Why a Small Business Should Outsource, or Not?
How does a small business owner decide if it’s time to outsource? What tasks should be outsourced? These have to be answered with some consideration and by first answering some other questions. Examining each task individually and answering these questions will help.
- Is it going to save the business money?
- Is it going to save the business owner or other key members time?
- Can I get a qualified and reliable service provider?
- How will it affect the quality of the final product?
- Is it a core, business defining task?
- What are the risks? And, how could the risks affect the business?
Is outsourcing the task or project going to save money? Often, the task being outsourced is a repetitive lower level task. This is usually a no-brainer; it should be outsourced unless this is your core competency. In short, if your core competency generates $200 per hour, and other tasks which do not define your business could be outsourced for $25 per hour, then generally, you should consider outsourcing those tasks. Just because you can do those jobs, doesn’t mean you should. In this case, you aren’t saving $25 per hour, you’re losing $175 per hour. Obviously, outsourcing these kinds of task saves the business owner time. Now, the owner and other key members of the business are free to do upper level tasks which generate more profit. Key to the validity of this method of thinking is the assurance of the quality and reliability of the service providers. You can’t afford to have jobs done twice; service providers have to be qualified and reliable, and should get jobs completed in a timely manner. Knowing where to turn for qualified service providers is extremely important when choosing to outsource.
Another consideration is the effect outsourcing will have on the quality of the final product, service or the bottom line of the business. For example, if you are doing your own accounting for the business and you are not a cpa, there may be many things you are missing that cost the business money. Even if a cpa charges more per hour than your core competency generates per hour, you could be losing money because of the quality of the work. This same idea could apply to tasks such as IT, Payroll, HR, Legal Services, Insurance, or Website Design. Again, obtaining qualified service providers is essential.
Your core competency, your main money making activity should not be outsourced. This is the activity that defines who the business is; it is what makes you different from others in your field. Because you want your clients to know this particular quality of service is only available from you, it should not be outsourced.
You should really spend time defining the risks of outsourcing before doing so. Examine exactly what parts of the outsourcing process could potentially pose security issues and what systems could be established to minimize the likelihood of an incident. Who is responsible if an incident occurs? Measures could be taken to limit the information a service provider has access to. How important is this particular task to the successful completion of a project? How reliable is the service provider? Do both parties understand exactly what is expected? There should always be a contract. This will hopefully eliminate any misunderstandings and can at least serve as a starting point if there are any misunderstandings.
These are questions that must be answered when considering outsourcing. The folks at The Small Business Benefits and Services Mall are accustomed to helping small businesses find solutions that fit their particular needs. Visit http://www.sbbsm.com or call 919-302-8849 and let us show you how.