Tips for Small Businesses on Outsourcing Business Services

Recruiting and retaining top talent is more difficult today than ever before. Here are tips for leveraging outsourced business services in order to keep costs down and productivity high.

BY: EMILY SNELL ON MONDAY, OCTOBER 12, 2020
Tips for Small Businesses on Outsourcing Business Services

Some years ago, businesses hired outside services mostly to strengthen tedious back-office operations, and consequently, to cut costs. Today, businesses that don’t avail themselves of outside business services, are, more often than not, left with a vacuum in critical skills areas like IT security, networking, accounting, legal, digital marketing, account management and translation services. The reason for this is that businesses today are faced with a more challenging situation of finding specific employees with required specialized skills, and then retaining them in the face of intense competition and high employee turnover. Founder of modern-day Singapore and its former Prime Minister Lee Kuan Yew, once said, “If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”

Therefore, it makes little sense in today’s world of extensive and instant connections, to try to do everything in your business. In fact, less than 15% of business owners and managers believe their time is spent on growing their business. In an increasingly complex world of business, no single business can handle every function, and a business able to work collaboratively with outside teams, will doubtless have a distinct advantage. Senior Editor at Fortune magazine firmly believes in the need for companies to change focus from “knowledge workers” to “relationship workers,” and calls empathy, the most critical skill in the 21st century.

In realizing this change of focus, thriving businesses today are engaging in a significant level of outsourcing. Deloitte, the world’s largest network of professional services, has coined a special name for this – Disruptive Outsourcing. Deloitte finds that when executed well, disruptive outsourcing transforms businesses, making them flexible, efficient and effective.

The following are strategic areas for businesses to outsource business services:

IT Services

In a recent survey, Deloitte found that Information Technology (IT) is the most commonly outsourced function in businesses, with nearly 60% penetration for some IT functions. Another 26% of businesses plan on IT outsourcing in the near future. IT outsourcing can save as much as 40% in costs, apart from the agility, skill level and flexibility it brings to your business.

Accounting and Finances

A recent survey by American financial software company, Intuit, found that over 60% of small businesses do not like handling their payroll, not because of diffidence, but because of extensive time-consumption. 79%of businesses said it was hard to keep on top of payroll tax laws, while, 61% were unaware of all deductions, incentives and refunds their businesses were entitled to, and were losing out as a result. Payroll is one of the costliest components of a business, and payroll mistakes can make it more expensive. The Internal Revenue Service (IRS) said that 40% of small businesses pay around $845 annually as penalties for late or incorrect filings and payments. While many businesses use automated payroll software, many really prefer to outsource the entire function to professionals.

Human Skills

American business magnate, Warren Buffet, said, “It’s in society’s best interests to have the most output produced with the least inputs.” Translating this to the needs of individual businesses today, many are turning to freelancers to fulfill specialized skills required by their companies such as translation services from foreign languages to English. A small business owner in California says, “Freelancing is awesome. It keeps costs down and lets you quickly test out an individual." Businesses can hire freelancers on contract and cancel the contract if things don’t work out. It is more difficult to break off with full-time inhouse employees. A recent study commissioned by Upwork and Freelancers Union, found that Americans are spending more than 1 billion hours per week freelancing.

Human Resources

If your business is seeking to hire new staff, it will cost you less to outsource the responsibility to a recruiting company, and task them with providing you with qualified candidates for interviewing. You could outsource the entire function of human resources that includes hiring, onboarding and managing the team. You can also find options to outsource training, payroll, time and attendance issues and benefits administration. This will help you to cut costs by not requiring full-time staff to handle the functions inhouse. A study recently undertaken by Deloitte found that Human Resources has seen over 30% growth in outsourced services by businesses, along with IT, healthcare, and finance.

Marketing

Running a small business is a running battle with time. Added to this, marketing your brand requires a lot of your time. A recent survey found that small business owners spend about 33 hours a week on marketing, and many times, not everything gets done. In this situation, outsourcing marketing is a smart move. Hiring a team of outsourced marketing experts not only provides you fresh perspective on your marketing strategies, but also the latest technology, multiple marketing channels, and an outside insight into your business. What is more, you will have consistency in marketing, that is not affected by staff-related issues, especially in content creation.

Logistics

For small businesses acquiring warehousing, technology, and transport for a reliable logistics plan, is expensive, and outsourcing logistics will save a lot of money. Outsourcing will also help improve customer service as logistic companies are experts in their field and are able to respond faster and in large quantities to meet demand on time more easily than you can.

Customer Support

In the absence of a dedicated customer service department your marketing and sales staff have to double up as customer service staff. Therefore, outsourcing your customer service function to a call center will get you the manpower you need without having to sacrifice marketing staff time. However, you should carefully consider costs and available services before making this decision. Cloud-based services or shared-agent solutions may be more affordable options.

Recent research shows that 57% of companies in the U.S. are engaging more business services, mainly for cost-cutting purposes, but also to free their time to focus on growing their core business.

As the Austrian-American management consultant, educator and author, Peter Drucker, said, “Do what you do best, and outsource the rest.”

About the Author

Emily Snell

Emily is a contributing marketing author at ChamberofCommerce.com where she regularly consults on content strategy and overall topic focus. Emily has spent the last 12 years helping hyper growth startups and well-known brands create content that positions products and services as the solution to a customer’s problem. To contact Emily about writing opportunities, her email is emily.snell@aol.com.

Full Biography