Small Business Owners looking at outsourcing opportunities.

The 2023 small business outsourcing guide

Are you bogged down with tasks that stop you from focusing on the areas of your business you need to the most? Consider the benefits of outsourcing. Outsourcing has become a tool for small businesses to access specialized skills, reduce costs, and boost efficiency.

In a Clutch report, 83% of small businesses planned to maintain or increase their investment in outsourcing business services in 2023. If you’re new to this, our guide will help you identify the best areas of your business to outsource.

Begin Your Outsourcing Journey in 4 Easy Steps

Step 1 – Identify Your Core Functions

Grab a pen and paper, and create two columns: one for your core business functions, and the other for non-core functions.

Core functions lie at the heart of your business. They represent activities essential to your business’s success and demand your direct attention. As for non-core functions, they’re time-consuming tasks that you don’t need to perform personally but are crucial for your business to function.

Example: Picture a passionate restaurant owner dedicated to perfecting the menu, food quality, and making sure his customers enjoy their experience.

Now, imagine that same owner had to manage social media, financial records, or staff recruitment. While these are important, do they require his direct involvement, or would it make more sense to delegate them to someone fully committed to the task?

In his book “The 4-Hour Workweek,” Tim Ferriss stresses the importance of focusing on the few tasks that contribute to your business’s success and letting go of the unimportant ones. His principles underscore the value of outsourcing your non-core functions to free up space to focus on where you can provide value.

Step 2 – Determine Your Outsourcing Goals

While the idea of outsourcing tasks may be exciting, before you dive in, establish clear objectives such as:

  • Lowering operational costs and improving financial stability
  • Elevating the quality of the services you provide
  • Addressing specific business challenges with the help of specialized expertise
  • Freeing up your time and resources to focus on core business activities

No matter what your goal is, these points will serve as a reliable point of reference to steer you back on track if you ever veer off course.

Step 3 – Cost-Benefit Analysis

What’s your outsourcing budget? While outsourcing can have high upfront costs, it can lead to long-term savings.

One useful step is to do a cost-benefit analysis.

Compare the outsourcing costs to potential savings. Think about things like labour costs, overhead, and how they could affect your profits. Make a decision rooted in data rather than emotions.

Step 4 – Legal and Security Compliance

With the continuous rise in cyber threats, legal and security compliance is crucial. Learn your industry’s specific regulations and understand data security and confidentiality requirements. Your future outsourcing partners will need to be educated on security rules and data protection laws.

Vendor Selection – Key Areas to Outsource

Choosing the right vendor can be overwhelming given the number of options on the market. Treat the process like hiring a new employee. Don’t hesitate to request references, evaluate their track record, and review their previous work. A detailed assessment will help you make an informed decision that aligns with your business’s values and goals.

Let’s explore some examples of various vendor types you can consider hiring:

  • Customer Support: For around-the-clock customer service help
  • Accounting and Bookkeeping: To manage financial records
  • IT Support: Covering system maintenance and cybersecurity
  • Digital Marketing: Handling online advertising, social media campaigns, and content creation
  • Human Resources: For recruitment, payroll processing, and benefits management
  • Website Development: For creation and maintenance of your website
  • Legal Services: For contract review, trademark registration, and compliance
  • Content Marketing & Social Media: For content strategy, SEO optimization, and managing social media content.
  • Manufacturing & Production: To outsource manufacturing and production processes
  • Data Entry & Data Management: For accurate and organized data entry and database management
  • Logistics & Supply Chain Management: To optimize the movement of goods and materials

You’ve Chosen a Vendor…Now What?

Much like an employee, maintaining a good relationship with your vendor is crucial.

Here’s how:

1. Clear Communication

Clearly define your expectations, deliverables, and timelines. Establish regular communication channels to address concerns and provide feedback.

2. Scalability

Consider the scalability of your outsourcing arrangement. Your business may grow or change, and your outsourcing partner should be able to adapt accordingly. Flexibility is essential to a long-term partnership.

3. Quality Assurance

Put in place quality control processes and service level agreements (SLAs) to make sure the work delivered meets your standards.

4. Risk Mitigation

Understand the potential risks associated with outsourcing and develop mitigation strategies. These could include contingency plans for disruptions and issues that could happen.

5. Monitoring and Performance Evaluation

Monitor the performance of your outsourcing partner. Use key performance indicators (KPIs) to test their effectiveness. This helps you decide whether to keep or change the outsourcing arrangement.

6. Cultural Fit

Cultural compatibility is often overlooked but can impact the success of your outsourcing relationship. Make sure your values and work culture align with your outsourcing partner’s.

7. Exit Strategy

While you aim for a successful partnership, it’s always a good idea to have an exit strategy in case things don’t pan out. Have a clear agreement on how to transition work back in-house or to another vendor.

Key Outsourcing Trends for 2024

  1. AI and Automation: Automation is transforming various industries. Small businesses are now using artificial intelligence (AI) and automation to streamline processes, reduce costs, and increase productivity.
  2. Nearshoring: Businesses are exploring nearshoring options to minimize time zone differences and improve communication. Nearshoring involves outsourcing to companies in nearby countries, reducing logistical challenges.
  3. Hybrid Work Models: The COVID-19 pandemic accelerated the adoption of remote work. Small businesses are thinking about mixing in-house and outsourced teams for more flexibility.
  4. Sustainability: Outsourcing partners are expected to align with environmental and social responsibility goals. Small businesses are considering sustainability and ethical practices in their outsourcing decisions.

The Takeaway

If daily tasks are piling up, and taking all your time, you should consider outsourcing. It might feel strange at first, but trust is key. Once you see the benefits, you’ll wonder why you didn’t start sooner. So, give outsourcing a try – the support you need is available.