Outsourcing, though not a new concept in business, is a rapidly growing trend. For hundreds of years businesses have been seeking to find the best way to make a profit. Throughout the 20th century most companies aimed to have everything under their own roof and take care of all of their business internally, while in the 1960s and 1970s many companies attempted to diversify and dip their toes into a wider variety of markets in order to increase profits. Today, businesses are looking to outsourcing as a means to be able to focus on their core competencies and make a profit.
Rob Handfield of NC State University defines outsourcing as, “…a strategy by which an organization contracts out major functions to specialized and efficient service providers, who become valued business partners.” Outsourcing basically means your company hopes to gain a larger profit by hiring contractors or freelancers to perform certain tasks.
So, should you consider outsourcing as a strategy for your small business? If you want to save both money and time—YES. Here is how outsourcing can help you with both:
You may be wondering how you can save money through outsourcing when outsourcing consists of hiring someone. It may seem contradictory, but hiring an outside source for some of your small business’s needs can help you save on the following expenses:
Think of how much you spend on rent and utilities for your physical office space to house all of the employees. As you expand, will you need to find a larger, even more expensive office? That will cost. Instead, as you grow, you could think about what tasks could be outsourced. That work wouldn’t be completed in your office and you wouldn’t need to pay for a larger space.
Furthermore, outsourcing could offset some of your administrative costs. Do you need a full time accountant on staff, or could you outsource this position? Things such as payroll, bookkeeping, taxes, and financial forecasting take time and expertise. It might be better to hire a company that specializes in this than spending the money on training one or more of your own employees to handle everything.
Hiring new employees is expensive! Not only do you have their wages or salaries to consider, but you also need to think about benefits, the expense of training them, and of course, the risk that they might not work out with your company.
There are certain areas of your business where you will always choose to hire an individual, but you may not feel as strongly about that in other areas. Outsourcing is a great way to gain more manpower without the extra financial burden of carrying another employee or the risk of it. Lastly, outsourcing gives you the flexibility to increase or decrease the amount of people you have on your team very easily.
Re-allocate your Budget
Is your business specialized? To some extent, probably. Outsourcing gives you the ability to use your precious resources to hire more individuals in your specialty instead of employees for areas such as accounting and administration. Or the budget could be re-allocated to give your current employees more in-depth training, to invest in new technology, or to simply save.
We have all heard one of Benjamin Franklin’s famous quotes, “time is money.” But, we have already talked about money, and I want to look more specifically at how choosing to outsource certain aspects of your business can help you save time, and how both you and your business will benefit.
Anything you have someone else do instead of yourself will save you time. Think about when you were a young kid. Did you ever try and convince your siblings to do one of your chores for you? If they did, that gave you much more time to play. Outsourcing tasks in your small business is similar, but you aren’t trying to convince someone else to do your work for you; you are looking to form strategic partnerships that will benefit both parties. When some of the burden has been lifted from your shoulders you have more time to:
Focus on Core Competencies
Small Business Trends points out, “When you start a business, you need to make sure that you do not lose your focus. In such circumstances, if you have to handle tasks such as attending to calls or bookkeeping, you may not be able to do justice to the more important tasks at hand.” Whether you have just started your business, or started it years ago, it can be easy to become scattered and bogged down in all of the extra details. Outsourcing helps you focus on growing and maintaining your business while making sure all of that extra stuff still gets done.
If you are wondering where to begin and what tasks to think about outsourcing, Entrepreneur offers a basic list: content marketing, bookkeeping, payroll, conversion optimization, and scheduling and administrative tasks. These are just a few starting ideas—the possibilities are endless.
Live a Balanced Life
Does having a good work life balance seem like a lofty goal? It shouldn’t. An unhealthy work life balance causes stress, which can hurt both mental and physical health and decrease productivity. This means that it is in the best interest for you, your family, and your business to maintain balance. There are many strategies for helping to reduce stress and clear your plate, one of which is outsourcing parts of your small business. There is no need to stay at the office past midnight to work on payroll or write content blogs if somebody else can do it for you.
How much of your business you choose to outsource will depend upon your business, its needs, and its budget. When it comes to outsourcing, it is not one-size fits all, and, how you use this strategy can change over time.
You should consider outsourcing because it can save you both money and time. Nevertheless, it will only be beneficial if you find the right contractor or freelancer. One of the dangers of handing over parts of your business to someone else is that they might not do it exactly how you want it done, when you want it done. What you don’t want is to re-do all of the work yourself, or have one of your employees re-do it all. This will waste time and money. Therefore, it is important to do your research, find someone you can trust, and make sure that lines of communication are open.
If you would like to learn more about outsourcing your business’s accounting needs, contact Lucid Books!