Many people say that when you start a business, you’ll have to wear more hats than you’d like:
Boss. Customer Service. Manager. Accounting. And more.
While the early stages require some grind, you can’t play jack-of-all-trades indefinitely. You eventually arrive at a plateau in your business when you need help. Outsourcing can help you overcome that slump and take your business to the next level.
What is Outsourcing and How Does It Work?
When you outsource, you are hiring a third party to complete business operations usually executed in-house.
Outsourcing is a widespread practice among many companies today. A study by Clutch shows that the “global outsourcing market totaled $85.6 billion in 2018” and that one-third of small businesses outsource at least one business operation.
Even big business names, like Alibaba, Google, and Transfer Wise, are several of their business operations.
What Are Some Examples of Outsourcing?
Depending on how complex your business, there are several types of outsourcing you can do. Some examples of business operations to outsource include:
- Human resources
- Customer service
- Social media management
- Web development
Outsourcing vs. Offshoring
There’s a distinction that needs to be drawn between outsourcing and offshoring. Simply explained, outsourcing is having a third party complete the work and offshoring is completing the work in a different country.
However, offshoring can still occur in-house. Imagine a company headquartered in the United States. That company can still outsource their customer support to India or the Philippines (these countries have a large English-speaking population). This company still operates within the United States but conducts part of their business operations overseas.
Businesses often participate in offshoring because they can leverage labor and services for less in cheaper countries. Also, there are certain tax advantages to conducting business overseas.
If you are considering offloading some of business operations, there are several pros and cons of outsourcing to consider.
Benefits of Outsourcing
Outsourcing creates strategic advantages that can position your business for success:
1. Scale Your Business
Growth can be exciting but can also feel overwhelming if you’re unprepared. Business growth is often accompanied by more problems and the need for more staff. If you’re not equipped to manage the workload spike, your business can suffer.
Outsourcing helps you keep pace with your business growth. It gives you access to a team of specialists trained in a specific business operation. For example, you can outsource your customer service. By directing customer flow to an outside firm that specializes in customer service, you can stop answering emails and calls and start running your business.
2. Increase Efficiency
Many businesses that outsource love it because it increases efficiency. When you intelligently outsource, you’re not just delegating work to a third party. You’re sending work to an outside firm where that task is their specialty.
If you tried doing your own design work, it can be a slow process. You need to play around with Photoshop, research colors and best practices. It’s time-consuming work and your time could be spent more effectively.
In this video, Ryan Daniel Moran discusses the various bottlenecks that you encounter when building your business to ten million dollars. Failing to outsource non-core tasks is one of them:
If you learn how to outsource properly, you free up your own time and increase business efficiency. Let’s return to the example of doing design work for your business. Outsourcing your design work to a third-party design firm can result in faster turnaround times.
3. Improve Operation Quality
Outsourcing work to a specialized third party improves efficiency and quality. Your business’ non-core tasks is the outsourced party’s core service.
If you’re not a trained copywriter, writing your own sales page might not yield your expected results. However, if you outsource your copy to a copywriting agency, they can increase conversions. Because trained copywriters understand the elements behind effective copy. Somebody who writes copy for a living can deliver superior quality compared to somebody who doesn’t.
That’s the advantage of outsourcing. You delegate business operations to third parties who specialize in completing those specific tasks.
If you need a customer service team to handle customer complaints, outsource it to a call center agency. If you need to clean up your bookkeeping, outsource it to an accounting agency.
Instead of juggling hats several times a week, learn how to outsource properly.
4. Skyrocket Productivity
With only 24 hours in a day, it’s important to distinguish between busywork and productivity.
As the business owner, you should be focusing on skills unique to you. What unique role do you play in your business?
You build strategy. Set brand direction. Make the final call. You see the big picture.
An effective business leader focuses on these critical tasks. Why then, do so many business owners dabble in busywork that can easily be outsourced?
Too often are our brains cluttered with the small things. When you outsource these menial tasks, you free up your mental bandwidth for thinking space. Accessing this realm gives you the focus required to think big thoughts about your business.
Don’t get bogged down in the small things. Outsource them and then leverage your unique talents to the maximum.
5. Slash Costs (And Add to Your Bottom Line)
The most attractive reason for many businesses to outsource business operations is to reduce costs. Hiring an employee in-house can be costly:
- Insurance (medical, workers compensation, etc.)
- Paid leave
- Retirement plans
For just one employee, these costs can quickly add up. Imagine companies with dozens of employees. The cost of hiring staff alone can discourage small business owners from even starting their businesses.
With outsourcing, the payment structure is different. For many agencies, you’ll pay by project. This is especially useful if you only require services for a fixed period. For example, you may want to hire a web designer for a few months to build your website and various brand visuals. Or you may want to hire a writing firm to create all the blog content for the next business quarter.
Outsourcing can result in significant savings for business owners.
6. Gain Access to Premium Talent
If you’re a small business, you might think that your hiring options are limited to local applicants. Outsourcing isn’t limited by physical distance. In this digital age, many services are offered over the internet. All you need is to establish a stable form of communication and to sort out the hiring paperwork.
With outsourcing, you have access to a larger pool of talent. If you live in Southern Carolina, you can look at premium designers based in New York or California. Outsourcing gives you the potential to work with the best of the best, unbarred by physical location.
Criticisms of Outsourcing and Offshoring
Sending Jobs Overseas
Many people disapprove of offshoring because they it is exporting domestic jobs overseas. Due to this, many people argue that offshoring increases the unemployment rate. Also, sending job overseas will decrease domestic income. The overall idea is that offshoring is bad for the domestic economy.
Lack of control
With outsourcing, you can outline what objectives that you need completed. However, the process itself is largely up to that third party company. While you can request regular updates, you have no control over when the project is being worked on and by whom. This can raise questions as to how much time is being devoted to your needs.
No Guarantee of Quality
Similar to how you lack control over the process, you have no guarantee of the product quality. Did the deliverable satisfy the requirements outlined in your contract? Or did they go in a completely different direction due to miscommunication? You have no idea of the work quality until you receive the deliverable.
There are also communication issues to consider when you’re outsourcing:
- Different time zones: Trying to establish regular communication when you’re in the United States and the third party company overseas can be challenging.
- Language barriers: When you’re not fluent in a shared language, directives can be miscommunicated and can lead to mistakes.
- Geographical issues: If you’re outsourcing your blog content, the language should be catered to your target region. If you’re an Australian company and outsource your blog content to an American copywriting agency, that copywriter might not include lingual nuances unique to an Australian audience.
How to Get Started With Outsourcing
Step 1: List all the different operations of your business
The first step to outsourcing is laying out all your business operations. Some different business operations include:
- Customer support
- Administrative tasks
- Data entry
- IT operations
- Human Resources
This is just a start and every business is unique. Review your own business and see what tasks you can outsource. And don’t limit it to just business tasks. Also assess your personal life to see what chores errands you can outsource to save you time and energy.
Step 2: Determine Which Tasks to Outsource
Pareto’s Principle indicates that 20% of your effort produces 80% of the results. See how you can apply this principle to your business.
What tasks unique to you are producing 80% of your business results?
Chances are, data entry won’t make the cut. Neither will responding to emails for three hours. Ruthlessly eliminate any busywork that isn’t producing meaningful results for your business.
Once you identify the core tasks that produce the majority of your results, consider outsourcing the rest. But be thoughtful about what you outsource. Every business is unique.
For example, Apple wouldn’t outsource their product designs. Product design is a key business operation to Apple. However, they might want to outsource manufacturing.
Step 3: Find an Outsourcing Company/Agency
Once you’ve prioritized the tasks according to Pareto’s Principle, it’s time to start outsourcing.
Do your research before committing to any agency or company. You can consider asking your business connections for any recommendations. Referrals can often lead you to long-lasting business relationships.
When you’ve found a company you want to work with, schedule an interview like you would for an in-house hire. How do they work? What can them promise? What is their work philosophy?
Step 4: Offer a Trial Period/Project
When Kevin Liang, CEO of ADI Ventures, finds somebody he wants to work with, he offers them a trial period or project. You won’t know how any partnership will work until you test it out. A trial project will help you determine whether you want to hire or fire this company.
Step 5: Create a Contract
If you’re satisfied with the trial period, draw up a contract. Some important points you want to cover in your contract include:
- Service expectations (blog posts, design work, bookkeeping, etc.)
- Expected timeframe for deliverables
- Payment schedule
- Terms and conditions
Outsourcing can be a method for reducing costs but try not to be cheap. Money isn’t a guarantee for quality but it’s often a good indicator. Hire the best you can within your budget.
What Is Outsourcing: The Bottom Line
While there are several criticisms to be mindful of when outsourcing or offshoring, there are still many advantages that can improve your business.
Increased efficiency. Upgraded quality. Superior productivity.
These benefits alone can be just what you need to take your business from barely floating to thriving.