Running a business is not easy; and running a small business is a particular kind of challenge. It takes all kinds of well-timed, well-considered, and well-executed moves to keep your head well above water. Find out why outsourcing should be one of those moves.
What Is Outsourcing?
Outsourcing is the business practice where a company hires another company to offload tasks that would otherwise be performed in-house by the company’s employees. It is a cost management move and usually involves such jobs as the following:
- administrative assistance
- clerical tasks
- customer support
- sales
- marketing
- IT
- payroll
- manufacturing
Because outsourcing best practices have been fine-tuned over the years, it has become even easier, and much safer, now to adopt this business model.
How Does Outsourcing Benefit Small Businesses?
So how does outsourcing help you grow your small business?
These are the top 7 reasons why it’s smart to outsource:
1. Scalability
One of the most attractive features of outsourcing is scalability. It is anchored on the theory that you pay only for what you use. That translates into considerable savings that can be redirected into parts of a business operation that you need to spend on.
The good news? Most outsourcing companies are able to work with you when you need them, and provide only the services you require.
2. Cost savings
With scalability firmly in the equation, outsourcing further helps increase your savings through these areas:
Hiring and training
For a small business, the cost of hiring and training one employee alone will make a serious dent on their budget. You need to cover not only salary, benefits, and taxes but also the money lost during the period when the employee is still on training and has limited to zero productivity.
Outsourcing gives you people who have already undergone the training and gained the experience, therefore eliminating the need for you to spend anywhere near the investment that is typical for an employee.
Payroll taxes
With these, you can potentially be spending more—i.e., anywhere from 1.25 to 1.4 times higher—on each employee’s salary than their basic salary. After that, the extras: gym memberships, mobile data allowances, trainings and seminars, etc.
Compensation and benefits
Based on the 2020 news release by the Bureau of Labor and Statistics, the average employer cost for private industry worker compensation is $35.96 per hour worked in June 2020:
Average wages and salaries cost: $25.18 (70.0 percent of employer costs)
Average benefit costs: $10.79 (30.0 percent)
Meanwhile, the average cost of health insurance benefits was $2.73 per hour worked (7.6 percent of total compensation in June 2020).
Health care
The Society for Human Resource Management (SHRM) estimated the average total cost of health care for employees and dependents at $14,800 per employee for 2019.
Additional managers and HR personnel
New employees can mean either a new or a bigger team, an expanded department, etc. These all translate into additional costs for hiring and/or training managers and HR personnel to effectively manage a bigger workforce.
IT costs
According to Gartner Inc., the average SMB spends 6.4% of its annual revenue on IT expenses, while the average monthly IT expenses per employee is $700 per month per employee on IT.
Employees also spend 30 minutes per week on attempts to fix PC problems, theirs or their coworker’s. And if your company still relies on password authentication, a single password reset request costs you $70 on average.
With the onset of COVID-19, companies who are using desktops in the office may have had to provide laptops to their employees who now have to work from home, unless they have a BYOD (Bring Your Own Device) policy. But still, the transition to WFH can mean additional work for IT to modify corporate network security.
Office equipment and supplies
Before the massive-scale shift to WFH, hiring new employees usually meant adding rather than replacing, which in turn meant additional office equipment and supplies.
With WFH, the additional expenses will still likely cover office equipment and supplies. For a start-up company, any amount saved, from anywhere, adds to much-needed security.
3. Increased efficiency and productivity
Efficiency inevitably results in productivity. When you outsource costly and specialized tasks, you are able to focus better on your core tasks and projects. This means better planning and goal-setting, followed by better execution: less mistakes, more tasks completed on time. The bonus? A much-deserved morale boost.
4. Competitive edge
Outsourcing levels the playing field to a certain degree: your outsourcing company, whether it’s an IT services provider or a digital marketing agency, provide you the kind of expertise of their counterparts working in-house at the big companies. This means you can keep up with them as well as stand out among your fellow small businesses.
5. Increased growth opportunities
With a newfound level of efficiency, you and your team can have the time and the space to improve as professionals—acquire new skills, fine-tune your existing ones. You will also have time to brainstorm and test new ideas.
6. A better perspective on your business
You may know the core of your business like the back of your hand, but you can’t get around the fact that there are parts of it where you’re not the expert. And as we’ve already established, hiring additional in-house professionals to cover specific areas will cost you—at least substantially more than having the right professionals working for you through your outsourcing agency. These outsourced experts can help you adjust your perspective so you can make better decisions.
7. Reduced risks
Errors are cut down and the risk of major operational disruptions and reputation damage are greatly minimized when certain areas of your business for which your in-house staff are not prepared to tackle are handled by people with the necessary expertise.
An outsourcing agency’s team of seasoned professionals knows the risks, both in general and specific to your business, and they are properly-equipped to address them. They can give you sound advice on how to establish your brand and how to protect it.
Conclusion
As a small business, you need all the empowerment and enabling you can get. And in these challenging times, your in-house staff would certainly benefit as well from not having to deal with tasks that they are not highly familiar with while they’re also dealing with adjustments in their New Normal personal lives.
Start making another great move toward growth.
Contact Purple Cow to learn more about our approach to scalability that ensures maximum savings and quality.
