Even the hardest-working entrepreneur can’t do everything on their own. At some point, every small business owner needs to hire a team if they want their companies to get to the next level. While some roles require dedicated personnel—such as start-up’s need for a handful of full-time developers in-house—other responsibilities are often better suited for contractors, agencies, and freelancers. This article explains the outsourcing process.
If you’re thinking about outsourcing some of the tasks your team is dealing with on a regular basis, take comfort in the fact you’re not alone. In fact, one study found that 54 percent of businesses work with third-party entities to achieve their objectives.
Why do companies choose to outsource work?
When it boils down to it, small businesses usually decide to outsource work for two reasons.
First, they might simply not have enough room in the budget to hire a full-time employee, guaranteeing their salary, covering their benefits, and taking care of payroll taxes, unemployment insurance, and other expenses.
Second, as every entrepreneur knows too well, there are never enough hours in the day. So, as operations start to scale, small business owners often decide to outsource certain tasks they’ve taken care of since the beginning.
For example, an entrepreneur might decide to hire a payroll company for small businesses instead of taking care of accounting functions every quarter. As a result, there’s more time to spend on everything else.
What are the benefits of outsourcing?
There’s a reason more and more small business owners are working with contractors, freelancers, and third-party agencies: The benefits of outsourcing—which we’ll briefly explore next—are numerous.
1. More time to focus on the bigger picture
As all business owners know too well, time is a limiting factor.
While it might have been easy enough to write a couple blog posts, send out invoices, and handle other administrative responsibilities in the past, there comes a point when small business owners need to step away from these tasks and learn the power of delegation.
By outsourcing work, small business owners are able to reclaim time each week they can then invest in other more important areas of operations.
2. Hire experts to do specific tasks
Just because you’re not taking care of something on your own any more doesn’t mean quality will suffer. In fact, the opposite is often true.
To continue the above example, most small business owners aren’t experts in copywriting, accounting, and people ops. They’re experts in their business’ core functions.
By outsourcing the right tasks to better-qualified parties, small business owners are usually able to ensure the resulting outcomes are more impactful than if they took care of the same things themselves.
3. Get the job done cost-effectively
There’s no way around it: Hiring employees is expensive.
Not only are businesses responsible for payroll taxes and benefits, they also have to devote resources to sourcing and interviewing candidates. Once an employee is hired, the work is just beginning. Companies usually have to invest a lot of resources into hiring and training as well.
There are other hidden costs to consider, too. For example, depending on how many employees you have, you might have to hire additional workers (e.g., managers and an HR professional). There are also costs associated with equipment, utilities, office space, and more.
Luckily, outsourcing certain tasks lets you bypass this altogether. You end up getting to leverage someone else’s expertise without having to break the bank or absorb tons of indirect costs.
4. Invest in other areas of growth
Since you’re spending less money on payroll while outsourcing, there’s more budget to devote elsewhere.
For example, if you run a landscaping company, you might decide to sponsor a local Little League team with your savings. If you run a restaurant, you might decide to put your savings from outsourcing toward buying a food truck or opening another location.
Of course, you could always decide to put any excess funds aside and save them for a rainy day. As far too many small business owners learned the hard way in 2020, an emergency fund is more than just a nice to have.
5. Improve business continuity
Speaking of 2020, all business owners know how rapidly things can change. Everything can be going swimmingly one day, and then all of a sudden, an unforeseen event can rear its ugly head, derailing operations overnight.
By joining forces with third parties, entrepreneurs can mitigate some of this risk while improving business continuity.
For example, imagine a business headquartered in Colorado loses power during a massive blizzard. The business has partnered with a marketing agency in New York City and a freelance accountant in Austin, Texas. Even though their own doors may be closed, the marketing agency and accounting professional can keep plugging away, making sure work doesn’t grind to a halt entirely.
At this point, you have a solid understanding about the benefits of outsourcing. That said, just because outsourcing can help you grow your business doesn’t mean you should outsource every task. Up next, we’ll explore some of the more common tasks small business owners try to route to other professionals.
What should small businesses outsource?
While every small business is unique, there are still a number of threads that tie them all together. In most cases, here are some of the responsibilities that small business owners outsource most often:
Marketing. Instead of writing blogs or designing ebooks by yourself, consider enlisting the services of freelancers who can take care of these tasks for you. The right partners will be able to produce high-quality content reliably, freeing you to focus on other needs.
Web design. If you’re still using a template-based, do-it-yourself website builder, it’s probably time to give your site a makeover. Enlist a talented agency to take care of this for you. That way, you’ll end up with an incredible digital property on the other side—and you won’t have to waste countless hours making tweak after tweak.
Accounting. There comes a time when every owner of a growing business needs to step away from processing invoices, paying bills and taxes, and making sure employees are paid on time. In the digital age when a solution only is a quick search away, one of the easiest tasks to outsource is accounting.
HR. Chances are you don’t have time to make sure every new hire has signed each form, enrolled in health insurance, and has gotten up to speed with every policy and procedure. Luckily, human resources for small business services are popping up every day. Again, a quick search will find the answers you’re looking for.
Now that you have an idea of the kinds of tasks your small business can outsource, let’s turn our attention to some of the things you should keep in mind before deciding to hire consultants, freelancers, and third-party agencies.
What should you consider before outsourcing?
While outsourcing can be incredibly helpful to many small businesses, you can’t just decide to outsource any old task and expect great results. Here are some of the questions to ask yourself as you whittle down your options.
1. Is this mission-critical or is this something I should delegate?
If something is absolutely critical to your operations, by all means keep that responsibility on your own plate. The last thing you want to do is to outsource a really important task to someone only to find out the hard way they made a costly mistake.
2. Is this the right move for the long term?
With the right approach, outsourcing can help you grow your business. That said, it’s important that you don’t sacrifice long-term potential for short-term gains.
For example, if you have a dedicated employee who’s looking to develop more skills, it may make more sense, in certain scenarios, to train that individual to level up instead of contracting a third-party’s services.
After all, in an age where more and more workers expect jobs to be professional development opportunities, this could have a massive impact on employee retention and productivity.
3. Can I afford to pay freelancers and contractors?
If you’re thinking about outsourcing work and enlisting the services of freelancers, contractors, and third-party agencies, that’s awesome.
You just need to make sure you have the cash needed to pay them for their services.
Let’s face it: Every small business owner worries about cash flow—at least from time to time. While working with third parties can be the more cost-effective option in many cases, you still need to be able to settle up invoices if you want your outsourcing initiatives to succeed.
In the ideal world, you’ll always have cash on hand to pay contractors on time each and every time. But in the real world, you might run into a scenario where money’s tight and you need to turn to an outside source of financing to settle your bills.
Not to worry: By securing a flexible business line of credit, the funds you need to pay your near-term debts are always at your fingertips.
What tasks are you going to outsource?
No entrepreneur can do it all by themselves. Truth be told, there comes a time in every small business owner’s life when outsourcing tasks is a necessity for taking the company to the next level.
Since you’re reading these words, you’re on the precipice of witnessing the upside of outsourcing first hand. Form a plan, start small, take things piece by piece, and you’ll do just fine.