How is outsourcing essential to small businesses?
Small businesses regularly face many challenges when it comes to handling and maintaining operations. Ideally, business owners want to have every single aspect of their organization to be up and running as smoothly as possible. However, when these problems arise and appear to be overwhelming, a lack of solutions may serve as a pitfall.
Outsourcing can help small businesses overcome challenges as an outsourcing services provider can take over some of the company’s business functions when necessary. For instance, instead of hiring another in-house employee, an outsourcing company can assign a team or an individual to perform a specialized function. Also, they would provide the essential facilities that a small business needs to perform at the best of its abilities.
Before reaching out to an outsourcing company, owners must carefully decide if they really need help and choose which business functions to outsource. Read on to find out the possible hints to call for outsourcing help, what are the important factors to consider in an outsourcing service provider, and which services can companies avail through outsourcing solutions.
When should small businesses outsource?
These are the possible indicators of whether a small business needs to outsource certain services.
The need to regain focus and direction
Since small business owners tend to do all the tasks as much as they can, they might lose the sense of direction for themselves and for the company. This may cause mismanagement and may deem harmful in the long run.
Outsourcing aids mismanagement by helping owners and employees efficiently handle business tasks and processes. Hence, employees will get assistance and help from the outsourced teams, while the owners can focus more on core business functions.
The need for expertise
While business owners realize they couldn’t do it all on their own, employees may have been facing a similar problem, too. There are certain aspects in the company that may require people of certain skills and designation to perform the job. Hiring for another in-house talent, however, may not be a feasible solution for it may be costly. Once the owner chooses a provider, the outsourcing company would provide talents with specialized skills and knowledge that the business requires.
The need to control the costs and losses
Costs and losses are inevitable when it comes to operating a business. For one to expand and grow, one may need to spend. The question, however, is up to what extent? While a company can’t just be too conservative or too aggressive, their spending must be maintained at a manageable minimum.
Managing costs is one of the things that outsourcing companies can do for small businesses. Studies said that reducing costs has been one of the key factors why 70 percent of companies resort to this business practice. The valued services that outsourcing companies provide can help businesses control their budget and allocate them to other important things that fuel the business strategies further.
The need for resources
One of the essential elements in business is resources, such as physical facilities, equipment, and infrastructures. Small businesses may already have these, but it may limp them at one point when facilities start to show signs of wear and tear. Also, existing resources may not be enough to improve processes and operations, which may hinder business growth.
Lack of resources calls for help from outsourcing companies. An outsourcing partner can aid such a challenge of insufficient resources by sharing facilities, systems, or technologies needed by small businesses to increase productivity and streamline processes.
What are the factors to consider in outsourcing?
Let’s check on the factors to consider in outsourcing small business support services.
Pricing and Service Value
Savings is a crucial factor in the decision-making process when planning to outsource. In general, outsourcing aims to lower a business’s labor and operational costs. A lot of outsourcing providers can offer products and services at a very competitive yet reasonable price. One factor, however, that must set the difference is that businesses must check on what value they can get from each service, and we mean quality and other additional services.
That said, small businesses shouldn’t just go for the least expensive vendor simply because that’s all they can afford. Companies must look beyond the price and focus on the services offered by the outsourcing company. It will significantly benefit small businesses if the outsourcing company specializes in a specific function they require.
As mentioned, business owners should check on what an outsourcing company can offer to them. The more services they employ under their portfolio would seldom mean the better standing of what an outsourcing company can do.
Aside from the number of services, the question also revolves around whether the company provides value to the service they offer. Quality should matter, too, especially when these specializations can match the needs of a small business.
Services Level Agreement (SLA) and other Contracts
Legal paperwork consisting of the outsourcing agreement between a small business and an outsourced service provider is one of the most required materials before forging a partnership. That said, a contract between two parties must explicitly state the scope of work, its length, the rates, and other details that are deemed critical in the partnership.
It is very important that an outsourcing company must provide this document, with each detail dictated in a correct and concise form to avoid any ambiguity. It is best to have an accompanying lawyer review the terms the outsourcing provider is proposing and possibly make amends with the SLA when needed.
One of the things that small business owners may consider about their potential outsourcing provider is how it takes care of its clients. In a way, customer care makes up a large part of a company’s reputation, especially at a time wherein everything’s online and can be scrutinized under a microscope.
Aside from that, a lot of factors also build up a company’s image or branding like their capabilities to meet deadlines, performance under minimal supervision, trustworthiness, communication efforts, and ability to collaborate effectively with clients.
One of the critical factors to check for an outsourcing provider is the company culture, which determines their workability and ability to nurture their relationships with the companies they serve. As mentioned earlier, the working culture also makes up for a large part of a company’s reputation.
Beneath the surface, does the outsourcing company live up to the expectations that they set? Are the company’s practices aligned to the vision and mission? Are the outsourced employees able to provide the best services to their clients?
Behind the success of an outsourcing service provider is their clients. Through successful collaboration, the outsourcing company may gain a satisfaction rating, improved overall rapport from their client, and a much better stature amongst other providers in the industry. Research has always been the key to whether a small business has chosen the right outsourcing provider.
While it is one thing to look for the outsourcing company’s track record, small business owners should also check on the reviews and testimonials from existing and previous clients. Often, satisfied companies would not only praise their outsourcing partner, but they would give recommendations to other small entrepreneurs as well, especially those in dire need of their services.
What services can small businesses outsource?
Often, outsourcing earns a common misconception of being enclosed to the usual call center setting, providing customer service and tech support services. However, what must be cleared is that outsourcing isn’t only confined to these two services. In fact, small businesses can rely on outsourcing companies for these business functions.
Accounting and Bookkeeping
Even if some business owners are somewhat knowledgeable about handling their finances, not all are confident enough to take on responsibilities involving cash flow, payroll, and other hefty paperwork. This may bring inaccuracies in numbers that can derail the business’s growth pace because these accounting decisions were generally made to set the tone for all other operations. This is where an outsourcing company gets in.
Outsourcing accounting and bookkeeping services can help small businesses manage their finances. It saves money from hiring a full-time account manager, helps in making more accurate and amenable decisions, creates a better cash flow, and lets business owners focus on core business operations.
Administrative work is becoming one of the most sought-after services from an outsourcing company. Currently, many businesses search for virtual assistants (VA). Solopreneurs, small business owners, and even startup executives hire VAs for they are known to have multiple capabilities to do various services, depending on what is asked.
Outsourcing people to do administrative work isn’t only one of the common outsourcing services but also one of the cheapest. The starting price for outsourcing a VA is usually around USD3 to USD10 an hour, while VAs with specialized skills charge at least USD35 or higher.
For years, customer service has been one of the most commonly outsourced services. Normally, customers would contact the customer service department through various means of communication (call, email, messenger, etc.) to give their feedback and other concerns that would help small businesses improve their products and services.
Through outsourcing, small businesses can devote more time and energy to further strategizing product improvements and other important business matters, while outsourced customer service takes care of collecting and gathering feedback.
Human Resources (HR)
Regardless if there are many people in the company or just a few, maintaining an organizational structure among the staff of different ranks and departments can be challenging for a small business owner. This may prompt them to incorporate a management style that may harm and create strained relationships between everyone in the office, which also affects many factors in running a business.
Outsourcing people who can handle manpower is one of the services that small businesses can resort to. Having an outsourcing service provider do HR tasks for small businesses may help them get the right people for the company. Aside from that, the outsourcing provider will also help perform other HR functions such as recruitment, training and development, payroll, and monitoring organizational structure.
Like any other company, small businesses need to have a team to deal with the hefty workload concerning legal aspects in the organization. This includes checking a lot of paperwork and representation at meetings on whether each statement would prove that the business is still running on the right track.
While hiring an in-house legal expert may be a known favorable approach, outsourcing this function helps the small business gain the same high-quality expertise at a much affordable price. It also gives insights and advice that a small business may learn from when dealing with a lot of technical aspects of the business laws and regulations.
Manufacturing plays a vital role in making a small business successful, solely because it involves mass-producing a product that companies can offer to the market. Many electronic and clothing companies rely on outsourcing because it is cheaper and setting up a dedicated manufacturing facility is expensive.
Outsourcing this function lets a small business worry less about equipment maintenance and employees’ labor costs. However, business owners must note what quality of the products the outsourcing company can deliver and if it’s cost-efficient.
Getting the business name across the market may seem easy, but one of the biggest challenges small businesses face is the competition in the market getting stiffer from time to time.
Getting an outsourcing company to do all the marketing strategies helps a small business boost its presence, primarily online. And it can be done in various ways, such as content marketing, search engine optimization, and social media management. Especially with the advent of digitalization, even small businesses can go big as long as they manage to play their cards right in marketing.
Research and Development
Research and development account for being one of the most expensive functions in a company as it incurs significant overhead expenses including training, equipment, and administrative costs. Through having an outsourcing company as a partner, small businesses can spare themselves from the high costs of facilities used for research projects and overall operations.
Shipping and Logistics
Managing and delivering products to customers isn’t as easy as it looks. Businesses are expected to deliver once a customer purchases from them. This can put pressure on small business owners to deliver as per what the company promises.
An outsourcing company that offers shipping and logistics functions takes away the hassles of handling delivery. As a result, business owners and staff members can now focus on other business priorities such as operations, management, and marketing.
Technology has played a hugely critical factor in today’s business operations. With everything going mobile and online, businesses tend to run around the clock, and both owners and employees respond to their customers in real-time. That said, software bugs, Internet connection problems, or hardware and software-related issues might hamper operations and ignite problems concerning technical support.
If a small business doesn’t have its own technical support team to handle technical concerns, outsourcing this business function is a viable option.
Besides the mentioned, small businesses can outsource the following services: creatives, content marketing and optimization, drafting, event production and management, IT management and computer programming, lead generation, public relations, sales, and virtual tutoring.
Though they are commonly known, these are generally depending on the type or nature of business and services, the owners’ aspiration to scale, and the availability of their internal resources.
How outsourcing helps
A surge in small business clients in outsourcing is said to be on the rise this year. Through outsourcing, small businesses can still be productive and efficient by maintaining and improving their business even without the need to hire a new in-house team. Aside from that, it helps the owners do more by not doing everything, which means they could let go of the tasks that don’t really need much of their attention and focus more on core business strategies.