How to Use Outsourcing to Cut Down the Overheads of Your Business

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Many small business owners make the mistake of trying to do everything in-house. By their reckoning, if they’re doing their own marketing, book keeping, ecommerce fulfilment, and customer service, that means that they’re in control of the quality of the service, and they’re keeping costs down because they’re not paying someone else to do the job for them.

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In truth, however, keeping all of your operations in house can be an incredibly costly way to do business for small and medium sized companies. If you’re in the office all day, every day, getting on with small admin tasks (that can often take a lot more time than you first expected) then when will you find the time for coming up with innovative new ideas to make your business stand out from the crowd, networking, social activities and growing your empire? Even God rested on the Sabbath and outsourcing can help you to do so too!

However, whilst big businesses can enjoy the economies of scale that go with running a large customer service operation, or having their own warehouse for e-fulfilment and shipping, when you’re handling orders in the hundreds, rather than the tens of thousands, it doesn’t make sense to take on the overheads of extra employees, equipment, and buildings. So what do you do? Outsource!

Which Activities Can Be Outsourced

In general, outsourcing makes sense for any part of your business that does not directly generate revenue for you. You wouldn’t want to outsource anything that involves strategic or competitive activities; for example, R&D, product design, or other highly specialist work. Non-core activities such as customer support, managing your web presence, payroll, accounts, or packaging and delivery are, however, good candidates for outsourcing and could help you free up time for other important endeavours.

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When Does it Make Sense to Outsource?

In theory you could outsource everything! You could hire a virtual assistant to replace your secretary; you could have outsiders managing your accounts, web development, web hosting, payroll, billing and almost any other task you can think of! Whilst this could sound like bliss to those who enjoy working in a quiet environment, it’s a juggling act.

The more services you outsource, and the more individuals you have doing the outsource work for you, the more companies you will find yourself depending on. This leaves you open to a higher risk of tasks not getting done, or something going wrong. This is why it’s a good idea only to outsource jobs that would be too expensive or complicated to do in house. For example, if you would have to make a substantial investment in plant, machinery or intensive training for your employees in order to be able to do the work in house, it’s probably best if you outsource!

That said, if you find yourself relying on your virtual assistant eight hours a day, every day of the working week, having a full-time secretary would be cheaper and more efficient. If your company grows to more than a handful of employees, you may decide that HR and Payroll would be best handled by someone inside the office who can deal with queries on the spot.

Right Shoring

Outsourcing is a touchy topic for some businesses, who feel that the practice of outsourcing to third world countries where the cost of living is lower, enabling service providers to charge far less than they would in the West is killing the economy.

Outsourcing can be good for economic growth, if used correctly. If you’re considering outsourcing, you should choose your providers carefully. Basic clerical tasks can be outsourced to countries that offer cheap rates for bulk work, while more complex or customer facing jobs should be handled by a local specialist.

Right shoring allows you to keep your overheads down, whilst still ensuring that your customers get quality service and you can be confident that your providers are qualified for the task at hand.
Image source: Free Digital Photos

About the author:

Crispin enjoys writing about a variety of topics surrounding business – from crisis communications to entrepreneurship.


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4 Comments

  1. Ansh
    June 25, 2013
    • efoghorjoe
      June 25, 2013
  2. mohammad
    June 25, 2013
    • efoghorjoe
      June 26, 2013

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