It used to be that only big companies outsource the more labor-intensive but low-value aspect of their business like customer support or back-office processes. High-value processes such as research and development, design, and security are kept in-house.
Now even small business owners are outsourcing parts of their operations to become more competitive, nimble, and profitable. Processes like payroll, logistics, fulfillment, invoicing, lead generation, and more, are being farmed out to specialized and capable firms.
Outsourcing has become the norm rather than the exception. Businesses around the world spent $75.2 billion on outsourcing security last year. And 78% of those businesses say they made the right decision to outsource. The present economic situation has only forced companies both big and small to quicken their outsourcing plans.
Outsourcing doesn’t mean third-world country or offshore. A lot of small firms and agencies in Canada, Europe, and the United States are into providing services for bigger companies.
Cloud services or Software as a Service (SaaS) have allowed service providers to be more competitive with their rates. About 93% of companies are considering or have already adopted cloud services.
For you as a small business, what can be the advantages of outsourcing?
1. Less overhead
This is the main reason why you want to outsource. It should bring down your operating costs. With outsourcing you will need less space, power, hardware, software, office supplies and human resource issues. That’s a lot of money, management and logistics that you can save your business from if you outsource.
2. Fewer HR issues to deal with
Yes, this is my second most favorite benefit of outsourcing. Outsourcing companies will be taking care of your employees’ remuneration and benefits. You will be spared from office politics, conflict management, employee training, health programs, and more. These won’t be your responsibilities anymore.
3. Access to expert advice
Outsourcing gives you advice to experts in the industry. An accountant or a lawyer that has been in the industry for years will be a valuable asset to your business. They have already gathered the connections, knowledge, and skill ahead of you. You can take their advice and steer clear of the pitfalls that could hurt your business if you have consultants.
4. Quickly scale
Opportunities often have a limited window in business. But hiring more staff could mean weeks or even months before you find the right candidates. You need to put out wanted ads, screen resumes, interviews, tests, hire and do the paperwork. With outsourcing, you can quickly get the manpower to take advantage of these opportunities.
5. Avoid training costs
Training your employees is expected but can be costly. You also don’t have any assurance that they will stick around for long. Imagine sending your most promising employees to a seminar only for him to get poached by a competitor?
That can be traumatic for a small business owner. Outsourcing companies provide ongoing training to get the most recent best practices for their employees. This is something that you get full advantage of as a client.
About 24% of small businesses outsource to improve efficiency. Another 18% said they outsource to access expertise. And 52% said they will continue to outsource even in the post-pandemic economy. Are you convinced already?
So what are the non-core functions that you, as a small business, can outsource? Here are some:
1. Administration
There are low-value and repetitive tasks that you can outsource to another firm or hire a virtual assistant. Jobs such as managing utilities, security, lease agreements, procurement, and permits can be handled by a visual assistant or a contractor.
Find someone from your area or who has connections. Dealing with bureaucracy can be a headache. Someone who knows the ins and out will be able to speed up the process.
2. Lead generation
A continuous stream of leads is very important to a business. Leads turn in customers. These customers pay the bill. Lead generation is even more important for B2B companies.
There are now firms specialized in generating leads for businesses. These agencies are efficient and skilled in creating a leads pipeline for just about any business. If lead generation is something that you are having trouble with then perhaps you should try a lead generating agency.
There are a lot of moving parts to a lead generation process and setting it up can be complicated. But once everything is in place, lead generation can be automated. With the experience and knowledge gained, your team can start taking over this function.
3. Content marketing
This is the process of producing and publishing content on your digital properties to attract online traffic. These digital properties are your website and social media pages.
The types of content produced are blogs, infographics, photos, and videos. The publishing part is putting out content in discoverable and consumable media. As you can see, content marketing is very labor-intensive and time-consuming.
You need a writer, graphics artist, and a digital marketing specialist. Each one will require a different setup and equipment. Those PCs for graphics are expensive. You can contract content marketing out to PR agencies, Digital Marketing Firms, or Content Marketing companies. They offer unique approaches to Content Marketing.
4. Inventory, logistics, and fulfillment
When your business starts growing and the garage can’t hold your inventories anymore you need a quick way to scale up.
You should take a look at companies that specialize in inventory, logistics, and fulfillment. These companies maintain warehouses so that their clients don’t have to.
Your stocks will be housed in these warehouses.
Everything is automated. When a purchase happens on your website, the system starts the fulfillment process. The product is selected, packed, labeled, and delivered to your customer. You are prompted which stock is running low so you can have your supplier ship new items to your warehouse. This is how big companies maintain their supply chain. Thanks to technology, small businesses, like yours, can benefit from this economy of scale.
5. Social media marketing
Social media is perhaps the best way to interact and engage with your customers. The immediacy and shareability of social media are too much to ignore. Doing so will put your business at a disadvantage against your competitors.
But social media networks like Facebook, Instagram, Twitter, Pinterest, and LinkedIn have different rules. There are also nuisances between them and their users.
I usually advise our clients to focus on just one social media platform But this too can be overwhelming for a busy entrepreneur. Unless you are a digital native or part of the “older” millennials, it is best to outsource or contract out social media management.
The good news is that there are a lot of digital natives who can do this for you. This young generation grew up around social media which to them is like fish to water.
For a startup with scarce capital, I suggest getting a freelancer to manage your social media for you. These freelancers have very competitive rates. They also speak the language of millennials. You can level up to a social media marketing agency when business starts to boom and things get too complicated.
6. Accounting
Filing taxes, fixing your cash flow, collecting unpaid invoices, managing your debts, budgeting, shall we go on? You get the picture. These are some of the things that accounting does. It is not for the faint of heart.
As an entrepreneur, you don’t want to get bogged down by data. Ideally, when you are ready, the numbers should be in clear, simple, digestible, and, most of all, actionable format. This is what accounting does for entrepreneurs.
It is a very specialized skill and intensive process. Good accountants are always in demand. It drives up their pay scale. This is why maintaining a licensed in-house accountant can be expensive.
And this is only one person. Depending on your business, you could need a whole team. Companies solve this by outsourcing their accounting to back-office service providers. Nothing is stopping you from doing the same with your accounting needs.
7. Payroll
Payroll, something that business owners need to do but do not enjoy. Don’t get it wrong, entrepreneurs like to pay their employees. But processing the whole thing is not enjoyable.
In this case, the destination is better than the journey. Computing for overtime, deductions, benefits, taxes, and social welfare contributions is a time-consuming process.
Payroll is one of the non-core functions that small businesses should outsource. It is very easy to do so because of cloud computing. There are services and cloud-based applications that do payroll for almost any type of business. These payroll systems integrate with time in/out apps and accounting software.
Depending on your location, payroll software takes care of taxes for local, state, and federal authorities. All you need to do is review and approve your payroll when it is due.
8. HR
It is part of any business, big or small, to take care of the employees. Workers need to be taken care of so that they can work optimally and productively.
Your employees are your greatest asset and so their welfare should be important to the company. You will need to coach, guide, train, and listen to your employees. This is an ongoing process.
But if you outsource, you can avoid these. Your outsourcing partner will handle the overall health and provide benefits for their workers. No need to worry about compensations, welfare benefits, and training. These are already provided to the workers who take care of your business.
9. Creatives
Unless you are a creative agency, you don’t need to keep an in-house team of artists or a Creative Department. Creating artworks, images, and videos requires specific software and hardware. The costs can run into thousands of dollars.
You also need to update and upgrade these at least every six months. There are cloud-based software that allows you to easily create artworks and videos for all kinds of use. It only takes a matter of minutes.
Even better, you can go to Fiverr or Upwork to find freelancers who will gladly create what you need at a fraction of the cost of a creative agency.
10. IT services
When small businesses start to get a headcount of 10 employees, that’s when things start to get complicated IT-wise.
You will need someone who can take care of the hardware and software issues your employees will be griping about. These are only the hardware and software that your employees directly use to do their work.
You will also need to set up your IT infrastructure. This is the technology that makes your business hum but is not visible to your employees. Data security, business continuity, auto-backups, server links, and storage, to name a few, are the domain of your tech guy.
The problem for most small businesses is that they cannot provide a competitive salary that will prevent bigger companies from pirating your IT person. Imagine training your IT only for him to end up somewhere else.
Outsourcing your IT needs shields you from such possibility. You can hire someone who visits every week or so to check on all things IT. This person can also be on-call for emergencies like if someone hacked into your website.
This contractor can also refer someone capable of taking his place if your IT guy needs to relocate to another part of the country.
Conclusion
The single most important consideration when outsourcing is to lower your direct cost of doing business. If you are only starting, you have to make sacrifices like forgetting about convenience for lower operating costs. Yes, doing payroll can be a pain but if you can’t afford to outsource it, then roll up your sleeves and buckle down.
Only outsource the non-core parts of your business. You don’t have to outsource everything in the list above. Only the things that make sense for your business. If IT is your thing and doing so is easy for you then keep it in-house by all means.
As a small business owner you have to be smart. View outsourcing as anything from hiring someone to pickup the office supplies to a full-pledged accounting firm. If someone can do it better and cheaper than doing it yourself then outsource.