Is Outsourcing Right for you?
Regardless of industry, small business owners have one thing in common: constantly running in a million different directions. There are customers to serve, books to balance, taxes to pay, and employees to manage. Work is non-stop.
And the thing is you didn’t start your business to do most of these things. You started a business because you love baking, landscaping, or creating wooden furniture. But it’s all the extra stuff you have to do to keep your business operating that takes up most of your time.
As a small business, we at Whirks empathize with your constant battle between keeping the lights on and pursuing your passion. Most employees here wear multiple hats to ensure everything that has to get done does.
It might feel like owning a small business means you have to be everything to your business. But as John Donne famously realized back in the 1620s,
No man is an island,
Entire of itself;
Every man is a piece of the continent,
A part of the main.
None of us can know or do it all. This is where outsourcing services to industry experts can allow us to grow our business and focus our time on our core business.
This article will help you determine if your business is ready to outsource services like payroll processing, hiring and training new employees, and dealing with the IRS. If you are ready to partner with an industry expert, we will point out the pros and cons of outsourcing so you can set realistic expectations.
What are your business’ core competencies?
Before you start Googling for someone to take over your marketing or customer service departments, you should determine your business’ core competencies. Strip everything down to your bread and butter, then get rid of the jelly.
Set aside some quiet time for yourself and your leadership team to assess which business activities align with your core purpose. Let’s say you are a florist, and your core competency is creating awe-inspiring, sweet-smelling bouquets. If you need vases, you order them; you don’t learn how to blow glass. If you need flowers, you select and purchase them from a trusted nursery; you don’t cultivate a field of flowers and you don’t go back to school to study floriculture.
Take this oversimplified example and apply it to your business. Determine the services you provide or products you create that generate the most revenue. Focus your time, energy, and money on those things. Outsource the rest. Anything that detracts from your core business prevents you from growing. Consider paying an expert to take care of the duties you hate or have little knowledge in.
Which duties can I outsource?
Most essential business functions can be outsourced. The top ten most common outsourced small business functions are:
- Customer Service
- Information Technology Management
- Human Resources
And let’s face it. This is America, where our national religion is capitalism. If there’s a task in need of completion, there is a person who has monetized getting it done. You can hire someone to hang picture frames in your home or office. You can hire someone to detail your car in your office’s parking lot. You can hire someone to stay in your home and take care of your pet for one day or one week.
Considering how overwhelmed most small business owners are, it is unlikely you realize what your outsourcing options are unless you hit a roadblock and go searching or someone tries to sell it to you.
For instance, Whirks’ sales director had no idea Salesforce administration could be outsourced until a referral partner mentioned it. And she was thrilled to discover such a service! While she loves the benefits of Salesforce, she was not an effective user of the customer management software. Having outsourced this task, the sales department retains the value of the technology while focusing their time on setting appointments and making sales.
Make a list of all the tasks you dread and search for companies created to complete them for you. You don’t know what’s possible until you ask.
Pros of Outsourcing business tasks
Depending on who you ask, there is probably a long, detailed list of benefits to outsourcing. We are going to hit the highlights here.
You started your business because you are an expert at something. You create the best flower arrangements, you bake the best cupcakes, you invented the widget that prevents kitchen injuries, or you build really cool bicycles.
And most likely you are not quite an expert in human resources (HR), payroll, or complying with government mandates. But there are plenty of HR professionals, payroll processors, and compliance consultants ready to lend you their expertise. Some of them may even be in the market for beautiful bouquets or bicycles.
Outsource the business functions you struggle with to experts, giving you time to increase your expertise and grow your business.
Outsourcing is most often cheaper than doing the task yourself or adding an employee.
But to accurately calculate the benefit of outsourcing a task, you must include the value of your time in the equation.
If your time is more effectively spent generating revenue than an outsourceable task, then it is a cost-effective solution. Here’s an example:
You’re a baker and your oven breaks.
You have two options: Hire an oven technician or Repair it yourself.
Both you and the oven tech earn $100 an hour.
Oven tech estimates he’ll spend 2.5 hours completing repairs, plus $50 for parts.
$300 would be a big hit to your bottom line. Couldn’t you save $300 repairing the oven yourself?
Since you aren’t an expert in oven repair, you spend 8 hours reviewing and pausing YouTube tutorials to complete the repair. You also spent $50 in parts that you drove to the store to purchase.
In trying to save $300, you spent $850 worth of your time driving to the store and making repairs, plus you spent $50 on parts. That’s $900 worth of time and money. Outsourcing tasks you aren’t familiar with or simply hate doing is usually the most cost-effective option.
3. Streamline Processes
Every small business will hit a quantifiable milestone that will bring joy and dreaded government compliance. Suppose you haven’t hired a human resources (HR) expert or outsourced HR and payroll functions. In that case, you may only discover you are out of compliance when you receive a notice from the IRS or a penalty from the Department of Labor.
Essentially your time will be spent reacting to issues, penalties, and notices instead of inventing another widget to motivate kids to pick up their toys. Outsourcing will streamline your business processes because an expert will be aware of issues before they become problems.
A company dedicated to payroll and human capital management will proactively set up systems to ensure you remain compliant with all the federal, state, and local regulations. As experts, they know that you must comply with the Fair Labor Standards Act (FLSA) and Occupational Health and Safety Administration (OSHA) rules after you hire your first employee. And once your workforce has grown to 50 employees, those same experts will ensure you comply with the Affordable Care Act (ACA).
4. Hiring (Or Not Hiring)
Another benefit of outsourcing is not finding, interviewing, onboarding, or educating new employees. If you hand over your marketing responsibilities to a third party, you save yourself a lot of time and stress. Marketing experts do not need training. They’ve already mastered the necessary skills to grow small businesses through marketing channels.
In the same vein, outsourcing could provide your company time and space to grow large enough to support a full-time in-house marketing department.
5. Focused Attention and Redunancy
As you well know, running a small business splits your focus into a thousand pieces. And as necessary as each of those pieces is to your success, it’s nearly impossible to give each of them your full attention.
When you outsource an essential function of your company like customer service or research to a trusted business partner, their team can fully focus their energy on that one topic. Outsourced experts who focus solely on customer service have time to notice trends and alert you to significant roadblocks in your business.
Suppose your customers frequently get stuck on one section of your website. In that case, a dedicated customer service partner will report that issue to you allowing you to correct it, improving your business.
Cons to Outsourcing business functions
Most changes have a downside. You have to have the Cons in a Pro and Con list, just remember to weigh each factor in relation to your business needs.
Handing over a part of the business you’ve created from the ground up requires a massive amount of trust. Outsourcing is more than hiring an outside vendor to ship your products or manufacture the widget you invented. It’s a relationship between two businesses and the teams that serve them.
“Good help is hard to find” became a cliche because it’s proven time and time again. Not every payroll processing company will have your best interest at heart. The manufacturing plant you’ve contracted with to produce your widgets may not treat your widget like their own creation, ensuring each one meets all specifications.
3. Terminating Contracts
And if you don’t find out until after you’ve signed a contract that your shipping vendor frequently misses deadlines, you are looking at a costly mistake. And not just in canceled orders and angry customers.
Early termination of contracts is often costly and painful. There is risk involved with outsourcing, and not all of us are built to sustain risk.
If this scenario prevents you from considering any outsourcing, keep in mind that termination terms should be detailed within your contract. If not, those terms are up for negotiating. And it will probably cost more to ride out the contract than severing it early.
4. Lack of Control
Control freaks (which I am) have a harder time with outsourcing than others, especially if it’s a task you think you should be doing as a business owner. If you’ve got it in your head that business owners should keep their own books or make their own sales, outsourcing isn’t on your radar.
Set aside your control issues and pull out your calculator. If you can make more money outsourcing, refocus your control issues on your hobbies, kids, or spouse.
A major weakness of outsourcing is maintaining your brand identity. Regardless of their expertise, another business will never be able to embody your brand as intimately and knowledgeably as you and your staff.
If you are building a brand or rely on a firsthand perspective on research, you will want to keep those tasks under your roof.
Outsourcing to build your business
If you are overwhelmed by all the must-do tasks of running a small business, you’re in good company. Unless you double majored in accounting and widget design, you will need outside expert help while building your business. Outsourcing may be a temporary fix to a staffing shortage or a permanent solution to your hatred of math.
If outsourcing helps you grow your business, gives you breathing room, or allows you to focus on your passion, make it happen. Keep in mind that finding the right fit for your business may take time because you need a quality company you can trust and partner with.
Determine your competencies, do a cost/time analysis, and weigh the pros and cons. If you would benefit from outsourcing your payroll processing and government compliance, schedule a 15-minute call with Whirks.