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Outsourcing is increasing in popularity within businesses of all sizes. Instead of hiring and training employees in house, businesses are using outside organisations or freelancers to perform specific functions. When handled correctly, outsourcing can allow businesses can remain competitive and grow as resources can be channelled into core business activities.
Pretty much any business role can be outsourced. Depending on what your business does, your outsourcing requirements will differ. For example, it may make sense for a marketing agency to outsource their payroll services, but not their marketing, because that’s what they do.
The most commonly outsourced business functions are:
In 2019, 37% of small businesses outsourced at least one business function. This trend is expected to continue for the foreseeable future.
The costs associated with hiring and training for jobs that do not require a full-time employee can be very high. Add to that the additional overheads and office space, then you could end up spending much more to fulfil a job function than you should be. If that employee then leaves or doesn’t live up to expectations, you are back to square one and need to start the recruitment and training process all over again.
In addition to employee costs, you will also need to consider saving made by not having to buy specialist software, equipment or training needed to keep skills up to date.
All these additional costs will likely end up being passed on to your customers.
Outsourcing gives you more flexibility when choosing what business areas to invest in.
Small businesses have limited resources and employees who often already perform a number of functions. Studies have shown that small business owners spend up to 40% of their time on tasks that do not generate income. You need your people to stay focused on the core activities of your business that serve your customers.
By taking away these peripheral distractions, you can focus on your true business priorities.
You are going to find it difficult to compete with big businesses that have in-house support if you try and do everything yourself.
By outsourcing, you can access the same skills, experience and economies of scale that bigger companies do. For example, if you use a specialist agency for marketing services, they will be using the same skills and tactics for you as they are for other businesses, meaning that you won’t get left behind.
Each area of a business has a certain amount of risk. This is a fundamental fact. It would be almost impossible for small businesses to keep on top of this. Technology, regulations and laws change all of the time.
By outsourcing to a specialist, they manage this risk for you in their own area of expertise. For example, your accountant will be expected to stay up to date on all of the latest tax laws and financial regulation and apply this to their work for you.
As you can see, there are many benefits to outsourcing, but some people are still sceptical. During the last recession, businesses were so eager to cut costs, they made the mistake of trying to outsource almost every aspect of their business to the cheapest bidder without thinking about their customers. That’s the wrong way to outsource.
By maintaining your focus and investment on your core business and outsourcing the peripheral (but still important) activities, you’re giving yourself the very best chance to be successful in a competitive market.