You know how we reach out to a doctor if we’re sick? We don’t research and take meds prescribed by our understanding of Google Search Results. We trust our healthcare needs to the experts in the field. We outsource. We engage in small business outsourcing.
Why yes, of course!
Outsourcing is the process of hiring a third party to handle a particular department in your small business for you.
Why is this beneficial for me as a small business owner?
- Cost Cutting
By hiring a third party, you are ruling out hiring a full time employee for the same role. Thereby, cutting down on business costs.
- Reduce Burden
Let’s face it, running a small business is no walk in the park. You have a ton of things that require your attention. By outsourcing, you are passing the responsibility for said department to the third party and reducing the burden for yourself.
- Increase Efficiency
When the experts are at play, you have little to worry. Outsourcing is done to individuals/companies that are experts in the task outsourced. This increases efficiency of the department and consequently the entire business.
We all have areas of strength and passion. Passion births the idea of a small business and strength propels it into motion. You need to stay focused as an entrepreneur and hone our passion further. Thus it’s important to outsource certain departments so we don’t stretch ourselves too thin.
According to Clutch’s research, more than 37% of small businesses outsource a business process.
We want to give you a detailed pros and cons dive into small business outsourcing. Based on this, you can make your decisions and know where to look for possible hiccups too!
Benefits of Small Business Outsourcing
- Focus on Important Areas At the risk of repeating ourselves, we recommend outsourcing as it allows you to focus on important areas. As a small business owner, you are most likely the only one in charge of decision making and calling the shots in general. Focusing on core activities that can’t do without your insight and presence is imperative.
This is where outsourcing saves the day! Once you’ve delegated departments to third parties, that makes it one less thing for you to focus on.
- Lower the Costs – It’s no secret that small businesses run a tight ship, financially speaking. Any money saved is huge especially when you’re establishing your business.
By outsourcing to third parties, you are reducing overall costs towards the department. Because the alternative is hiring a full time employee and undergoing administrative costs to host the department inhouse. Sounds expensive, doesn’t it?
- Growth Promotion – Small business owners get so involved in the day-to-day operations that they lose sight of the bigger picture. This stagnates the growth prospects of the business and poses potential harm in the near future.
By handing over departments to third parties, you can be rest assured about that aspect of the business. This reduces your burden but more importantly lets you develop important next steps for your business. It allows you to build and grow your small business.
- Control over Operations – This is more to do with operational costs and understanding that some departments just function better when they are outsourced. Running on a budget, you cannot afford all aspects of your business to be in house. Furthermore, hiring someone who is competent will require adding to the operational costs, diving deeper into the business pockets.
This can be easily avoided by identifying departments that are not meeting the performance to cost ratio. The next step is to find the right outsourcing fit for your business and reach out.
- Swift Continuity
‘’Hi there, I won’t be able to work for the next three days due to personal reasons. Sorry for the inconvenience.
Seems familiar? Every small business owner has gotten one of these from their employees at some point in time. It’s inevitable and the fact that there’s nobody to blame does not negate the panic bells going off in your head.
As a small business, you will more often than not have one person assigned per department. In the absence of this person, the department’s work comes to a stand still. This puts a cinch in business continuity and increases the risk of losing business.
The solution? You guessed it right: outsourcing. By outsourcing the department to a third party, you are ensuring smooth continuity of business operations at all times.
Downsides of Small Business Outsourcing
- Possible Security Issues – When you outsource a department, you are required to hand over necessary files. This leaves you vulnerable to the third party on a privacy stand front.
Make sure to protect your business legally whilst dealing with third party outsourcing. This way you can avoid possible security issues and ensure a smooth overall process.
- Additional Expenses – By additional expenses, we mean unforeseen expenditure that crops up along the way. This is usually the consequence of clauses buried in fine print. Outsourcing to a third party cuts your business costs but you have to look out for hidden expenses that might crop up later.
As a rule, read all agreements/contractual documents thoroughly before signing them. Clear any doubts in the beginning and go into the outsourcing contract fully aware of all the expenses you are taking on.
- The Perfect Vendor – Meeting the perfect vendor in the very first go is fairy tale like. It takes a few tries, substantial research and compatibility. You have to find a third party that fits your business’ vibe.
They should also meet your prerequisites for the department. It’s a basic pointer but worth the mention as it has to do with the foundational part of outsourcing.
- Lacking Control – The upside of delegating responsibility unfortunately results in the downside of lacking control over the department. This is why hiring the right people matters so much. You are placing trust in them to do the job well without your monitoring.
- Do you even English? – The title is code for miscommunication. Sorry if we failed to communicate that properly (pun intended).
Thanks to technology, most communication with third parties is via email/text/video calls. While this is great, it suffers a high possibility of miscommunication and lag in communication.
And the solution isn’t as simple as walking over to the person and clarifying. It requires time and presence of the required people. This delays processes and can be detrimental if not properly handled.
At this point, you have an idea of small business outsourcing along with the pros and cons. Now comes the million dollar question. Actually in this case there’s 3 of them.
The 3 Qs
Answer these three questions before outsourcing –
- Will it propel my business forward?
This question is growth oriented. As the owner, growth prospects should take up a good amount of your time and effort. So before outsourcing as well, ask yourself if by doing so, your business gets the speed it requires to grow faster than otherwise.
- Will it boost my business’ capabilities?
A performance oriented question; will outsourcing better the overall capabilities of your business. This one is usually a yes, seeing as the whole point of outsourcing is trusting the experts to do the work for you.
- Will it make my business more efficient?
Why do you take any step for your business? In order to improve overall efficiency. Same with this, before outsourcing, ask yourself if it will make your business more efficient.
Now comes the real deal. Notice how many times we said ‘’department’’ so far in this blog? Here’s a list of small business departments that you can potentially outsource.
Unlike some departments, accounting cannot exactly depend on brainstormed ideas. It requires knowledge of accounting standards and legal procedures followed in your country. Unless you are from an accounting background, this isn’t knowledge you possess. Since this is mostly the case, it becomes a no-brainer to outsource accounting to a third party.
Even if you do know accounting, it’s best to outsource the department as it channels your time and effort to entrepreneur centric tasks.
Breaking the accounting department down, there are a bunch of services that you can choose to outsource. Third parties can range from freelancers to accounting firms or companies. Depending on your requirements, you can delegate one or all of the following services:
- Bookkeeping – The most basic form of accounting. Bookkeeping involves keeping a record of day-to-day transactions in the form of journal entries. It can get cumbersome to keep track and make sure every transaction is accounted for. In other words, it can take up considerable amounts of time and effort.
Owing to technological developments, bookkeeping has become easier with cloud software built to complete the task. However, you still require someone to enter the transactions on a regular basis. This is where the third party comes in handy. By outsourcing this service, you are freeing up valuable employee time that can be channeled toward important tasks.
- Accounts Receivable/Payable – This service is generally outsourced. A third party who is expert in accounting management is the perfect entity to deal with accounts payable and receivable. They take care of a variety of services for you.
To name a few, invoicing reports, financial planning and analysis, billing, payments, receivables, etc.
- Drafting Reports – Highlighting the fact that this department requires theoretical knowledge, this service is especially outsourced. Financial statements/reports hold a lot of information, structured in a specific manner. As laymen, we aren’t aware of the structure required, the details to be filled within, etc.
Thus it’s better to outsource reports so we can be certain of minimal errors and maximum efficiency. This service is carried out by Chartered Public Accountants (CPAs).
- Financial Planning – The lifeblood of a successful small business is planning every aspect of it. While we might be able to plan the ideation of the business, the financial front requires an expert’s perspective.
To analyze the current information and project future charts and possibilities, it’s best to hire a third party expert to do the job for you.
- Controller – This service involves audit reporting, KPI reporting, Cash flow analysis, etc. To make sure your business is in keeping with the accounting standards and principles, it’s important that this service be carried out by an experienced professional.
The third party can provide much needed strategic guidance to your business.
- Taxes – From reporting to filing, taxes have to be prepared perfectly in order to avoid unnecessary penalties. Staying compliant with the rules set by the governing bodies is of utmost importance.
Besides that, an expert can guide you through the process of minimizing your tax burden while staying compliant with all the rules.
- Payroll – Self explanatory, payroll processing services can be outsourced to a firm as well. Not that you cannot use an accounting software to keep tabs on the same, it’s just easier to outsource this redundant task. This way, you can stay focused on more important matters.
Pro tip, there are a lot of accounting third parties in the industry. Most of them are quite expensive too. As a small business, you have a lesser workload and budget to carry out the service. In such cases, look out for accounting freelancers who will do the job for a lesser price. The task here is to find the right balance between efficiency and cost-effectiveness.
Lastly, besides the many useful services offered, keep in mind some of the cons related to outsourced accounting. These range from lack of control to process migration and understanding.
Why outsource sales?
In most cases, one of the first employees hired is a sales executive. It eases your burden of chasing leads and converting them, letting you divert your time to more business owner oriented duties. So if you hire a sales executive, why do you need to outsource this department at all?
The answer lies in the different stages your business goes through. It lies in the scalability of the business. As work volume increases, you will require more hands on deck in the sales department to warrant the growth. Constantly working toward increasing sales and leaving the department understaffed is counter productive.
Here is where outsourcing sales comes into the picture. Some of the services under this broad category can be outsourced to professionals in the field. When the business grows, your employees will take time and upskilling to adjust to the changes. While that’s good, there will be a lag until they are up to speed with everything. A lag your business cannot afford. If left to experts, you will not face this issue.
Furthermore, the costs tied to it are beneficial for your cash flow analysis.
- Reduced costs.
- No responsibility for employee healthcare benefits.
- Zero training hours involved.
- Zero responsibility for the team involved.
We understand finding the right fit can take some time and effort. But the result is worth the hours put in!
Some of the services under this category that can be outsourced are:
- Recurring Sales Model – The third party can develop a recurring sales model that can be used multiple times. They can factor in growth and other natural changes that the company will go through as well.
- Product Market Fit – Sales is all about understanding what sells and to whom. This service involves market research that will help you arrive at finding the right market for your product/service.
- Lead Generation – A major part of sales is generating potential leads. There are a lot of different avenues depending on your product/service.
For example, Profitcast is primarily an inbound lead generation agency. We help small businesses procure leads through inbound marketing techniques.
This is the primary blueprint we follow. It’s a proven methodology and you can sign up for successful lead generation too!
Some of the lead generation techniques include –
- Content Marketing
- Social Media
- Search Engine Optimization (SEO)
- Email Marketing
As is with everything, there are a few cons related to outsourcing sales. This ranges from not being able to monitor them using your CRM tool to them having different tools and software altogether.
Why outsource administrative services?
Admin services include back office duties and other clerical work. While it doesn’t require expertise, spending your time on it takes away massive time from your schedule. For that matter, hiring an employee for the same is also not required. This job requires flexibility – you should be paying only for when there is work on the docket.
In this case, outsourcing it to a third party works in your favor in a few ways. The ways being:
- Cutting costs and training time involved in hiring a full time employee.
- Leaving it to experienced people with the required knowledge and ease of working.
- Zero employer’s liability.
- Reducing your burden of paying for the additional employee perks.
- Reduced HR work.
Administrative work that can be outsourced –
- Office support on both ends – customer and employee support.
- Acquiring office stationery and other supplies.
- Well organized documentation of all files.
- Setting up the office calendar, coordinating on meetings, etc
- Speaking with vendors.
- Maintaining a computed database.
Good customer service matters
As a general business principle, your customer service has to be good. A customer’s experience whilst transacting with you should be easy and memorable. Why, you ask?
- Good customer service shows you care about your clients.
- It proves to be a useful and substantial competitive advantage.
- It boosts brand image and speaks for your ethic and value system.
- Happy customers become your brand’s ambassadors.
- Clients pay more as long as they get good customer service.
Coming to the process of finding the right customer service agency, we have a few pointers for you to think about before hiring one:
- Language and fluency.
- Testimonials for the agency.
- Softwares and tools adopted by them to carry out the tasks.
- Incentives provided.
- Test run the process.
Customer service outsourcing is a good idea. It’s also crucial to find the right agency as this can prove to be a make or break decision for your business. This agency is going to be in direct contact with your clients – both potential and existing. There is no room for error as it’s not internal. More importantly, the agency’s work reflects on your brand image.
Need to know basis
There are a couple things you need to know about the agency before hiring them –
- Their recruitment and training process.
- Quality Control maintenance.
- Security Measures taken.
- Areas of expertise.
Now more than ever, marketing plays a big role in the success of your business. Traditional marketing isn’t a small business’ go to as it involves expensive debits. However, digital marketing is the best thing that can happen to a small business. 58% of startups invest about 75% of their total yearly marketing budget on digital marketing to break out of the high business competition in the early phase.
Yes but I can do this by myself. Aren’t most of the digital marketing tools free, anyways?
One of the crucial reasons for the downfall of small businesses? 37% of startups try to manage their digital marketing strategies themselves despite having no background experience.
The availability of digital marketing tools aside, you can translate it to success only by knowing how to use it correctly for your business. This is where outsourcing comes into the picture.
Why should you outsource marketing?
- Reduced costs and increased efficiency.
- Successful campaigns.
- Third parties provide expertise in the field.
- Latest digital marketing tools and software used.
- Marketing Strategy and Planning involved.
- Omni-channel marketing.
- Research and Analysis of the market.
- Data Analytics through software.
Marketing tasks that can be outsourced
- Search Engine Optimization (SEO) – You know what we’re talking about but do you really know? We’ve heard this term being thrown around in conversation today but few of us actually understand how it works and more importantly, how to make it work for us. SEO is a skill and a popular one at that. Lucky for you, we happen to have inhouse SEO experts who will make sure your rankings are improved with the data to back it.
- Digital Advertising – You’ve seen those ads that pop up on the sides of the article you’re reading. That’s one example of digital advertising. In order for this to work, placement and negotiation is important. Being a digital marketing company, we have trained professionals who know just where to place your ads in order to get maximum conversions.
- Social Media Marketing – We don’t need to explain this to you. We’ve all been in this situation. We’ve seen brands run their entire business thanks to social media marketing. While that doesn’t always work, it sure is important to add it in the mix of other digital marketing services. For the plethora of it, go on and click here.
- Email Marketing – The underdog, if employed correctly, email marketing can be a very useful tool while dealing with potential and existing customers. Periodic newsletters, special offers, product/service endorsements, birthday wishes and reminders. These are some proven methods of successful email marketing.
- Web Development – Your website is your digital storefront. All your marketing efforts point towards the website. So the marketing you do to reel the customers to your website will only work if your website itself is good. By good we mean user friendly, pleasant to look at, updated and UI/UX powered.
- Content Marketing – We’ve saved the latest for the last. This concept came in recently and it blew up the digital marketing world altogether. Strategising a strong content calendar backed by data driven research and focus on target audience is a gist of what content marketing is.
Content marketing is a marathon, not a sprint.
But there are so many companies offering these services. How do I know which one to pick?
Some qualities to look for in a digital marketing company before signing them –
- Dedicated professionals
- Transparent and consistent reporting
- Tailor Made strategies and campaigns
- Tech-driven analysis
Now, we wonder whom you can reach out to for these services. It should be someone who is an expert in the field and cost-effective at the same time. Hmm, this one’s quite the puzzle.
How can a digital marketing company (we) help?
- Drive-up web traffic
- Promote brand awareness
- Improve customer experience
- Tap into social networks
- Build customer loyalty
- Captivate online shoppers
Why outsource manufacturing?
- Negligible capital expenditure – Majority of your capital expenditure is spent on acquiring the right manufacturing equipment and setting it up. If you outsource manufacturing, it lets you reduce the capital cost involved to a minimum.
- Premium Manufacturing Technology – By outsourcing this department, you are giving your business access to premium manufacturing technology that’s the latest and best in the business. Seeing as you won’t be able to afford the same by yourself, this is a clear advantage.
- Regulations – Manufacturing equipment and owning it comes with a lot of legal procedures and regulations. Staying compliant with this can prove cumbersome for you as a small business owner. By outsourcing, you are sparing yourself the legal procedures and the costs that come with it.
- Labor Costs – For the volume that you are carrying out, the labor costs will be significantly higher rather than having a labor team dedicated to various jobs that justify the labor costs in a day. The former is your situation if manufacturing is in house and the latter is a third party.
The obvious benefit aside, there are a few things we’d ask you to look into when you consider outsourcing this department –
- Shipment sizes
- Labor involved
- Process management
- Purchase orders
- Payment terms
- Product specifications
Wrapping it up,
Like all other things, outsourcing has its pros and cons. One of the biggest responsibilities for you as a small business owner will be finding the right fit for the services.
We understand that every outsourcing opportunity comes with its own risks and rewards.
Until next time, take care and stay safe.