Outsourcing has long been considered to be a strategy employed by larger businesses as way to reduce costs. Technology has made it possible for small businesses to utilize outsourcing even in the early stages of the business growth cycle. In fact, many business experts say that fledgling businesses should outsource routine functions so that the owners can concentrate on the strategic or specialized functions of the business.
It’s not uncommon for a small business to hit a ceiling as it strives to make gains in productivity and efficiency. And it’s at that point that business owners need to ask themselves five key questions:
Are My Overhead Costs Impeding My Profit Growth?
There may come a time when the investment in employees reaches a level of diminishing returns because overall productivity fails to keep pace with the growth in the cost of salaries and overhead. When you consider that the cost of an employee extends well beyond a salary and into benefits, holidays, vacation and sick days, the total overhead costs of the employee could amount to as much as 130% of salary or more. This doesn’t take into account the administrative costs of employment that include record keeping, tax filing, and other human resource support of the employee. Particularly if you need flexibility and variety in skill sets, outsourcing may be the answer.
Is it a Way to Optimize Your Time?
If you (or your key people) are spending a lot of time on non-essential or routine functions, your talents aren’t being used in ways that will allow the business to grow. For example, if you value yourself at $200 per hour and are regularly performing a $15 per hour function, you are potentially costing yourself money – even though you think you are saving it. Your time is most likely better spent building revenue and garnering new clients than doing a bookkeeping function, for instance. You need to be as efficient with your time as possible and one way to do that is to tap into one of the fastest growing outsourcing industries – virtual assistants. Offered by home-based entrepreneurs trained to perform any non-essential office function they can communicate as effectively via their computers as if they were in the next cubicle…and they can free you up from the routine items that eat up your time.
Could Wearing Too Many Hats Actually be Hurting the Business?
Most business owners wear multiple hats, tend to be do-it-yourself types, and like to be in control of just about everything. They are the CEO, and out of necessity (or cheapness) they often take on the other essential functions of CFO, HR Director, Legal Counsel and Business Development VP. These positions all require specialized skills and knowledge. Without this specialized training and expertise, the business could land in a mess of financial and legal troubles. So think about when it is time to let go. All of these executive level functions can be performed by seasoned people who offer their expertise on a retainer or pay-for-function basis. You may not need someone full time, but on a consulting basis the right person can improve your bottom line and also help you to reduce risk.
Do I Need to be More Invested Technologically?
Technology drives business growth. No matter the type of business or service offered, a business needs to be digitally wired for marketing, sales, PR, recruiting, and customer service. For product manufacturers and technical service providers, the Information Technology (IT) function is a business essential. IT functions such as programming, software development, web design and maintenance are all part of an international language that can be provided as easily and effectively by offshore tech gurus as they can by a locally hired IT person, and the cost savings can be substantial.
Am I Serious About Growing the Business?
Everything else aside, business owners are usually in it to win it and the ones that eventually achieve success have done so by overcoming obstacles, innovating, and improvising in the execution of their business plan. Successful entrepreneurs earn their reputation through their ability to make the right moves at the right time by weighing costs and opportunities in every business decision. And, often, by figuring out how to recover from a bad business decision or unexpected business challenge…it is rare that business success is on a straight upward trajectory.
Knowing when you need help and what help you need is critical to success. Large corporations have proven that outsourcing can have immediate, positive results on the bottom line. Small businesses that employ outsourcing as part of their growth strategy can reap the rewards and still control their costs.