Outsourcing: Pros & Cons
As your business grows, you'll need to expand your workforce to cope with demand and assist with different parts of the business - finance, development, administration and others.
This can mean a hefty outlay for a small business. Increases in payroll software (if applicable), employee pay, employer national insurance, employer liability insurance, and other costs mean it can be expensive to expand.
However, that doesn't mean you shouldn't.
A common route to take is to outsource some of your tasks to a third party who specialises in these areas. For example, you could appoint a marketing agency to handle your marketing or 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, delivery is a critical part of your business that can be outsourced to a courier.
- Commodity tasks: This could include things such as cleaning, reception duties, printing business cards, etc.
The Pros: Why you should consider outsourcing
There are a couple of arguments for outsourcing, including:
- Leave it to the experts: For example, outsourcing your marketing to a specialist agency gives you access to a wealth of experience and expertise, meaning they should be able to guide your marketing efforts effectively
- Focus on the business itself: With someone else looking after an outsourced area, you can concentrate on the core areas of your business
- Little setup costs: For example, if you outsource deliveries for your goods, the company you outsource to already has all the machinery, staff and procedures in place. If you tried to do it yourself, you would have to absorb these costs
- 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.
These are a few reasons to consider outsourcing over hiring additional staff. However, many more reasons would make sense within your business, such as how its run and what you want to achieve.
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 and 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 IT infrastructure, your equipment, and your 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.
Theres no right or wrong option for whether you should outsource areas of your business. You should use the method of expansion that makes sense for your business in both the short and long term. For example, it might make sense to start by outsourcing an area such as your IT department, but as your business grows and your IT infrastructure becomes more complex, it might then make sense to bring it in-house.
Ready to take your business to the next level? Become a limited company today.
- 27 Nov 2024 - VAT - What is it and how do I register?
- 21 Nov 2024 - Outsourcing: Pros & Cons
- 24 Oct 2024 - Why do Businesses Fail?
- 23 Sep 2024 - What Is A Company Limited By Guarantee?
- 28 Aug 2024 - Can You Be Disqualified From Running A Charity?