Outsourcing is the practice of hiring another firm to perform tasks that would normally be handled by your company. The outsourcing industry has grown considerably in recent years, to keep up with increased demand from both large and small businesses. If you’re the owner or manager of a small start-up, it’s likely that you will have to outsource some important functions due to a shortage of staff or a lack of relevant expertise. Larger companies also turn to outsourcing to cut costs. There are many benefits associated with outsourcing, and this guide will outline a few of the most important advantages.
Every business must strike a balance between their outgoing expenses and the profits they make. Failing to maintain this balance will result in insolvency and can completely undermine the success of your company. Outsourcing is a way of converting fixed costs into variable costs; it also releases capital for investment in other areas of your business and allows you to avoid large expenditures in the early stages. Additionally, it is known to make businesses more attractive to investors as your firm will be free to direct capital into activities that will produce extra revenue.
Reduction of Labour Costs
Put simply, you don’t need to employ more staff when you can simply outsource certain tasks. Hiring and training employees for short-term or peripheral projects can be very expensive and waste money that could be used for business growth in other areas. Temporary employees can also be unreliable.
This is one of the most important benefits of outsourcing, because you can engage the services of a business that specialises an area that your firm doesn’t specialise in. Employing a specialist accounting firm like Gibson Hewitt will ensure that your accounts are in safe, competent hands, while your staff are freed up to concentrate on their areas of expertise. It’s always better to outsource rather than to attempt tasks in an unskilled manner. If you try to do everything yourself, you will have high development, distribution, marketing and research expenses, that will eventually translate into higher product costs for the consumer. Outsourcing allows your business to prioritise tasks and focus on activities that will benefit the customer.
Swift Starts for New Projects
Many good outsourcing firms will have the resources to start a new project immediately. In-house, it might take weeks or months to hire and train the right people and a significant capital investment may be required. Outsourcing makes the start-up processes for new projects much quicker.
Competition and Risk Management
If you’re a small business, it’s likely that you won’t be able to afford the in-house support services maintained by larger companies. Outsourcing is a way of levelling the playing field, so that your small firm can cooperate on a similar level to big competitors, as it allows access to the same economies of efficiency, scale and expertise that much bigger companies take for granted. Outsourcing providers also assume and manage the risk that every business investment carries, due to changes in markets, financial conditions, technology, and government regulations. Moreover, they are more adept regarding the management of risk because it pertains to an area of their expertise. If an investment isn’t fully understood by your company, it’s always better to outsource.