How Today’s Entrepreneurs are Finding Their Path to Success
Outsourcing
Outsourcing is a business practice in which a company hires a third-party to perform tasks, handle operations or provide services for the company.
What it’s not: Outsourcing doesn't necessarily mean off-shoring. With today's connected world your small business can follow the talent whether it’s in another continent or country, or right in your own community. It also doesn’t have to be with a large firm or on a permanent basis, it can be as simple as having a logo designed or a limited series of emails and social media posts for a campaign.
Below are some statistics compiled by fortunly.com about small business and outsourcing
“Freeing up resources to focus on core business is the most widely cited reason for outsourcing IT functions, at 49%. Saving money is secondary, but still a top priority. About 45% of companies outsourcing IT say that their information technology outsource projects are meant to save money. About 46% say outsourcing lets them access skillsets that aren’t available in-house.”
“Small businesses usually turn to outsourcing when it comes to accounting and IT because those tasks require proficiency and skills that they might not possess internally. That’s why small business outsourcing stats show that 37% of all accounting and IT tasks get outsourced. Digital marketing tasks follow at 34%, with development and human resources at 28%.”
“Small business owners care about efficiency above all. Compared to larger companies, these businesses usually cannot afford or simply do not have access to the necessary resources to build a team from scratch.
United States outsourcing statistics show that another common reason (18%) that a small business turns to outsourcing is to increase available expertise and seek expert assistance. The latest research has also shown that 52% of small businesses will continue to outsource, especially non-core functions even in the post COVID economy.”
There is a widely held belief in the small business world, especially among first time entrepreneurs and recently launched ventures. Tonya Thomas, president of The Small Office Assistant, puts it this way in an article in Entrepreneur, “I felt like I was the only one who could do the work efficiently; I wanted control over everything.” Thomas went on to add that she had to learn to “let go” and in the first year she started outsourcing some of her workload, her company’s revenue doubled. Adding to that, David Walsh, an entrepreneur and author of Source Control, notes that “Many owners take pride in having the world on their shoulders and their entire organization buried in their mind. Knowing your business is critical, but keeping yourself indispensable is reckless and un-scalable.”
Lets address the elephant in the room here, you might be saying “My margins are razor thin, I simply can’t afford to hire out this task or that process.” Now let’s look at that claim through a couple different examples. Two of the top challenges of growing a business are retaining existing customers and keeping a positive cash flow.(Crowdsource)
Retaining existing customers. All your marketing efforts and your great product or service turned into customer acquisition. Investment in retaining those customers is literally money in your pocket as it is up to 25 times more expensive to get a new customer than to retain one. Except now you have to spend more time to make more of your great product so there's less time for marketing. In other words you have to focus on your core business to make sure it’s quality stays top shelf. You don't have time to keep pounding the pavement of social media and google ads.
Cash flow problems are one of the most common reasons that small businesses fail. Yes, businesses need to spend money to make money but that can be a slippery slope, especially if your strengths are in building custom furniture instead of bookkeeping. Simply hiring an auditor to analyze your cash flow and find holes in your efficiency is a form of outsourcing and could make the difference between growth and going under.
Are we seeing a pattern here? Another one of those top challenges to growing a small business was knowing when to delegate. It’s inevitable, at some point your one or two-man team is not going to cut the mustard anymore. Either you expand your capacity or your business will start its downhill slide.
Of course your team will grow over time, you will want to acquire and retain highly qualified team members. However, the costs of hiring and retaining employees add up very quickly and it will soon be time to take a hard look at which tasks are core to your business and which are a part of every well-run small business.
Reasons why small businesses are choosing outsourcing
More and more businesses every day are making that calculation and coming up with the answer that hiring out some business functions makes the most sense for their bottom line in one way or another.
Here are 5 reasons that large and small businesses are choosing outsourcing as a part of their business model;
1) The access to talent and skills is unprecedented. Today's connected world removes geographical barriers. Just like Silicon Valley became known as a tech center, new places all over the world are popping up as hubs for IT services and software development. Many regions around the globe have a combination of low labor costs and high education levels, with many skilled developers and computer engineers. Places that would’ve been unthinkable as tech hubs 20 years ago, like Warsaw and Prague are now major players. Similarly, developing countries like India and Nepal have a very low labor cost but a highly educated young population. You may find a team that does HR management in Bulgaria and a team of developers in Kathmandu that suit your needs and your budget.
2) The detrimental effects of multitasking. The dreaded M word. Lots of studies have shown that multitasking is bad for our brains and actually decreases efficiency.That’s because it takes lots of mental energy to focus and our supply is finite at any one time. Even if we CAN focus on multiple things at once it's not long before something slips. On the other hand, deep focus or concentration is actually good for our brains and for our work. Focusing on a single task is not only good for our skills of concentration but makes us happier and more satisfied in our work. It’s also more conducive to new ideas and innovation. If your own mind or those of your staff are overburdened with multitasking that opens the door to more mistakes and more stress all around, when what you want is every mind humming along at peak performance.
3) Which leads to the third reason that more small businesses are turning to outsourcing, it allows your staff to concentrate on the core business and make a better product. Handing off a task to the experts is one reason for outsourcing but the other branch of this tree is freeing up time for your staff to do what they do best. You wouldn't want to have your sales people also keeping track of shipping for instance, or your product development head trying to update the website.
4) Reduction of costs and risk management. Outsourcing can lower costs by reducing those associated with onboarding additional employees, including the candidate search, interview process and training, not to mention healthcare, payroll taxes and increased time and tasks for HR. Outsourcing manages risks and quality control as well. When you hand over a project or responsibility to a contractor they are then responsible for the quality of the product and the costs of maintaining their staff. There's also savings to be found in equipment costs and not having to office more employees.
5) The capacity expansion potential with outsourcing is endless. Maybe you have an idea for the next big app in college sports, you just need a team to build it. Or maybe you are a gifted artist but only your friends and patrons of your local gallery have viewed your art because you lack the skills of an entrepreneur and marketer. There's everything from contracting on a permanent basis for your IT security to hiring a free-lancer for a single logo design. Outsourcing is no longer just for customer service and factory labor.
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Every small business owner has a lot to carry on their shoulders. The successful ones have realized which loads they should continue to shoulder and which ones they can set down.
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