The key to making a small business successful is many things. You need to be smart with marketing, consistent with employee training, and generous when it comes to upgrades and investments. Most importantly, however, you need to be smart with how you run your company.
One of the early challenges in running a business is expanding. It can be tough finding the right budget and people to support your company. Not just that, you have to consider whether or not your businesses’ space is large enough to accommodate more employees.
As these are some of the early challenges, many business owners consider outsourcing instead.
By definition, outsourcing is a business practice where companies resort to hiring an external party to complete a specific function of the business. It’s an alternative to handling things internally. Most commonly, you’ll find companies outsourcing employees for IT, customer service, and others.
Outsourcing is a practice most commonly used by large corporations and companies that are already established. However, that doesn’t necessarily mean that small businesses shouldn’t consider trying out this practice as well. Here are a few pros and cons of outsourcing.
Pros Of Outsourcing For Small Businesses
1. Cost-Efficient Means Of Getting More Labor
A big upside to outsourcing is that it is an overall more cost-efficient means to expand your business. The practice of outsourcing basically lets you hire people from far-off places. It can be across the state or across the oceans. This might not seem like much of a big deal, but it has major implications for business owners.
Outsourcing is more cost-efficient because, for one, you are no longer hiring individuals. You are hiring a company to work for you. Depending on how large the talent you need, this is often cheaper than compared to hiring a complete group of individuals separately. You don’t even have to worry about the benefits of the people you outsource to.
Another reason why it’s cost-efficient is that with outsourcing, everything you need will be handled by the company you hire from. In terms of adjustment, there isn’t much you need to do to get your business set up for outsourced employees. On the other hand, you need to make various changes to your business with regular business expansions.
Overall, small businesses benefit from outsourcing because it’s cheaper than traditional business expansion. For small businesses on a limited budget, this is a big plus, too. As there are many outsourcing packages out there, you can find one that fits your needs and budget at the same time.
2. Access To Larger Talent Pool
You only want the best for your business, so it shouldn’t be surprising that you want a larger talent pool to tap into for yours. According to Sleek Tech PTE LTD, another major benefit of outsourcing the talent you hire. You can find specific people for your needs, and that’s a big plus!
Let’s put it into a real-life setting so that it will be easier to understand. Let’s say that your business is in a small city in a small state. While the talent pool is filled with individuals who are good with customer service, the overall area lacks talented individuals in the field of IT.
This is where outsourcing can help you out big time. What you can do is outsource from tech-heavy areas like Silicon Valley, or even in other countries like India and Singapore. This is access to a talent pool that you’d usually have no means to get, and that’s a big step for your business.
3. No Need To Expand Office Space For New Employees
When you’re expanding your team, that also means you need to expand the size of your office or establishment as well. The last thing you’d want to do is to force your employees into a small space, as that can gravely affect their performance and morale.
For small businesses, expanding the size of the business or the establishment is a good idea. However, it isn’t always achievable because of budget limitations. If businesses wait for a larger budget before they can expand their location and then their team, then the overall growth of the business will be delayed.
What’s great about outsourcing is that the people you hire are in a different location already. Not just that, all of the tools and solutions they need to work are already provided to them. It’s a good way for small businesses to achieve growth without having to waste time.
4. Efficient Business Management
When you hire an outsourcing company, you basically hire people that manage other parts of your business as well. For instance, if you hire a team of outsourced call center agents, there will be people to manage that team for you. All you have to do is simply watch them do what they are intended to do.
If you are running a small business already, then you know just how frustrating it can be to manage a large group of people. Through outsourcing, you will be able to efficiently manage your business better. Instead of focusing on the small stuff, you can focus on how to let your business grow further.
5. Better Risk Management
When investing to make your team and your business larger, it’s a big risk. Even if you calculate it to ensure that your business will be poised for growth, it’s never a guarantee that you’ll get your returns and then some in the future. Simply put, it can be risky to build a larger team.
On the other hand, outsourcing is a less risky way to expand. Its cost-efficiency in terms of overall expenses and investment in property upgrades is far less than compared to traditional expansions. For big businesses, this is a big risk as well. What about small businesses?
With outsourcing, small businesses are able to manage their risks more effectively, and this is a vital factor for growth.
Cons Of Outsourcing For Small Businesses
1. Security Risks
One of the major problems with outsourcing is that there are security risks that come with it. Since outsourcing is purely online by nature, the chances of a major security breach or a digital threat happening will always be there. Small businesses can suffer greatly from such problems.
The good news is that while common, security risks are easy to manage. All employees need is good digital security software and proper training on risk mitigation, and the risks will be limited by a huge margin. That being said, outsourcing requires a lot of security preparation.
Small businesses can be gravely affected by security risks. As much as possible, you’d want to avoid outsourcing if you don’t have the means to invest in security measures for the company.
2. Control Issues
Some business owners love better control over their teams. If that’s what type of business owner you are, then you might not be up for outsourcing. Keep in mind that in outsourcing, the employees under your company are usually very far off.
In terms of moderating or leading the team, your control will be very limited. In fact, some outsourcing companies limit your control through collaboration software. While this is not exactly a major con, some business owners are just more confident if they are able to micro-manage every part of the company.
On the other hand, some outsourcing companies are more open when it comes to giving you more control of the team. This means allowing you to talk directly with the team through conference or collaboration tools.
3. Risk Of Lowering Existing Team’s Morale
If you have existing employees already, and you begin outsourcing more people, then there’s a chance that they’ll experience low morale. Put yourself in their shoes, would you feel okay if you see your boss hiring people when there are already enough inside the business.
They might also see it as a threat that, eventually, their job will be overtaken by an outsourced employee in the future. It’s important to assure your existing employees that outsourcing benefits everyone in the company. Of course, it would also be great to assure them that they aren’t at risk of losing their jobs.
4. Communication Problems
Last, but not least, expect communication problems through outsourcing. It doesn’t take much for there to be communication issues between your company and the outsourced employees. For instance, if the internet connection goes offline between one of the two parties, then you have a problem already.
In cases like these, it would be wise to have other means to communicate with the outsourced employees. Communication only becomes a problem if there are connection issues, so you can mitigate these problems by having backup solutions as well.
Outsourcing is definitely not for every business but in truth, many businesses can benefit from it in many ways. Understanding the pros and cons is key in ensuring that outsourcing is also the next best step for your business. Think it through and who knows, it might be your avenue for growth.
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