Over time, many owners of Small and Medium-sized Enterprises (SMEs) have found themselves in situations where they are overstretched and overworked but still tackling ‘hundreds’ of different tasks. Breaking out of such a rut is not easy, especially when every one of those tasks seems vital to the survival of the business. However, outsourcing some of those responsibilities could keep the business running, while freeing you up for more productive work.
Outsourcing will involve contracting out business processes (e.g. ICT management, manufacturing, customer management etc.) to another company and it can be costly to do so. Using the 80/20 rule, create a list of all the activities in your business and single out 20 % of the most vital tasks that produce the most profit or impact (if you run a social enterprise), which you will focus on. The remaining 80 % can be outsourced depending on their nature.
When Is The Right Time To Outsource?
When outsourcing proactively, do so if you are scaling your business to reach more people or when you’re planning to venture into different locations which will outstretch your resources. Outsourcing is only beneficial if and when it makes your business more efficient Nevertheless, make sure you can afford to outsource, if your business is young and has not yet started making money, outsourcing will be an investment that you won’t be able to guarantee its returns.
What to Outsource?
As a rule of thumb, never outsource your core business processes, any task that is critical to your enterprise. For instance, if you run a clothing line, do not outsource anything that deals with design work, training designers, choosing fabric etc. If you run a cake company do not outsource vital tasks like selection and mixing of ingredients, baking, or even cake decoration. Outsourcing such a task means that the unique value you provide your customers can be obtained from somewhere else. Additionally, outsourcing vital business activities strips you of the ability to control the quality and consistency of your product/service-which will be affected if you ever decide to change the contracted firm. It also possibly opens you up to fierce competition from the outsourced firm.
Outsource highly repetitive tasks like accounting, data entry, delivery etc. For instance, if you contract another firm to be in charge of delivering your cakes on order-you will be better able to concentrate on improving the quality of your cakes or production capacity-tasks with a direct impact on your business. A repetitive chore like delivery requires no special expertise and even if you decide to change the delivery firm, your customers won’t notice it in the taste.
Only outsource specialised skills like IT and machine maintenance, as such skills take time to master and could be overwhelming to learn from scratch. For instance, if you occasionally have to do maintenance and repair work on your fashion company’s sewing machines, it wouldn’t make economic sense to hire a full-time technician who would just sit around waiting for machines to break down. Outsource such a task whilst saving on expenses, and because it is not core to your business, even if you change the technician, the quality of your clothes will remain unaffected.
According to Forbes, here are the 6 key areas to outsource when starting a business. Taking everything into account, outsourcing enables entrepreneurs to run leaner businesses and reduce costs by outsourcing capital intensive tasks like manufacturing to hubs like China and Ethiopia while at the same giving businesses the edge to compete at a global level due to increased productivity.
Running a small business? Here are tips to help you bootstrap your business and cut costs
