Outsourcing – Why it Makes Sense

Outsourcing – Why It Makes Sense

Firstly what is outsourcing – it can either be giving work that you would normally do to other business, this helps if you get more work than your current resources can cope with.  Or it can be getting other businesses to do something which you just can’t do, marketing, book-keeping or something that is complementary to your service

When running a business, partcularly in the early stages, it is too tempting to take on all work given to you, as you want to generate income.  There are two main reasons for outsourcing

  1. To be able to take on more work and grow a business
  2. To give work that the owner does not have time to do to someone else

The thing they have in common – saving time.  It is important that the business owner(s) remain focused on their business and depending on the nature of that business, there may not be enough hours in the day to do admin, bookwork,  marketing or payroll.  One of the most common questions I get asked is how can I employ staff to do this, so I don’t have to and be able to guarantee a set amount of hours each week?  The answer is outsourcing.

With the looming public spending cuts, there will be many new opportunities as more people become self employed offering a range of skills.  The recession has already seen an increase in redundancies amongst accountants, book-keepers and HR specialists, who subsequently go it alone.  This gives them the autonomy to work with different businesses and conversley, the businesses are on a pay as you go agreement, which means not having to employ staff.  It is a situation that is becoming extremely attractive to both parties.  There is also a growing number of virtual assistants offering administration services, which again gives much flexibility to both parties.

Similarly, certain industries grow their businesses by outsourcing.  The most commonly known is construction.  Many tradesmen will be commissioned to carry out a project be it an extension, bathroom or kitchen fit.  It is quite unusual for one tradesmen to have all the skills required to see through the whole job.  Therefore they will enlist contacts they have built up to do the work that they are unable to.  Usually plumbers enlisting plasterers and electricians or vice versa.

This model is now becoming more widely used in other areas of business, quantity surveyors teaming up with architects or consultants coming together to use an associate model.

It can be difficult at first to overcome pride and ego and admit your own strengths and weaknesses and to know when to utilise other services, or when to do it yourself.  However teaming up with others can generate more business, makes self employment less lonely and can generate additional income.

If you are outsourcing to take bigger contracts, you can mark up your prices slightly to cover outsourcing costs and to add your own margin.  Alternatively, an agreement can be reached between parties on a commission structure.  There are many ways to manage it, but where you are sending work out, it is highly likely the other parties will send work to you as well.

This is not a get out of employing staff trump card however and you do have to be mindful of the law.  Yet it is ideal for small businesses to keep costs down and grow networks effectively.

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