Here are some indicators that outsourcing might be the right solution for you:
- Everyday, essential tasks are regularly getting postponed because you don’t have time to do them.
- You’re spending your valuable time doing tasks that you dislike.
- You lack the experience to do tasks accurately and well.
- You or your staff are making costly mistakes that are impacting your bottom line.
- You’re not getting the results you need from tasks that could be outsourced, such as marketing or IT.
- Customer service is suffering and your CSAT scores have taken a hit.
- You can’t pursue new ideas or goals because you’re too busy doing other things.
- You don’t have a healthy work-life balance.
If any of these things is true of your business, then it may mean that it’s time to consider outsourcing to remove some of the burdens from your shoulders and free up your time to work on other things.
7 Benefits of Small Business Outsourcing
There are many benefits to small business outsourcing. Here are seven to consider:
#1: Outsourcing is Less Expensive Than Hiring
One of the biggest advantages of outsourcing is that it is usually less expensive than hiring an employee. There are labor costs associated with employees that don’t apply to outsourced contractors, including taxes and benefits.
#2: Outsourcing Provides Access to Worldwide Talent
When you outsource work, particularly work that can be done remotely, you can get access to a much larger pool of talent than would be possible if you needed to hire an employee to work on site. Virtual assistants and other workers can be found anywhere in the world.
#3: Outsourcing Makes It Easy to Expand Your Hours
It has become increasingly common for small businesses to make their services available 24 hours a day. Outsourcing some of your labor can help you to expand hours by engaging skilled workers in other time zones (or other continents).
#4: Outsourcing Increases Efficiency
It’s difficult to be efficient when you’re trying to do everything yourself. Outsourcing makes it possible to do work more quickly and efficiently because giving work to experienced people typically takes less time than struggling through it on your own.
#5: Outsourcing Frees Your Time to Work on Growing Your Business
Small business owners may find they lack the time to focus on setting and pursuing their business growth goals if they’re trying to juggle multiple tasks and functions. Outsourcing is one of the best ways to remove tasks from your plate and give you the time you need to set goals and achieve them.
#6: Outsourcing Can Level the Playing Field
One of the hardest things to do as a small business owner is to compete with larger and more established companies, particularly if you’re trying to do all the work yourself. Outsourcing can help to level the playing field by giving you access to the best talent and the best resources even if you don’t have the same budget as your large competitors.
#7: Outsourcing Can Reduce Risk
There are risks associated with running and growing a small business. Outsourcing important tasks to experienced workers can help to reduce your risk because you’ll have access to their knowledge and expertise. Contract workers can help you identify areas of opportunity and avoid risks that might cost you money.
What Are the Disadvantages of Small Business Outsourcing?
Just as there are benefits to outsourcing work for your business, there are disadvantages and risks, as well:
- Loss of control. If you’re accustomed to having complete control over your business functions, you should be aware that outsourcing will require you to give up some control. You can mitigate your wariness about control by putting clear boundaries in place.
- Unexpected costs. While outsourcing can be more affordable than hiring employees, there’s a risk involved if you’re paying people an hourly rate. Here again, it can be useful to have workers sign a contract that spells out limitations on weekly or monthly hourly billing or to negotiate pay on a project basis, instead.
- Security. Any time you give an outsider access to your business network and systems, there’s a security risk. The best way to mitigate the risk is to make sure to check references and, when possible, read reviews. For individual workers accessing your systems remotely, you may need to put limitations on what they can see.
- Communication. It’s undeniable that outsourcing can complicate communication because you’ll be expanding your team and—if you’re outsourcing to a country where English isn’t the primary language—may have language barriers. Part of your onboarding process should include laying out expectations for communication. For example, when should outsourced workers be online? Available by phone? How quickly should they respond to emails? Conducting interviews on Zoom or Skype can help you get a handle on how prospective candidates communicate.
- Timing of Projects. Planning projects around schedules of people in different time zones and workspaces can be a challenge. It may be helpful to use a project management system to help you keep track of everything and set deadlines for remote workers.
While these risks are not insignificant, they can all be managed by taking some common-sense precautions and using the right tools to keep everything organized and maintain accountability.
Get Working Capital to Pay for the Cost of Outsourcing
Running a small business is a challenging job, but outsourcing some essential business functions and tasks can help you save money, keep up with your competitors, and focus on achieving your business growth goals.
Do you need access to small business financing to help you pay for outsourcing? Select Funding can help. Click here to read about our small business financing options and start the application process today.
