Outsourcing is the practice of transferring one or more business processes and operations to an outside company. There are many reasons why a company would choose to outsource its business process and operations. The reasons vary from one company to another, but most companies choose to outsource their operations because it helps them save money on costs, save time in certain areas, and if used in the right way, can help improve overall employee happiness. Outsourcing is far from a new trend. Companies have been doing it for ages. But what parts of your company should you consider outsourcing? And why?
What Is Outsourcing in Business
Outsourcing is the transfer of a business process and operation to an outside service provider. When outsourcing, you’re granting another company access to any part of your business not deemed essential to the core competency. For example, a large IT company may outsource some of its technical support to an independent company, or an insurance company may outsource claims processing to an outside firm.
When you think of outsourcing, you might think that it only applies to call centre jobs, technology firms and other business resources. However, there are plenty of aspects to a business that can be outsourced. Outsourcing, when applied properly and with the right mind-set, can benefit your business. Here’s why.
What Are the Outsourcing Benefits?
There are many benefits to outsourcing that impact all areas of a business. Some include cost savings, increased productivity and profit margin increase. Businesses are always looking for ways to expand their reach and profits. Trying to do everything in-house can be overwhelming, time-consuming and is often a waste of resources. By outsourcing the parts of your business that you don’t need to be involved in, you can focus your time, energy and expertise on the core aspects that generate income, thereby increasing productivity and improving results.
Benefits of Outsourcing in Business
When you’re starting a small business, it can be hard to know where to start. And you want to be careful not to over-commit yourself. You don’t want to promise too much and end up with lots of orders or so many products that fill up your warehouse, only to find out that you don’t have enough people or space to fulfil them all. But outsourcing is an investment it’s one of the things you’ll need to scale your business. So which parts should you outsource?
There are plenty of questions you’ll want to ask before deciding on an outsourcing partner. Here are some top 10 benefits of outsourcing:
1. Outsourcing Saves Time
The more tasks you delegate, the less time you have to spend doing them yourself — and the faster your business grows. Outsourcing helps you focus on what’s most important for your business to thrive. Not only does this save time, but it also gives you a chance to simplify your work and make sure everything is running smoothly.
Outsourcing allows other businesses to use your resources without having direct contact with each other. This means they can control costs while they grow (and pay their employees). An outside contractor can also keep a close eye on everything from quality to sustainability of services.
2. Help Your Company Run More Smoothly
Outsourcing is becoming the new strategy to help your company run more smoothly. By outsourcing, companies can cut down on expenses and concentrate on their core business. In addition, companies outsource to get things done more efficiently. Outsourcing is a very important strategic decision for any organization and should be considered with care. Many times when you outsource something you can get it done much faster than doing it yourself or through your employees.
3. Increase Your Business’s Efficiency
You can improve your business’s performance if you outsource. You can increase your business’s efficiency and reduce labour costs by outsourcing. Outsourcing is a professional way to do the work, which will enhance your business’s growth.
Outsourcing is a part of a company’s strategic plan to reduce costs and gain profits in its core business activities. It helps them to focus on their core competencies without having to worry about other support activities such as payroll, accounting and administrative functions. Outsourcing benefits are numerous. Companies can save money, increase efficiency, focus on core competencies, gain skilled labour force, flexibility and scalability etc.
4. Outsourcing Is the Future of the Workplace
There is growing interest in outsourcing, as companies begin to see it as a way of gaining a competitive advantage over their rivals. As the economy becomes more competitive, and as the world economy grows closer together, outsourcing has become a way to maintain a competitive edge. Its benefits include the ability to focus on core competencies, reduce costs, and improve business efficiency. Businesses of all sizes and across industries are taking advantage of outsourcing services to focus on core competencies.
What Parts of Your Company Should You Outsource?
What parts of your business should you outsource? Chances are, you don’t need to run them yourself. These tasks can be labour-intensive and are often better done by outside companies that specialize in that kind of work. There are two main types of outsourcing:
Subcontracting or “task-based” outsourcing – Similar to how a restaurant might hire a delivery service to bring food to its door, you would hire an outside company to take care of all the tasks you don’t have time to do yourself.
Outsourcing or “capacity-based” outsourcing – Where you outsource your entire business – the entire infrastructure supporting it – rather than just one or two specific tasks within it.
Do you have a small team or a big one? Do you have the knowledge needed to handle certain tasks? How much time is it going to take you to learn each task? If you could save some money and still get the job done, it’s probably worth your while. There are certain parts of every company that can be outsourced. It’s a way to have tasks completed more quickly and save money – by hiring out the job instead of keeping it in-house.
1. Shipping and Logistics
If you are running a large e-commerce business with warehouses on multiple continents, then you should certainly outsource your shipping and logistics. This will help you manage all aspects of order fulfilment, warehousing, picking, packing and shipping through access to thousands of independent merchants around the world who specialize in these areas.
2. Book Keeping
While it may seem like you can manage your business on your own, most small business owners outsource some of their operations—whether it’s for convenience or expertise. It is generally recommended that companies outsource functions that take away from revenue-generating activities, like marketing and development, while focusing internally on profit-generating activities like client relations and strategy.
3. Data Entry and Research
A big part of any business is its ability to find new clients, and without enough time for marketing, you won’t be able to grow. That’s why it’s always a good idea to outsource some of your data entry and research. By using freelancers or full-time staff, you can use those resources for your most important tasks while saving time for others that need it more.
4. Virtual Assistant Services
Virtual assistants (VAs) can help you handle small-to-medium business tasks, like accounting, invoicing, bookkeeping and online research. VAs can do anything from writing your content to researching and editing it for spelling and grammar errors.
5. Marketing and Communications Services
There are many tasks for your small business that you should consider outsourcing. These include marketing and communications services. Whether you hire an employee from an agency or a freelance resource, communications can be outsourced at a reasonable price point and with significant benefit.
Outsourcing is key to the future of any industry. You are bound to get the best results out of your employees by outsourcing your work. It allows you to focus on what you do best and what requires most of your attention, which in turn increases productivity and profitability. Considering that outsourcing is significantly cheaper than hiring an internal employee, we must go deeper and consider how each part of your company can be outsourced.
1. What parts of your business should you outsource?
If you can afford it, outsource absolutely everything that’s not strategic and integral to your business plan.
2. How much will it cost me to outsource my business?
That depends on what you’re outsourcing, what industry you’re in and how much demand there is for those services or products. You may be able to hire certain employees for less than it would cost for your business to retain them directly — but before doing so, keep in mind that there are additional costs involved such as benefits.
3. Are all outsourced services equal?
No, far from it. It pays to shop around until you find someone who understands your needs and understands what needs to be done and why.
4. Should I trust whoever I decide to bring on to handle aspects of my business?
Of course not! Trust no one! Be diligent and take nothing at face value — even if it comes from people whom you know well or have worked with before. Always verify information, investigate claims and check facts.
5. What else should I consider before bringing an outsider into my business?
It could cost you an arm and a leg to replace whomever you hire if he does a terrible job, burns through your budget or otherwise disrupts operations.