As a business leader, it’s critical that you balance your day to day operations with strategic planning. Staying on top of the details is the key to running a successful business. In saying this, however, being too involved or handling too much of the day to day work can be distracting, and is a common cause of business failure. To address this problem, business owners are increasingly turning to outsourcing to help alleviate the strain and free up time for themselves and key staff members. Outsourcing can save your business considerable amounts of money, such as through eliminating salaries. It may even lead to increased efficiency through the specialisation of operations, where outsourced employees focus more directly on a smaller function within a role. However, aside from the obvious consideration of budget, it can be hard to determine what roles you should outsource if you own a small or medium business. To help you get started, use these four questions to evaluate whether outsourcing is a viable option for your business.
1. How does your business deliver value to its customers?
It is highly important to consider what value you are delivering to your customers, and which business functions help it to deliver unique value. Understand your value proposition to customers, and if a function does not directly contribute to it, it may be time to consider outsourcing. For example, if you run a local retail store that customers love for the unique product range stocked and outstanding customer service, you should focus on those two areas, and keep your merchandising and sales teams in house. However, day-to-day operations like accounts receivable could be outsourced, especially during busy periods such as holiday seasons where core staff may be struggling to keep on top of their workload.
2. What is your business’ competitive advantage?
Focus on what makes your business unique in the marketplace. It’s crucial to understand how your core competencies and business activities contribute to this competitive advantage. If you own a car rental business that prides itself on the quality of of the customer service compared to your competitors, as provided by your experienced staff, you’ll want to keep this expertise-in house as this is your core competency. By the same token, a car rental business’s accounting processes will likely not be providing a competitive advantage compared to other car rental businesses in the market, and this is something that can easily be outsourced. In fact, it is beneficial to the function that you outsource, as someone else may be able to process your payroll better than you do. If a role is core to your functions, as with as with the customer service provided by the car rental business, there may still be benefit to hiring external consultants to help you to adopt new ways of working and keeping your regular team ahead of the latest developments in the marketplace. An external pair of eyes is always valuable, especially if they come with deep expertise that’s relevant to your specific challenges. This isn’t really outsourcing, rather consulting.
3. Is it a part of your business that’s continuous, or is the work more sporadic?
You need to consider which functions your business requires on an ongoing basis, and which roles are required less often or even only during special events. If your inhouse recruitment and HR team is only at capacity for 50% of the time, outsourcing these functions could be a easy way to improve efficiency and reduce overheads. Most outsourcing contracts will be on a flexible basis, allowing you to scale up when required, and reducing costs during quieter times.
4. How much control do you need over the role?
Considering your answers to the previous three questions, you can gauge whether you as the business owner need a lot of control over the function, or whether the role is relatively "generic" such as applying a set of skills to solve a specific problem over and over again. If this is the case, you probably don’t need too much control over the people doing the work and can rely on their expertise to deliver results. For example, some accounting or marketing production processes would be very similar across multiple businesses, making these areas much more straightforward to outsource. However, many areas within finance and marketing might require the management of complex relationships or heavy involvement in day-to-day operations of the business. These kinds of roles that are likely to be more difficult to outsource. That’s not to say if you need a lot of control or the role is complex then you can’t outsource, however in these situations you will need to pay extra attention to how communication channels are established and maintained throughout the relationship. Have you ever considered outsourcing? If you have any tips you would like to share, let us know in the comments below!