This article has been contributed by John Ross.
Small business owners are almost always micromanagers. We just can’t help ourselves – our business is our livelihood, and sometimes, our life. And this usually means managing every minor aspect of our business, which naturally translates to keeping everything in-house. However, outsourcing some of the non-core parts of your business is a great way to lower costs and free up your time.
When you outsource a part of your operations, not only do you have more time to focus on the aspects of your business that you enjoy most, but you also hand over tasks to an experienced professional that is very likely more knowledgeable about their area of expertise than you.
In short, as a small business owner, there are a few functions of your business that you should always outsource. The benefits just outweigh the costs.
The Benefits of Outsourcing
Small business owners know intuitively that outsourcing certain tasks offers a ton of benefits. From cost-savings, to expertise, to more bandwidth, we know these advantages exist. Yet we just can’t seem to let go of our iron control over our business. Let me try to convince you of the true value of these perks with a deep dive into the benefits that outsourcing offers.
Control Your Costs
This is likely the biggest “no duh” benefit out there. The main advantage of outsourcing some parts of your business is the amount of money you are likely to save. Let’s just think about this on a business 101 level. What costs more? A full-time employee that you need to train, pay a salary to (with grossed up wages for payroll tax), offer benefits, and keep busy with 40 hours per week of work – or a highly specialized professional that efficiently handles your tasks on an as-needed basis?
You’re supposed to say the outsourced pro. Now, I know some of you out there are probably thinking, “hold on, not necessarily.” And to those I say, yes, as businesses grow, it does make sense to bring functions back in-house as you gain economies of scale. But this article is focused on small businesses with just a few employees, who are trying to focus on their core operations.
It is for these types of businesses that outsourcing makes the most sense from a financial perspective. If you outsource efficiently, you will save significant amounts on highly specialized full-time staff, which you can reinvest into your growing business.
Focus on What You Do Best
If you outsource parts of your business, you can focus on doing what you enjoy most. Small business owners are constantly battling the clock, with the biggest drain of their productivity being administrative tasks. In other words, business owners can’t focus on the key, core components of their business because they’re too busy responding to emails, updating their books, dealing with HR issues and setting up ad campaigns.
By outsourcing certain business functions, small business owners can spend less time completing behind-the-scenes work that customers do not see much of, and instead focus on their ‘real’ business. Whether this means more time improving your product or service, offering a better customer experience, or working directly with your core team, it is all time back in your day.
Outsourcing some of the vital functions of your business will also allow other management to prioritize more effectively. Your managers can spend more time building relationships with customers and working with your in-house staff to develop their skills.
Though it may seem counterintuitive, you can actually learn more and develop your skills by doing less work. Did that just put your mind in a pretzel? As a small business owner, by doing your books yourself, or researching workers comp issues, you only have yourself to learn from. You’re not learning from an experienced mentor or specialized professional. You only have you, and that places a ceiling on the growth of your skills in these areas. However, if you pay attention to the processes and procedures of the third-party companies you are outsourcing to, you can actually increase your own understanding of the way your business works.
For example, if you lack knowledge in human resources, working with a third-party human resources firm can teach you how to process an FMLA claim or set up an HSA for employees. In other words, outsourcing provides a good learning opportunity. Think of the people you outsource to as an extended section of your professional network.
Become More Competitive
Outsourcing parts of your business can help make you more competitive with larger companies in your space. Larger companies have more resources and employees, warranting their own human resources, marketing and accounting departments, while smaller businesses generally find it more cost-efficient and effective to outsource these functions.
Through outsourcing, smaller companies can leverage outside firms to get the same services as large companies, for a fraction of the price. This can help level the playing field and keep small businesses relevant and viable amongst larger companies with more resources and a much larger budget.
The world is always changing, and that means there are constantly new developments taking place in law, technology, and compliance. Outsourcing can help you stay on top of these new trends and updates and avoid falling behind – or worse, getting into legal trouble.
Third-party firms are experienced in managing risk in their area of expertise and can likely do it better than you and your staff. These professionals are paid to stay on top of the ever-changing regulatory landscape in their niche, and will actually be watching for these updates. This is just one more worry off your already crowded plate.
Tying into the concept of freeing up time for the aspects of your business you enjoy, outsourcing also provides significant gains in efficiency. You’re not a CPA, or HR expert, or marketer, or web developer – you’re a small business owner. You build things and connect with customers. Outsourcing these functions allows you to streamline your team and the activities you tackle every day.
When we are allowed to focus on fewer tasks in a day, we get more done. Loss of time is inherent in constantly switching between tasks. In fact, when you are interrupted from whatever you’re working on, research shows that it generally takes 23 minutes to get back on track. So the fewer the responsibilities on your plate, the fewer the interruptions, the less time you lose. This all adds up to a core business and team that is more efficient.
5 Functions You Should Always Outsource
Now that you know all of the different reasons why you should outsource certain parts of your business, you might be wondering which functions are the best to outsource. You likely have already gained an idea from the above as to which functions need outsourcing, but here are the top 5 business functions every small business should outsource.
1. Human Resources
The term ‘human resources’ covers a wide range of business activities, but generally includes all of your recruiting, training, employee management, timekeeping, payroll, benefit plans, workers comp, and more. The easiest and most effective HR tasks to outsource include timekeeping, payroll and management of leave. You can either do this through a software provider like Gusto or Intuit, or use an outside firm.
Outsourcing your payroll services in particular can help you drastically cut costs and help you avoid legal trouble with state and federal governments. Making sure your employees are paid correctly and on schedule is one thing, but making sure you are following tax laws and regulations is another altogether. Navigating tax laws as a small business owner can become overwhelming and very difficult. Outsourcing payroll can mitigate bigger problems down the road.
On the other hand, recruiters can help save valuable time by connecting you with the right talent when hiring. This saves you from running ads online, sifting through resumes, and even running background checks. In addition, you can engage benefits companies to administer and manage your health plans, 401(k) retirement plans and other employee benefit plans like HSAs. In short, you can outsource all of these HR functions to one outside firm, or piecemeal it for ultimate cost savings.
Small business owners should always outsource their accounting to a licensed CPA or bookkeeping professional. You may think you know your books, but as Socrates once said, “You don’t know what you don’t know.”
Your books could be plagued with errors and you’d never know because you never actually took the time to learn to do them properly and you’ve been following the same process ever since.
Being a good accountant takes a lot of smarts, skill and knowledge. If you lack advanced financial knowledge, a CPA or tax professional can leverage their years of training and education to streamline your books and make sure you’re covered from a legal and compliance perspective. Studying for the CPA exam is a painstaking process, requiring years of schooling and months of examinations. In other words, CPAs are well paid for a reason.
Though they don’t come cheap, outsourcing to a CPA can help save you thousands on your accounting needs. A CPA for a small business would likely only need a few hours each week to complete their work, so avoid paying a full-time salary to someone who struggles through your financial records and books each day.
No matter what line of business you’re in, you need to market your brand. This is the case for a local pool cleaning company, an online ecommerce store or even a mechanic. Every business needs at least a website these days, and likely more. However, many small business owners don’t have the requisite knowledge or experience to build a website, work on SEO, set up Google Ads campaigns, or monitor social media.
So outsource these tasks to a marketing agency. There are hundreds of digital marketing agencies across the world that will handle these tasks for you on a finite budget. These agencies specialize in web development, social media and digital ad campaigns. They know the market, and what works. Often you can put them on retainer for just a few hours per month to take all of these tasks off your plate. This will save you a ton of time and frustration.
4. IT Management
Outsourcing your IT management is a great way to save money and boost the efficiency of your business. If you are running a small business, you likely will not need a full IT team on-call every day. As your business grows, and your need for more specialized technology increases, you will want to outsource to an external IT management firm that can take care of the technology your business needs to operate.
IT management is also essential for managing your growth as a small business. IT firms can make sure that you integrate new tools and technologies slowly and carefully so that you can create sustainable growth for your business.
5. Administrative Tasks
The final part of your business that every small business owner should outsource is administrative work like scheduling, responding to chat questions on your website, sending appointment reminders, and inbox management. Busy work like this can slow you down when you are trying to improve your customer experience and engagement.
The cheapest way to outsource administrative tasks is to hire a virtual assistant. A virtual assistant (VA) can help you complete administrative tasks without even coming into the office. You can hire a virtual assistant for as little as $10/hour but should expect to pay more than $30/hour for a talented assistant.
If you need a VA with a certain specialty, you can wind up paying even more, but you should generally be able to find someone at any price point to help you. The best place to look for a skilled VA is the internet – online, you can find any sort of VA you need in abundance.
As a small business owner, outsourcing highly specialized parts of your business can be both cost-effective and can make your business much more efficient. Many small business owners choose to outsource other parts of their businesses as well – there is no exact formula for which parts you should choose to outsource.
The parts of your business that you outsource should be based on the skills that you already have in-house. If you are skilled in finance or have a member of your team who can handle your IT services, you probably do not need to outsource to a CPA or an IT management firm. Outsource according to the needs of your business – make sure it is actually saving you money, too, before you commit to an agreement with a third party. The bottom line is that if you’re a lean small business with limited resources, HR, accounting, marketing, IT and admin are the five main tasks that you’ll want to outsource.
About the author: John Ross is the owner of Test Prep Insight, a small business that prepares students for higher education and professional exams.