As soon as you go from being a one-person business to a company, you need to start thinking about cost even more seriously. With growth comes increased expenditures, such as employees, product development and creation, marketing, technology, and more.
Many businesses consider outsourcing at some point, with the biggest benefit being how much cheaper it can be than choosing internal professionals or local consultants. But outsourcing isn’t the best solution for every business, and it definitely has both pros and cons to think about.
In this post, we’ll talk about some of the positives and negatives of outsourcing for both a single project, like an app or website, or a continued service such as bookkeeping or customer service.
Why Outsourcing Works
Some businesses just need a one off project done, while others want to use outsourcing as a long-term solution to administrative or service based tasks. The benefits of sending work along to other parties in these circumstances can be substantial. Some of the benefits include:
Saves You Money
Outsourcing can reduce overhead and/or production costs, allowing you to have more breathing room in your budget, and a little extra to spend on another aspect of your business.
Frees Up Your Time
Outsourcing can significantly lessen the amount of time you have to put into a project, because it keeps you from doing the work yourself. When you have more time, you can focus on other areas of your company, which makes it so that you can hone in on what is important to you, and what you are good at.
Easier to Manage
Without having to interview, hire, fire, or reprimand employees or consultants, you’ll experience a more stress-free work environment. You’ll save time, money, and feedback will be considered part of the business relationship as opposed to having to provide criticism to an employee.
Outsourcing gives you more freedom of choice. You can have your pick of suppliers or service providers to match your needs and budget, which can be a big deal to startups and entrepreneurs who have skills in specific areas but not in others.
Extends Your Hours
If you are outsourcing for a service, you can extend your hours and be available to your customers at more convenient times. Think about it—your business could be available for stat holidays, evenings, and possibly even weekends. This ups your sales potential and allows you to solve customer issues quickly.
Why Outsourcing Doesn’t Work
Outsourcing doesn’t always meet the needs of every business, and there are some defined negatives to be aware of before making the decision to go forward, such as:
Potential Loss of Quality
It’s a lot harder to vet businesses located in other countries, and you might not always be on the same page when you pick one. This can not only cause quality loss, but also waste money because you would end up having to pay for services that you were unsatisfied with.
Your target market and the technologies available in your area might not be the same in the country you are outsourcing to. If the business providing services to you really doesn’t understand your target market and the technical requirements of your needs, then it’s almost guaranteed that you will receive an unsatisfactory end-product.
Loss of Control
When you hire an employee or contractor locally, you will likely meet with them every so often to evaluate their progress and to provide some input. That’s a natural part of any business relationship that outsourcing does not allow for.
You’ll be One of Many
With an employee, you will be the main focus. Even with a consultant, you should have a clear idea of the timeline and scope for the project. With outsourcing, it is unlikely that you are either the only client, or one of a few. Because of this, it can be difficult to maintain the focus of your provider.
So, you know what you have to pay for the service, but what else do you need to pay for? Will the workers technically be your employees, or is this simply a business deal that encompasses one project? Do you have to cover the overhead costs, or are they going to? And what happens if there is an issue, or the business shuts down for a day and loses you money? Outsourcing may be a cheaper option, but only if it goes smoothly.
What Local Can Provide
It wouldn’t be fair to only cover outsourcing without speaking to some of the benefits of selecting local business or consultants to provide for your business needs. While it can be more expensive, choosing professionals within your area can be an excellent way to hand off certain tasks without losing control.
Some of the benefits include:
Often, local businesses or contractors allow you to be as hands-on as you want to be. You can request to have updates every week or once a month, depending on your preferences. You’ll also be able to meet face-to-face as opposed to communicating solely through emails or long-distance phone calls.
Supports the Local Economy
Creating jobs and relationships with other businesses can benefit you in the long run. You’ll be supporting your local economy by putting money into it, and you may even receive business in return in the form of referrals. You may even be able to try partnering with others in exchange for services that could reduce your costs.
More Targeted Experience
Local service providers know what your market is like and what you should expect. They are aware of current trends, typical customers, and likely have experience with businesses just like yours. You can look into their experience, contact references, and view their previous work much more easily.
To Outsource or Not to Outsource
Whether you decide to outsource or not is entirely up to you. You have to choose what contributes to the health of your business, not just in the short-term, but in the long-term. Think carefully about what tasks you are willing to give to others, and what you expect in terms of results. Vet any provider carefully (whether local or international) before going ahead and signing a contract, and weigh your options with your goals in mind.
Have you ever outsourced work to a third-party? What was your experience like?