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Outsourcing for Small Business Owners

Outsourcing for Small Businesses

It’s not uncommon for people to wear multiple hats in one role for SMEs and startups. A business’s infancy calls for flexibility, maximizing each employee’s abilities. However, doing so isn’t sustainable and will inevitably cause burnout. Fortunately, all of that can be solved by outsourcing.

Gone are the days when outsourcing was viewed as a strategy for large enterprises only. Nowadays, small businesses are also reaping significant advantages by leveraging outsourcing, making it a viable option that frees up time for core business tasks.

A study done in 2019 reported that 37% of small businesses outsource at least one business process. What’s more, 52% said they foresee their business being outsourced in the future.

INTRODUCTION TO OUTSOURCING

Outsourcing for Small Business

WHAT IS OUTSOURCING?

Outsourcing is simply transferring specific functions to a third-party provider, such as Business Process Outsourcing (BPO) firms, agencies, or freelancing individuals. These providers, sometimes called outsourcing partners, specialize in specific tasks or services.

Despite its recent popularity, outsourcing has been a business practice for three centuries already. Its humble beginnings during the Industrial Revolution enabled American factories to go beyond their geographical limits and explore cheaper options for labor and materials.

In modern times, outsourcing has expanded into the digital space. Large enterprises, such as Fortune 500 companies, conglomerates, and even small to medium enterprises (SMEs), all leverage outsourcing for the same reasons businesses did during the 18th century.

Aside from cost savings on labor and services, outsourcing is now viewed as a strategic partnership rather than a transactional one. Outsourcing has had a major facelift in the past few years, but it still isn’t in its final form. Projections say the industry will be more innovative and lucrative in the near future.

BENEFITS OF OUTSOURCING

Outsourcing opens an avenue of opportunities that would otherwise be hard to achieve. Here are some highlighted perks small businesses can enjoy through outsourcing:

Cost savings

Focus on core business activities

Access to specialized skills

Increased scalability

Enhanced efficiency

Elevate competitiveness

WHAT ROLES ARE COMMONLY OUTSOURCED?

If it can be done virtually, it can be outsourced. Here are the common roles outsourced by businesses worldwide:

TYPES OF OUTSOURCING

Outsourcing is a broad term that can be classified into three categories, each targeting different areas of operation and offering unique benefits. Therefore, having a clear understanding of these variations is essential.

ONSHORE OUTSOURCING

In this type of outsourcing, companies seek providers within the same country.

Pros and cons of onshoring:

  • Cultural Compatibility

    Sharing the same language, culture, and time zone enables both in-house and outsourced teams to have better communication and understanding.

  • Quality and Compliance

    Being in the same area, they can leverage local expertise to ensure that they meet industry regulations, standards, and quality controls.

  • Higher Cost

    Onshoring might cost more than other types of outsourcing. This is because the employment costs are still based on their geographical location.

NEARSHORE OUTSOURCING

Nearshoring means finding outsourcing companies in neighboring countries, typically within the same continent or time zone.

Pros and cons of nearshoring:

  • Cost-Effectiveness

    This offers more competitive pricing than onshoring because employment rates or the cost of living in other countries might be lower.

  • Time Zone Compatibility

    Having similar or close time zones allows for more real-time collaboration and easier coordination between the client and their remote team.

  • Cultural Affinity

    While there may be some cultural differences, nearshore outsourcing often allows for better cultural alignment compared to offshore outsourcing.

OFFSHORE OUTSOURCING

This involves partnering with outsourcing providers located in a different geographic region, often on a different continent. This model has been a significant driver of globalization and offers several distinct advantages, especially for small businesses.

Pros and cons of offshoring:

  • Significant Cost Savings

    Offshoring offers significant cost reductions due to lower labor and operational expenses in certain regions.

  • 24/7 Operations

    Working with teams in different time zones allows for round-the-clock operations, accelerating project timelines.

  • Cultural Differences

    Coming from different ends of the world, cultures may not be as compatible and may cause misunderstandings between the in-house and offshore teams.

IS OUTSOURCING RIGHT FOR YOU?

The truth is, outsourcing isn’t for every business. There may be several factors businesses need to consider before making a big move. Knowing exactly what your company needs will help in determining the right solution to enhance operations.

  • Conducting a Comprehensive Business Analysis

    It all starts by analyzing your company’s current operations, processes, and organizational structure. Defining core and non-core roles and business activities plays a pivotal role in discerning which jobs can be potentially outsourced.

  • Defining Clear Objectives

    This step should help you answer why you want to outsource and what you want to achieve through outsourcing. Objectives could either be cost reduction, access to global talent, increased efficiency, scalability, or risk mitigation. Having well-defined objectives will help you evaluate potential outsourcing partners effectively.

  • Identifying Critical Business Processes

    Determine the critical processes that notably impact your company’s performance and competitiveness. It is best to keep these processes in-house to maintain maximum control and focus.

  • Evaluating Cost-Benefit Analysis

    Conduct a thorough cost-benefit analysis to determine whether outsourcing a specific process will lead to substantial cost savings or operational enhancements. Additionally, consider both short-term and long-term financial implications for a well-informed decision-making process.

  • Assessing Risks and Mitigation Strategies

    Outsourcing companies deploy several measures to ensure their clients’ data remains secure. Internally, businesses could also develop appropriate mitigation strategies to address these risks effectively.

SELECTING THE RIGHT OUTSOURCING PARTNER

If you’ve decided to outsource, the next grueling step in the process is choosing an outsourcing partner. Choosing a firm to work with is crucial, as this will influence the effectiveness of your outsourcing efforts. The service provided isn’t the only basis for success; sharing the same values and commitment also contributes largely to determining if a BPO or outsourcing firm is right for you. Here are the key factors to consider:

  • Define your requirements

    Start by clarifying your outsourcing needs and objectives. Identify the tasks or services you want to outsource, the level of expertise required, your budget constraints, and any specific industry or regulatory requirements. Having these criteria should help you select a few outsourcing companies.

  • Evaluate their expertise

    Conduct more in-depth research about the companies you’ve shortlisted. Visit their websites and review their services, case studies, testimonials, and portfolios. Look for providers with experience handling projects like yours. Also, check if they have worked with clients in your industry.

  • Review security measures

    Data security is crucial, especially if you plan to outsource sensitive tasks. Inquire about the outsourcing provider’s security protocols, certifications, and compliance with industry standards.

  • Assess their capabilities

    Contact each provider and assess their capabilities. Inquire about their team’s expertise, the number of employees, the infrastructure, and the technology they use. Understand their scalability and flexibility in case your requirements change.

  • Discuss pricing and contracts

    Obtain detailed pricing information and clarify all the costs involved. Discuss the terms of the contract, including the scope of work, payment terms, project milestones, and penalties for non-compliance.

MANAGING OUTSOURCED TASKS

Handing over functions to an outsourcing provider doesn’t mean you should no longer oversee them. Managing an outsourced project carries significant responsibility. Without a well-established system, it can become perplexing.

  • Provide Clear Instructions and Guidelines

    Outsourced teams heavily rely on a client’s instructions in order to complete tasks accurately. Giving vague guidelines might result in low-quality work and frustration. Working hand-in-hand through this process will set expectations for both parties.

  • Regularly Review Progress and Quality

    Implementing Key Performance Indicators (KPIs) and other performance metrics helps clients determine whether their outsourced team is performing efficiently. Reviewing these metrics periodically is a must to identify gaps and opportunities.

  • Address Issues and Feedback Promptly

    Encountering issues is inevitable. What matters is how your outsourcing partner addresses and resolves such concerns. Simultaneously, the client playing an active role in promptly reporting problems will significantly contribute to faster resolutions.

  • Build A Strong Relationship with Your Outsourcing Partner

    Open and transparent communication should exist between a client and their outsourcing partner. Doing so encourages a collaborative approach that helps them establish trust and understand each other’s working styles and processes.

THE REMOTE GROUP SUPPORTS OUTSOURCING FOR SMALL BUSINESSES

Small Business Outsourcing

The Remote Group is a leading provider of outsourcing services for businesses of all sizes. To date, we have helped small businesses worldwide thrive through our services. We are their partner in scaling their business and streamlining their day-to-day activities.

Tell our experts what you need, and we’ll help you get started on your outsourcing journey today.

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About The Remote Group

About The Remote Group

The Remote Group is a leading provider of customized offshore staffing solutions to businesses worldwide. Their services focus on solving talent and skills shortages, scalability, cost savings, and streamlining processes that help increase business productivity while diminishing inefficiencies.

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