Outsourcing has become one of the most important ways for business owners to find professionals to handle parts of their business that they don’t necessarily need someone to do full time. The process involves contracting out some of the functions of your business to someone else so that you can grow your business rapidly without worrying about whether you have the money to bring someone on full time. Some of the most common business functions that are outsourced include:
- Payroll and accounting
- HR or human resources
- Information technology (commonly referred to as IT)
- Marketing and sales
Any business owner who wants to be successful in today’s global economy must become a master of outsourcing, and here’s why.
The Advantages of Outsourcing
In most cases, outsourcing saves you a lot of money in a variety of ways. It could save you money on the cost of operating additional office space. If you don’t have a place for employees to work, then you’re saving money on electricity, monthly rent, and basic operating costs that are associated with running a building or a space that’s larger than what you have now.
In addition, you also save money on personnel. You don’t typically have to pay freelancers for vacation time or provide health insurance for them, so the cost of hiring someone who will do a great job is much lower.
Just keep in mind that outsourcing is not always going to save you money. Before automatically assuming that this is the case, you should check the return on investment associated with doing these functions yourself. Consider how much you would have to pay to do it on your own and compare that with the cost of outsourcing those functions to see if there is actually a savings there.
Outsourcing can also help make your business more efficient by taking necessary functions and moving them away from your business, enabling you to focus on your core business instead of all the details. It can also improve the capacity of your business because you will have access to the vast resources of the contractor rather than trying to keep up with the costs of doing it yourself. For example, if you contract logistics out to a large company, you gain the use of their entire fleet, which is probably much larger than any fleet you could operate effectively on your own.
You also find that you have a much larger pool to choose your workers from. By contracting with a company that does nothing but the process you need to have completed, you gain the experience and knowledge of people beyond what you would be able to find in your area.
Avoiding Common Outsourcing Problems
Of course just like with anything else in business, there can be problems with outsourcing. Here are some tips to help you avoid the most common pitfalls:
- Should you really hand over the reins of this process to someone who doesn’t work directly for your company?
- Read reviews and do research on contractors before jumping in with them.
- Always have something to fall back on in case the unexpected happens, like the contractor goes out of business.
- Get an attorney to help draw up a contract with the outsourcing company. All service level agreements should indicate the levels of service that they will provide to you, the time frame within which those services will be provided, each party’s responsibilities, how disputes will be handled, and the details for exit if one of you should decide to end the arrangement.