Outsourcing for Small Business

Basic economics have made outsourcing common, with its use becoming more and more widespread as costs spiral and business people seek additional means to hold onto their shrinking profit margins. However, many small businesses are wary of utilizing the services available as owners are put off by the term outsourcing, often because they don’t really understand what it means. The most common misconception is that outsourcing is about large international companies farming out jobs to third-world countries where the labor market is much cheaper. Another misconception is that outsourcing is only worthwhile for large, very specialized projects. The simple fact is that outsourcing can be a basic service, and a very worthwhile resource for a small business owner.       

What is Outsourcing - Dispelling the Myth

Although many think outsourcing is a new business process that started in India or the Philippines in the last couple of decades, the truth is that it has been around for much, much longer. The problem is that many people just associate outsourcing with business processes such as overseas call centers, when in fact outsourcing is simply the current term used to define an age-old practice - paying someone else to do jobs that you either can’t do yourself, or don’t want to do yourself.

There is nothing special about outsourcing, and it is certainly not just a business function for large companies. I can guarantee that every reader of this article has used outsourced services. Don’t believe me? Well, do you fix your own leaking toilet, produce your own drinking water, or supply your own power? Most people outsource all of these tasks to a plumber or utility company without realizing that they are outsourcing. You see, outsourcing is not just call centers for IT problems; any third party that provides a service is an outsource provider.

How Outsourcing Can Help a Small Business

No matter where you operate, the highest overhead for a small business is generally staff wages. So, if you have a skilled task that only needs doing a few times a year, does it make any financial sense hiring someone full-time? Remember, outsourcing is just having a third-party perform a task or service you can’t or don’t want to do yourself. It may be a task that requires specialist knowledge you don’t have, or require equipment that is too expensive. Alternately, it could also be a task for which you have the skills and could perform yourself, but it would take up a large amount of your time – time you could better use for more profitable purposes.

There are outsource providers for so many services, from web design, to copywriters, to computer specialists and more. By using their services, you have immediate access to skilled staff when you need them, but only pay out for their time used in performing that specific task. This means your overheads are lower as you have no monthly salary to pay out, no equipment costs, no vacation pay, etc, etc. So, what makes outsourcing a worthwhile service for a small business owner to try out, is that by using an outsource provider, you have tasks done when you need them, pay only for the task you need doing, and it costs you less. The bottom line is that less cost means more profit.

An outsource provider pays out to ensure staff with specialist knowledge, equipment and facilities are available in a specific business area. They pay for this by using these resources to provide service to many clients, spreading the cost out so that each individual client pays less than they would if they had to provide the resources themselves.

A good analogy is to think of an outsource provider like a power company. The power company pay out huge amounts to generate electricity, and everyone who uses their power pays a little towards these costs. The power company makes money because, put together, the bills paid by each individual user exceed the cost of generating the power – a win for the power provider. It is also a win for the power user - because each individual pays out much less for their power than what they would if they had to produce their own electricity.

So, if you are a small business owner, represent a club or other small organization, check out whether outsourcing tasks would be cost effective for you. You may be pleasantly surprised at the range of services available, the results possible, and the all important savings you can achieve.

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