This is a guest post courtesy of Miz Sue Fenton.
If you’re feeling any kinda overwhelmed with your business and entrepreneurial shenanigans, it “may” be time to consider outsourcing.
Just throwing it out there. 🙂
Please make Sue feel welcome in the comments below.
If you run a business, you are likely to be (at least somewhat) familiar with outsourcing. Ie:
contracting for services with an external service provider
Outsourcing is a common, nearly universal practice among smart business operators and entrepreneurs because it offers a wide variety of benefits, from expansion of your business base to significant savings in costs of labor.
Yet outsourcing has its pitfalls as well, and you need to consider them carefully when deciding how, when and with whom to outsource.
The following is a brief, no-fluff guide for your first toe-dip into outsourcing.
Your reasons for outsourcing will be unique to your enterprise, and one of several reasons may apply.
1. One reason is to expand your business operation by arranging for a partner to perform core services. This is done to allow you to meet client needs faster and more efficiently than through internal expansion.
The outsourcing partner already has the infrastructure and staff in place to do the work you need it to do, so outsourcing to them can save both setup time and ongoing expenses.
You pay the outsourcing partner, they deal with headaches such as the heating bill and staff scheduling, and you don’t have to worry about it yourself.
2. Another major reason to outsource is to take advantage of another expert’s knowledge and talent pool in an area relevant to your business.
In our highly competitive global economy, not everyone can be a master at everything.
It provides both a superior service to clients and enhances business value when you can maximize the quality of services offered.
Should your expertise be in areas other than what you happen to need at a particular time, it pays to outsource for that expertise, instead of delaying client fulfillment to acquire secondary expertise.
3. Finally, the third major reason for outsourcing is to take care of ancillary functions that are not essential to your enterprise except insofar as they are essential to any enterprise.
For accounting matters you retain an accountancy firm or a bookkeeper, for the drafting of contracts you retain legal representation.
In a similar way, you can outsource ancillary services normally rendered internally by larger companies, such as accounts receivable and customer support.
This offers benefits similar to those involved in outsourcing core services.
What to Look Out For When Outsourcing
The main risk involved in outsourcing is the receipt of substandard value from your outsourcing partner.
For this reason, you are well advised to conduct careful due diligence on any potential collaborative ventures.
Research their number of years in operation, their balance sheet, their reputation within their industry, and their level of competence at the services they offer.
If possible (and applicable), travel to their place of business and receive a tour of their premises, so that you can see in person how they conduct business and whether their facilities and staff are sufficient for your needs.
Another way you might find yourself receiving substandard value, is while their service may be well worth what they charge for them, it is simply not cost-effective for you and your current budget needs.
It’s important for you to do a careful analysis of the costs and benefits of outsourcing, and decide which of three approaches makes the most sense for you:
- Outsourcing with this or another partner.
- Establishing your own internal infrastructure to meet the client’s need.
- Or, if all else fails, forgoing the business opportunity as not being cost-effective.
Ongoing Monitoring of Outsourced Services
Should you come to an outsourcing arrangement, it is essential that you do periodic reviews of the performance of your outsourcing partner.
Review any cost savings and increased revenue that results from the outsourcing, and any specific issues that the partner might need to address.
Business is dynamic, so business conditions are also dynamic.
If it was sensible for you to enter into an outsourcing arrangement six months ago, it might no longer be sensible to continue in that arrangement with your current outsourcing partner, or with any partner; and it might be advisable either to restructure the arrangement through a fresh agreement with your partner or to find a new one.
In some situations, as your enterprise grows and expands, it becomes sensible even to internalize previously outsourced services and provide them yourself.
Another avenue is to purchase the operation of the outsourcing partner and expand through those means. Dreams of the future that we all dream, and that can become your reality.
It is hoped that this succinct summary of outsourcing considerations assists you in making one of the most important decisions a successful entrepreneur and small biz owner will face; when and how to expand.
Over to You
Do you outsource anything within your business? Do you find it’s an effective solution for some of your needs? Or not worth the headache? What else might you delegate out to others? Please share your stories in the comments, and if you liked this post… yo… share it already! 😉