How can small businesses use outsourcing to grow?

1 What is outsourcing?

Outsourcing is the process of hiring an external party to perform a certain function or task that is not part of the core business. Outsourcing can be done for various reasons, such as reducing costs, increasing efficiency, improving quality, accessing new markets, or gaining competitive advantage. Outsourcing can be done in different ways, such as offshoring, nearshoring, or onshoring, depending on the location of the provider. Outsourcing can also be done for different types of tasks, such as administrative, technical, creative, or strategic.

2 Why outsource?

Outsourcing can offer many advantages to small businesses, especially those with limited resources, staff, or expertise. By outsourcing, small businesses can benefit from cost savings such as reduced overheads and the avoidance of hiring, training, and managing employees. Additionally, outsourcing can help small businesses save time and focus on their core activities, as well as meet deadlines and handle peak workloads more efficiently. Moreover, outsourcing can give small businesses access to specialized skills and expertise, leverage the best practices and technologies of the providers, and ensure high standards of quality and performance. Finally, outsourcing can open up new markets and opportunities for small businesses by expanding their network and reach. As such, it can help them learn from the providers and adopt new ideas and solutions that can increase their competitiveness and differentiation.

3 What to outsource?

When considering outsourcing, small businesses need to take into account their needs and goals. It’s important to not outsource the tasks that are essential for their brand identity, customer satisfaction, or competitive edge. On the other hand, outsourcing the tasks that are simple, routine, or low-value is usually a good idea. Additionally, businesses should outsource the tasks that are difficult, expensive, or time-consuming to find, hire, or retain in-house. For instance, a small bakery may not want to outsource its baking or recipe development, while a small accounting firm may outsource its data entry or bookkeeping and a small software company may outsource its web design or graphic design. Ultimately, it’s important to carefully evaluate each situation before deciding what to outsource.

4 How to outsource?

Outsourcing is not a straightforward or risk-free process, so small businesses should be aware of some best practices to make it work for them. To begin with, they should clearly communicate the objectives, deliverables, timelines, and quality standards of the outsourcing project, and establish a contract outlining the roles, responsibilities, and terms of the relationship. Additionally, they should conduct research and due diligence before selecting a provider and consider factors such as reputation, experience, portfolio, references, pricing, and compatibility. Furthermore, regular and open communication with the outsourcing provider should be maintained through tools such as email, phone, video conferencing or project management software. Constructive and timely feedback should also be provided to the provider while addressing any issues or concerns as soon as they arise. Lastly, small businesses should measure and review the results of the outsourcing project against the initial goals and expectations while soliciting feedback from both the provider and customers.

5 What are the challenges and risks of outsourcing?

Outsourcing is not a perfect or guaranteed solution, and small businesses need to be aware of the potential challenges and risks. Quality control can be compromised, resulting in errors, delays, or defects that can affect the reputation or satisfaction of the small business. Communication and cultural barriers can arise between the small business and the provider, possibly leading to misunderstandings, misinterpretations, or conflicts. Additionally, security and confidentiality risks can arise if the provider handles sensitive or proprietary information or data. This can increase the vulnerability of the small business to cyberattacks, fraud, or theft that can damage its assets or reputation.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?