1. Lower operational costs
In a survey of small and medium business owners carried out by freelancing website Elance, 78% of respondents said that outsourcing specialists for various business tasks gave them an advantage against their competitors. The majority of them named cost savings among the main reasons to outsource, with a large part of respondents managing to cut their costs by at least 50%. Actual savings you achieve might vary depending on the exact tasks you outsource: for instance, they usually reach around 20% in human resources, but can grow to 25-50% in IT services.
2. Company growth
When you’re running a business, time is always an issue. This is especially true for entrepreneurs and start-up founders who have to become accountants, IT specialists, lawyers, marketers, and customer service representatives all at the same time. If you do all that by yourself, you’ll quickly notice that business growth and strategy simply don’t fit in your daily to-do list anymore.
According to entrepreneur David Walsh, progressive businesspeople understand that a single person simply can’t deal with every aspect of the company. Some of the tasks can be very time-consuming but are essential in maintaining the business, so outsourcing is always a better option than spending countless hours doing things that we can’t do as effectively as an outside professional.
This results in more time you can spend planning how to actually make your company grow instead of stalling in the same place. Even better, current technology makes the outsourcing process easier than ever: in the words of Mr. Walsh, “small business, augmented by a global pool of human capital, can compete directly with the biggest players in their space, and win.”
3. Access to missing skill sets
According to Gregg Landers, director of the #8 largest accounting and business services company in the US, there are three main groups of tasks which should be outsourced in most cases:
- Tasks requiring a high level of expertise, including financial analysis, legal services, etc.
- Tasks requiring specialized knowledge, including IT support, marketing and advertising, web programming, etc.
- Tasks which are highly repetitive and time-consuming, including data entry, accounts payable, inventory supervision, etc.
While the third category of tasks could be done by you or your staff (although we’d consider the time it’ll take you to do that beforehand), the first two groups will typically require you to hire new employees (which will typically be very expensive) or outsource the activities to other businesses or individuals.
4. Access to better technology and resources
If you decide to hire new staff with specific skill sets for some of the above tasks, you should always consider the cost of the technology and resources they’ll need for their work to be effective. A programmer will need a powerful computer, a designer will require some very specific software, while an analyst might need access to some costly databases
Let’s consider the extra expenses that build up when you hire your own staff. For example, the latest version of the Adobe Creative Suite (essential for every designer) can cost as much as £900. The price of a computer suitable for some heavy-duty programming is even higher, and we’re not even mentioning the cost of some industry-standard CRM or business analytics systems. If you outsource, you don’t have to worry about any of these things, as every service provider comes with their own tools necessary to get the job done.
5. Minimal initial investment
Let’s look at the story of Peter Laughton, CEO of online plant store Plantify. A few years ago, when he was starting up his business with minimal investment, he decided to hire a number of freelancers to do some of the tasks he wasn’t well-versed in, including website design, bookkeeping, and programming. The result? Plantify currently has the largest plant selection among UK online retailers – a result which would hardly have been reached with the same budget without outsourcing some of the essential business tasks.
If you decide to outsource some tasks to freelancers just like Mr. Laughton, most major online freelancing hubs such as Elance or Freelancer will require no initial investment – you’ll pay only when the job is done according to the specifications you provided. If you decide to work with other businesses instead, a contract signing fee is also rather rare, but it’ll typically depend on the exact tasks you’re outsourcing.
Satish Patel, CEO of accounting firm Analytix Solutions, considers scalability to be one of the most significant factors when making a decision whether to subcontract certain tasks – by outsourcing, “a small business can save a significant amount of money that would otherwise have been consumed by retainer costs”.
Some tasks, such as online customer service or helpdesk support, have high-traffic or peak activity periods but still need someone on duty at all times, meaning the staff you hire might either be too busy to take care of all the inquiries or spend a large part of their day doing nothing. If you outsource these activities, you can be sure that someone will help your customers out at all times while paying only for the work actually done.
7. Access to different markets
Let’s go back to late 1890’s – during that time, Coca-Cola was already a well-known and highly successful company, but it didn’t have the means to produce their own bottles, which stopped them from reaching new markets with their product. Their solution was simple – the company chose to license a group of independent bottlers to sell their syrup to while maintaining strict quality control standards, allowing them to popularize the soft drink throughout the US, and, later on, throughout the whole world.
While times have changed, Coca-Cola and most other major global brands still hire local marketing and advertising agencies to be closer to their end-users in various markets. In addition to improved access to new business, outsourcing some of the tasks to local specialists instead of hiring employees and renting offices can usually save you a considerable sum of money as well.
8. Company image
All kinds of things might happen when you’re running a business, but the less the customer sees or hears about it, the better. Let’s say you have two people answering your customer support phone and both of them are busy with problems which take a long time to solve. A third customer who’s calling in might have to wait for an hour or more before getting help, and that can easily result in lost business and negative reviews.
If situation like this happens once or twice a month, it’s certainly not the greatest idea to hire a third person to answer your calls. That’s why outsourcing areas of business such as helpdesk support is such a great idea – companies providing such services always have several people on duty, so you can be sure that someone will provide the necessary help for your customers every time they call. Showing that you care about their problems is a great way to build a positive image for your business.
The significance of flexibility when choosing between outsourcing and hiring new staff can be associated with the recent financial crisis: in a 2011 survey executed by Norton Rose, 69% of both customers and suppliers indicated that flexibility was a motivating factor for outsourcing, in comparison with less than 10% of respondents of a similar survey carried out in 2008.
Businesses are reluctant to take on new staff unless they’re completely sure that they’ll be able to keep them busy at all times. It’s understandable really: while an employee might be either idle or not able to deal with all the duties depending on the period, outsourcing the same tasks will usually mean that they’ll be done quickly and effectively – the workload distribution is the duty of the company you’re buying services from.
10. Staffing issues
Holidays, sicknesses, maternity leaves – you can plan ahead for most of these staffing issues, but some of them come unannounced, so you end up having heaps of work which needs to be done with no one to do it. Luckily, there are plenty of companies which offer to cover all of these issues by sending an experienced professional to do the necessary work until your employee is able to get back to work.
Some of the more prominent areas for this practice are accounting, HR, and IT support. When you’re outsourcing other aspects of the business, you won’t have to worry about these issues at all, as the whole responsibility falls on the company you decide to hire to do the work. All larger companies are able to cover their own employee absences, so your work will be done no matter what.
All in all, there are plenty of reasons to consider outsourcing some of the areas of your business to other individual professionals or companies, with some of the more prominent ones including cost savings, scalability, and easier access to new markets for larger businesses and the ability to focus on strategy and growth for the smaller ones.