Outsourcing: Pros & Cons
As your business grows, the chances are you'll need to expand your workforce to cope with demand, or to assist with different parts of the business - finance, development, administration and others.
For a small business, this can mean a hefty outlay. By the time you include payroll, the employee's pay, employer's national insurance, employer's liability insurance, and other costs, it can be expensive to expand. However, that doesn't mean you shouldn't.
A common route to take at this point is to outsource some of your tasks to a third party who specialises in these particular areas. For example, you could appoint a marketing agency to handle your marketing, or you could appoint a bookkeeper to keep records of your purchases. But is outsourcing the right route to take?
First things first, what should be outsourced
There are two types of outsourcing you could consider:
- Critical tasks: This could be anything relating directly to the services or products you supply. For example, if you run a small retail business, you could outsource the delivery aspect to a courier. This is a vital part to running your business.
- Commodity tasks: This could include things such as cleaning, reception duties, your own printing such as business cards etc.
The Pros: Why you should consider outsourcing
There are a couple of arguments for outsourcing, including:
- Leave it to the experts: If you're outsourcing your marketing for example, you're likely to be outsourcing to an agency who deal with multiple businesses, as well as working with a number of different industries too. This gives them a wide range of experience. After all, they would be experts in marketing. With an agency, you can call on them as and when you need to, compared to an employee who may have little work to do and are still being paid. This could potentially save you money
- Focus on the business itself: With someone else looking after an outsourced area, you can concentrate on the core of your business
- Little setup costs: If you were to outsource deliveries for your goods, then the company you outsource to probably already have all the machinery, staff and procedures in place. These are costs you'd have to absorb if you chose to do it yourself
- Free up internal resources: You may have someone employed to do your administration for you, but outsourcing to a virtual assistant could free up that member of staff to assist in other areas.
- Quicker Service: Because the company you outsource to are experts in what they do, they would have developed robust procedures to speed things up. It could take you a couple of years to achieve the same speed.
There are many advantages to outsourcing - we've only highlighted a few.
The Cons: Why you should keep it in-house
Of course, as with most things, there are downsides too.
- Only you know your business: You could outsource to the best business around, but only you truly know your business. You can explain, and they can research, but only you will be on top of your figures, know the processes and procedures that you've built your business around
- It's not you: If you have an in-house IT team, they will focus purely on your own IT infrastructure, your own equipment, your own users - no one else's. They'll also know your systems better than outsiders as they are dedicated to your business and only your business.
- Customisation: With your own processes, you can customise the steps involved to suit your own business. You may want to offer a click and collect service from your warehouse to promote local custom; if this is outsourced, you may not have the flexibility to offer services like this.
To sum it up, it's down to you, your business, your goals and your budget. Hiring an agency may seem like a good idea to take advantages of streamlined costs and processes, but if you want the more customised service, in-house may be the way forward.
As with most things - research before committing to anything.
- 24 Nov 2020 - Are Directors and Shareholders Liable for Company Debt?
- 06 Nov 2020 - Can My Company Make Contributions Towards My Pension?
- 27 Oct 2020 - Retirement and Company Ownership
- 23 Oct 2020 - Reasons Why You Need an Accountant for your Limited Company
- 30 Sep 2020 - What is a Director's Loan and do you need to pay tax on it?