Five ways outsourcing can save your small

business money

Many people connect outsourcing with large telecommunications and IT companies. However, somall businesses can gain substantial benefits from outsourcing non-core parts of their company operations. 

Many small businesses outsource clerical, financial, accounting, payroll, distribution and other functions in order to save money or because they have no other options. Sometimes the costs of performing these operations in-house are prohibitive. 

For example, in order for a small business to operate its own Internet servers, it will need to put up substantial startup investments for hardware, software, office space and skilled IT personnel. The system will require backup power, cooling, and storage along with 24x7 monitoring and security. 

Benefits of outsourcing:

• Reduce startup costs – The investments required for certain types of functions may be beyond the budgets of many small companies. Outsourcing providers typically provide all the equipment, people and expertise needed to get the job done. 

• Reduce overhead costs – Maintaining many functions outside of the main thrust of the small business can also consume substantial portions of the company’s budget. For example, something as simple as a reception desk can prove a major headache if the company experiences high worker turnover. Finding the right person for the job and then training that person can be time-consuming and costly. With the outsourcing option, the contractor finds and trains all the workers that you need.

• Improve company efficiency – By outsourcing peripheral functions, the small business can concentrate on the work that really brings in the money. Fewer distractions can lead to increased overall efficiency.

• Increase flexibility – With outsourcing, it is easier to fold up and start new projects. The company does not have to worry so much about hiring and firing workers as the outsourcing company does this work. The outsourcing company also handles problems like office and industrial space, equipment and other resource needs. 

• Increase competitiveness – Since outsourcing provides small businesses with many advantages they can gain a competitive advantage over companies that try to handle too many functions in-house. By focusing on their core business, the can improve performance and lessen distractions and wasting of vital resources.

• Reduce risk – By outsourcing certain operations, the small business is also outsourcing the risk involved with those operations. Therefore, this option provides a great tool for risk management especially for functions that require significant expertise. 

Outsourcing options for small companies

Here are five of the best ways that small businesses can save money through outsourcing:

1. Outsource clerical and reception duties – One popular type of outsourcing today is the virtual reception desk and answering service. In fact, it is possible to outsource all of the office’s basic clerical work using virtual or other services. A virtual answering service takes business calls using either automated recorded messages or human receptionists. Many business centers and shared office setups offer these types of services for all tenants in the building.

2. Outsource logistics – In manufacturing and transportation hubs, it is popular to utilize third party logistics (3PL). These types of companies provide warehousing, packaging, assembly, fulfillment, shipping and other services. Traditionally, many companies would try to handle these operations in-house, but there is growing acceptance of using subcontractors in order to lower overhead costs.

4. Outsourcing manufacturing – Many companies may develop products, but they are in no position to manufacture these products. Manufacturing requires significant upfront investment. A production line may require milling, molding, lathing and other expensive equipment that would break the budget of most small companies. Therefore, they have no option but to find contractors to handle their manufacturing needs. In the United States and many other countries, it has become increasingly difficult to find shops and plants that can handle their manufacturing requirements or that can do the job at affordable prices. In such cases, they may look for manufacturers in foreign countries. 

4. Outsourcing IT operations – Information technology work generally requires significant expertise. Computer scientists, computer engineers and other IT workers tend to demand high salaries and hefty benefits packages. For this reason, it often makes sense for small companies to outsource IT work. Running a data center is a major operation that will extend beyond the expertise and resources of most small companies. Even simple matters like designing a website may distract too much from the company’s core business. Businesses can find cheap outsourcing services for IT work online from providers in other countries like India and the Philippines, which both have substantial English-speaking populations. 

5. Outsourcing payroll – Payroll outsourcing is a very popular option for small businesses and some sources claim that up to 50 percent of small companies pay tax-filing penalties. By outsourcing payroll, the contractor assumes all the risk for tax filing and for ensuring that the company complies with all government payroll regulations. Outsourcing firms can handle the entire payroll operations for a small business. 

The list above gives some idea of ways that small companies can save through outsourcing. However, there are many other options including outsourcing marketing, sales, finance, accounting, legal assistance and human resources. 

Finding good outsourcing providers takes a little work and the Internet provides the easiest option for research. The competition is fierce and, generally, it is better to work with the more experienced companies with proven records. However, it is possible to get great deals at times by contracting completely unknown companies that are sometimes located offshore in other countries.

While dealing with such smaller firms carries some risk, when you find one that provides high quality work, it may be possible outsource all or a good portion of your work to that company. 

Virtual outsourcing companies are often the easiest to work with since you may be able to handle all your dealings with the provider online. Many of these companies have packages set up, so the client can arrange the service without ever speaking to anyone. They simply choose the package they want, fill out the necessary forms and pay online using a credit card or other form of electronic payment.