In this information age defined by virtual office tools and high-speed internet, outsourcing has become a common practice for small and big businesses alike. This practice is not limited to large corporations and million-dollar businesses anymore. You have likely outsourced some form of product or service in the past. This article discusses outsourcing as a vital part of running a business.
What is outsourcing?
Outsourcing means enlisting someone outside your company to produce items or perform specific tasks for the business. This is when a client company hires an outsourcing company under a contractual agreement to provide services or products.
The term outsourcing originated from outside resourcing, which is the opposite of in-house resourcing or hiring employees who work in-house. Thus, to outsource is not to take in employees but to hire a third-party service provider in their place.
The main purpose of outsourcing as a business strategy is mainly to cut labor costs and other business expenses. Because of this, outsourcing has a bad reputation for prioritizing profit over other areas of the business. But if done right, outsourcing can benefit any small, medium, or big business, including its employees.
Types of outsourcing for small businesses
The main types of outsourcing based on location are onshore outsourcing and offshore outsourcing, but there are other types derived from the variations of these two. Onshore outsourcing is when you hire contractors within your country of operations, while offshore outsourcing is when your contractors are based outside your country.
Every outsourcing type has pros and cons, and it’s up to you to decide which type to go for. What is essential is that any outsourcing relationships you form should benefit both companies and protect you with clear and well-defined outsourcing contracts.
What to outsource?
There are many types and forms of outsourcing services, most of which depend on the business function they perform. A company can outsource any of the following business functions:
Hiring an administrative services provider is one of the most common forms of outsourcing. You can outsource most of your administrative tasks to contract-based freelancers in place of full-time personal or executive assistants. This way, you can delegate some of your tasks without paying for full-time hours.
These freelancers, commonly called virtual assistants or VAs, are popular among startup founders and entrepreneurs. At affordable rates and flexible working hours, expert VAs can help you with handling administrative tasks such as managing emails, scheduling meetings, preparing travel arrangements, and many more.
Sales and Marketing
For a small business to succeed, it must reach its target market and acquire the necessary sales to be profitable. Outsourcing your small business’ sales and marketing functions to a third-party company can be beneficial in reaching your goals.
Some marketing tasks you can outsource include brand development, advertising, and social media content creation and management. In addition, industry experts can increase sales for your business through sales calls, customer service support, market analysis, competitor research, and others.
Aside from analyzing the market and studying your competitors, researching the other essential aspects of your business can also contribute to your success. In fact, research and business data analysis is one of the fastest-rising business process outsourcing fields nowadays.
You can hire third-party firms who specialize in auditing your business processes, evaluating your core competencies, and surveying your competitive advantage in your industry. These research results can provide valuable insights to help you make effective decisions for the success of your business.
Business accounting requires specialized skills and years of business experience, which you or your employees may have yet to gain. Thus, outsourcing accounting services to an outside provider may be a great option.
Outsourcing accounting services is beneficial in the smoother running of business processes, evaluating your finances, and ensuring compliance with the standards of good accounting practices. A third-party accounting firm can help you with bookkeeping tasks, financial statements, budgets, business tax planning and filing, and many more.
Your business’ success depends on the people who run it. Therefore, it is necessary to have an effective human resources department tasked with hiring the right employees and assisting them in doing their job right.
Outsourcing human resources functions can free you from the time-consuming tasks of putting out job openings, interviewing applicants, training new hires, monitoring personnel performance, and terminating employee contracts. A third-party HR outsourcing company can also help in processing timesheets, preparing payroll, and establishing employee policies.
Information technology (IT)
Another popular outsourcing service is IT management, where you hire a third-party provider to support your tech processes and assist you with IT-related issues. Outsourcing IT management gives you access to IT experts and updated resources without the full cost of hiring and training an in-house IT team.
One of the most common IT services that companies outsource is website, application, or software development and management. You can also outsource the services of IT experts specializing in data storage and backup, and cybersecurity.
Manufacturing and distribution
The manufacturing industry can also benefit from outsourcing its manufacturing operations and distribution. Most local manufacturing facilities in the US stay competitive by outsourcing companies from regions or countries with low labor costs. These outsourcing companies produce raw materials and semi-finished products, which the US companies then assemble locally, thus producing cheaper yet still considered US-made products.
Outsourcing distribution services is also an excellent way for small businesses to avail cargo and trucking services without the need to buy expensive equipment and vehicles. If you are an online retailer, you can also outsource a drop shipping company to take care of the logistics for your business.
How to outsource?
Now you know the different business functions you can outsource and the benefits of outsourcing them. Next, let’s look at the steps in outsourcing these functions.
Step 1. Identify your outsourcing needs
Effective outsourcing begins with defining what processes and tasks need to be done for you. It also helps to set your goals and expected timeline for these tasks.
Step 2. Evaluate your budget
Once you’ve identified what tasks to outsource, calculate the cost of doing these tasks in-house. Your outsourcing budget should be lower than the cost of hiring in-house but still provide the same results.
Step 3. Find contractors or outsourcing companies
The ideal contractors or outsourcing providers are easy to find once you know what you need and the amount you are willing to pay. Make sure you research the services offered and look for hidden costs when hiring an outsourcing partner.
Step 4. Discuss and agree on terms of service
Here is where you present all the specifics of your outsourcing needs and let your outsourced provider on board your project. Ensure that all the terms of outsourcing services are clear to both parties.
The risks and cons of outsourcing
Outsourcing is a beneficial business strategy but not a perfect one, and there are various factors that can result in harming you as a client company. Below are some of the risks and cons of outsourcing:
- Outsourcing is cheap but can affect quality. You can maintain quality by setting quality standards and strict work instructions.
- Outsourcing can pose a risk to confidential information. Prevent the leak of confidential information with non-disclosure agreements (NDAs) and confidentiality clauses in outsourcing contracts.
- Outsourcing can fail to meet deadlines. Ensure that the deadlines set are reasonable for you and your contractor. You can further prevent delays through close monitoring of progress and constant communication.
Outsourcing with Remote Raven
Outsourcing is a valuable strategy to decrease operational costs, increase productivity, and lighten your or your employees’ workload. But the processes of outsourcing can be tricky, and not doing it right can only harm your company.
We at Remote Raven recognize that outsourcing for small businesses is not a one-size-fits-all strategy. We have been in this business long enough to know that different businesses have different outsourcing needs. If you are still determining which area of your business needs outsourcing, feel free to send us your questions.
Remote Raven can help you decide which business function to outsource and recommend qualified and experienced contractors for your approval. Remote Raven also trains, manages, and monitors these contractors for you, ensuring they meet deadlines and produce high-quality outputs. In addition, we let our extensive network of skilled professionals sign NDAs and confidentially contracts to protect your confidential information.
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