More than one-third of small businesses (37 percent) currently outsource a business process, <a href="https://clutch.co
co/bpo/virtual-assistants/resources/small-business-outsourcing-statistics" target="_blank" >according to a recent study by Clutch, with most of them seeking support in IT operations, marketing, or customer service. In fact, the global outsourcing market reached $92.5 billion in 2020, with over 300,000 jobs in the US being outsourced every year. When asked about their preference for outsourcing, many businesses cite its usefulness as an effective tool in business growth. For business leaders who think it’s time to grow their business, outsourcing can free up financial and human resources to focus on business development - a key consideration for those startups trying to save money and expand at the same time. However, before you can enjoy the benefits of outsourcing during your business growth, you must first consider whether it is the right fit, and how you can make it work for your business.
Are The Benefits Of Outsourcing Applicable To Your Business?
One of the most commonly cited benefits of outsourcing includes the reduction of costs - or at least, the expected reduction in costs. Most of the small businesses outsource their accounting to CPA`s and keep an eye on them remotely using tools such as Cloud based QuickBooks and VDI desktop as a service. Due to the economies of scale and significant savings on overheads of in-house staff, companies in the growth phase can redirect the capital saved towards their business development plans. Outsourcing can also improve operational and time efficiency in a business. For instance, many law entities gravitated towards subcontracting during C-19 as a way of satisfying their marketing and recruitment needs, without the full-time in-house price tag. However, harnessing this benefit comes down to getting the right outsourcing deal - one that fits the nature and needs of your business.
Finding the right outsourcing partner for your business takes some legwork, and is best done when you are clear on your business needs. Before you can narrow down the list of ideal outsourcing partners, businesses must identify a clear scope of work and the expertise they will require. Having a clearly defined budget is also critical. Ensure that you have clear boundaries set with your outsourcing partner about your budget boundaries, or you may find yourself having disastrous miscommunication - and rising costs.
Have You Identified Your Core Business And Goals?
Another trick to making outsourcing a successful part of your business growth is to identify the business processes you want to keep in-house. During business growth, it can be tempting to diversify and lose focus of your core business (what your company is known for or the products/services that garner the highest ROI). Businesses that make the mistake of outsourcing their core business processes risk compromising the quality of their most popular products or services which are a critical foundation on which business growth is built.
Perform a business audit, and separate your business functions into core and non-core functions. Look for business functions that either give your business a significant advantage in the market or can have a direct domino effect on your bottom line and growth prospects. Functions that have a direct impact on the short and long term health of the business are deemed critical, and should be kept in-house. For instance, most companies choose to outsource secondary functions like IT, marketing and finance. Identify what are aspects of your business will most require your attention during the growth phase, and those will guide you in your decision.
Do You Have Clear And Comprehensive Contracts?
Finally, outsourcing can get tricky if you do not have clearly defined terms from the start. A great example is the outsourcing of IT or finance functions. Both of these involve the handling of sensitive customer and company data. The leaking of or mishandling of these can result in severe financial and legal action against the company. Also, this can damage the brand and its reputation so far, which hampers company growth.
With this in mind, businesses should draft a sound business agreement with their outsourcing partners. Business agreements should be clear on pricing, payment terms, delivery specifications, communication outlines, and contingency actions for breach of contract. It is also advised that businesses become familiar with the types of outsourcing contracts before drafting one so that they can make the right choice.
There are a lot of benefits to outsourcing, particularly when you are trying to grow. However, it is not for everyone, and does require having the right conditions. Focus on having the right markers in place to support outsourcing rather than the other way around. If done right, it can fast-track your path to success and business expansion.