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Why Small Businesses Can Benefit From Outsourcing

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Why Small Businesses Can Benefit From Outsourcing

It can be incredibly stressful being a small business, there is so much that needs to be done. There are financial, administration, marketing, human resources, customer service, public relations, just to name a few.

Why would you outsource?

There are several reasons why you would want to outsource your work, the main reasons are usually –

  • Lack of time
  • Lack of knowledge
  • Lack of desire

A common reason people outsource services is that they do not have the time to do something. Maybe you have a cleaner or personal assistant? What about someone to write a report or analyse some statistics?

The next common reason people outsource services is that they do not have the knowledge/ ability to do the task themselves. Maybe you paid for someone to repair your car or your sink? What about someone to go over your finances or work out your taxes? Maybe you paid someone to design a website or create a database?

Another common reason people outsource services is that they just don’t want to do it. They don’t want to do their own cleaning/ administration or write their own report/ analyse their own statistics, carry out repairs, do their own finances/ taxes, design their own website, create a database.

It does not matter why you outsource something; what matters is that you recognise a pain point and you have sourced someone to help.

The benefits of outsourcing

There are many benefits that can be had from outsourcing, these include –

  • Financial
  • Efficiency
  • Speed
  • Expertise

If you outsource your work to other people, you can gain financially from the fact that by handing over responsibility to someone else, you now have time to focus on other things, such as those tasks which generate revenue. You may be put off by the cost of hiring someone, however, you need to think of the long term. Yes, there will be a cost of hiring someone, however, you will need to weigh up the cost of hiring someone against the time you now have to concentrate on revenue-generating tasks. There are also ways to reduce the cost of hiring someone, for example, it is cheaper to hire a freelancer than it is to hire an employee.

Outsourcing work will also increase efficiency, you are hiring someone who can introduce systems and procedures which you may not have been able to implement yourself. You are also hiring someone who has the time to sit down and ensure that something is done correctly and properly.

Outsourcing also increases the turnover of work, since they will be able to prioritise their work, they will be able to ensure that work starts as soon as possible and is completed within the deadlines. They will be less likely to be juggling numerous tasks at the same time. They will be able to fully focus on the task at hand to ensure a fast turn over.

When you outsource a task to someone, you will generally hand over work to someone who is an expert in the area you need assistance with. You are paying for their knowledge and their experience, not just their time. This means that by outsourcing work you are leaving things in the hands of someone who knows what they are doing and therefore reducing the risk of things going wrong or being done incorrectly. Please be aware that this does mean there are no risks at all.

The risks of outsourcing

As I mentioned above, there are risks associated with outsourcing, after all, you are handing over control of an aspect of your business (or life) over to someone else. You will no longer have complete control over everything, so whilst this can be incredibility liberating, it will not come without risks.

There is the risk of things going wrong, most of the time these will be innocent mistakes/ oversights and the person who you outsource to will rectify these mistakes as soon as possible. However, there will always be a small risk that the will not. This is why contracts are important as they will clearly set out each parties’ responsibilities and liabilities.

There is also the risk of data/ information breaches, this will be incredibility important to consider if you are dealing with confidential information. There are systems and procedures you can put in place to try and reduce this risk. It is important that there are clear guidelines and agreements in place to ensure confidentiality is maintained.

There is also a financial risk if a serious incident or disagreement does arise then this may prove costly to resolve, there is also the risk of unexpected/ hidden costs. It is extremely important that you outsource to someone that you trust and believe in, do not hand over responsibility to the first person you speak to. You will also need to ensure that both sides are 100% clear on what is expected, what is the cost, and who is liable. Ensure that both sides know where they stand and that you are both happy with the agreement.

Who can you outsource to?

Who you want to outsource to will really depend on your needs and/ or requirements.

You can employ people to do the work, the benefits of employing someone is that you can set a standard of work, as they are employed by you then you set the pay rate, hours worked, holiday allowance, policies and procedures, and conduct. However, employing staff can be extremely expensive, it is estimated that employing someone with a salary of £27,600 actually costs a business closer to £50,000 when taking all the additional costs into consideration.

So, what is the alternative? You could hire a freelancer, this is someone who will work as an independent contractor. This means that they will set their own rates, will choose their own hours/ time off, and will have their own way of working. Now, whilst it may seem ridiculous hiring someone to do work for you at a rate of £30 per hour when you can employ someone to do the same work for £10.

However, you have to consider that a freelancer will be responsible for their own tax, insurance, training, resources, etc. So, therefore, they take on all the costs which are usually covered by the employer but since they usually have multiple clients the overall costs are spread.

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