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When to Outsource for Your Small Business

by Nora Dunn on 17 September 2009 0 comments

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

Photo: alexsl / iStockphoto

As a crucial growth step in any business—and in varying degrees throughout the business development process—outsourcing becomes a necessity. The big bucks are made not on one person’s efforts alone, but the efforts of many. Today we will look at the inherent characteristics of outsourcing, hiring employees (and the difference between the two), and how you can increase your profits—both emotional and financial—with outsourcing.

As a business owner—the king (or queen) of your castle, the master of your domain, and the ruler of all things to do with your company—you have it all. You also do it all, and sometimes you also try to be "it all" to everybody too.

You manage the core function of your business—keeping customers happy and product moving. But you also wrestle with the day to day operations of managing any business—accounting, taxes, marketing, technology, business development, etc. Then you perform a similar juggling act at home; after family time, cooking, housework, repairs, and maintenance, sometimes sleep can seem more of a luxury than a necessity. This is around the time you should really consider outsourcing.

The Difference Between Outsourcing and Hiring Employees

Hiring an employee is actually the first step towards outsourcing. In so doing, you are outsourcing obligations that you formerly met yourself, and overseeing their maintenance. The trouble is just that; you are overseeing their maintenance. You are providing office space and supplies, equipment, and eventually an employee (or even a department of employees) to manage your other employees. Many a business owner has found themselves entrenched in a world of employee management, far away from the source of their business inspiration, and drowning in negotiating ever-larger lease spaces and buying new office equipment to keep a small army operational.

Although this may be a slanted view of what it is to have employees, it also demonstrates the difference between outsourcing and hiring employees. Many of the headaches associated with having employees are eliminated by outsourcing.

Advantages of Outsourcing

  • The wages can be less than an employee’s. Although this is not always true, dollar for dollar outsourcing (after you take into account costs such as payroll taxes and benefits) is usually less expensive, especially if you are willing and able to outsource the work to somebody in another country with a lower cost of living.
     
  • You save on office expenses. Not having on-site employees means smaller office space and fewer supplies required.
     
  • You can take advantage of the time difference and speed up the delivery of your end product. If you happen to outsource to somebody in an overseas country, you can send them an assignment in the evening, and awake to a complete report in the morning.
     
  • You have more time to focus on the business, rather than being entrenched in operations.
     
  • If things aren’t working out, you don’t have to worry about regulations for firing your help or negotiating severance packages.
     
  • Per the above point, outsourcing is also great for finite or indefinite projects that are tricky to hire for.
     
  • Tax incentives: If you outsource overseas, some counties offer tax breaks for moving your business operations off-shore.

Disadvantages of Outsourcing

  • You have less control—or at least it seems this way. With little to no ability to stand over your helper’s shoulder, you must be explicit in your directives. Otherwise, you may end up having to do (or pay for somebody else to do) the project over again due to misinterpretations or miscommunications.
     
  • Sometimes you get what you pay for. I outsourced an online stock photography project last year, hoping for (what I thought was) some straightforward post-processing and administrative help. Unfortunately I chose one of the lower bids, and indeed I got what I paid for; in fact I got much less than what I paid for.
     
  • You may have to go through a few people before you find a good fit. As with hiring employees, the process of outsourcing can be one of trial and error. If you outsource online, you don’t often have a chance to communicate much beyond email for the interview process. Experts recommend that you try to interview your outsourcing candidates over the phone when possible.
     
  • If you don’t do your research, you won’t get what you need. As alluded to above, my own initial outsourcing experience left a bad taste in my mouth. Upon further research though, I discovered what the market charges for the services I wanted, and by low-balling the project, I got burned. It helps to know the going rates for what you want done, so you can make wise decisions.

Commonly Outsourced Jobs

  • Information Technology
  • Human Resources
  • Facilities Management
  • Real Estate Management
  • Accounting
  • Customer Support
  • Call Center
  • Market Research
  • Manufacturing
  • Web Development
  • Content Writing
  • Ghost Writing
  • Engineering

Resources for Outsourcing

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