Tips for outsourcing your small-business needs


By Joanna L. Krotz

Yes, small businesses can benefit from outsourcing too. More and more of them are turning over parts of their operations to outside experts, allowing owners to focus on critical needs and growth.

Following the trend of larger companies, small-business owners are outsourcing a range of services, from HR to finance and accounting to customer services. But the outsourcing process requires some time and investment to find the right vendor, build a working relationship, and allow your employees to adjust.

Here's how to evaluate whether outside experts can perform better, faster or more cost-effectively than your in-house staff. You'll also find advice about charting a path through the come-hither promises often made by outsourcing services.

First, define your core

Generally, the smart strategy is to hold on to operations or areas that define the core mission of your business. Then, consider outsourcing the other operations that are not as strategic.

If, for instance, your point of difference is customer service, make sure you have enough friendly and attentive full-time employees to make good on that. If, however, you promise rock bottom prices, then relying on an outsourcer, such as a Web-based virtual assistant, an automated phone system or an overseas call center, might make more sense.

Also, think through potentially outdated conventions about on-staff specialists, especially given the reach and effectiveness of today's desktop technology. Traditionally, small businesses have outsourced payroll and human resources services.

But owners can now tap outside facilitators for a much greater range of services. For instance, entrepreneurs with strong sales often assume they need a full-time bookkeeper to oversee the books. But, in fact, you can be running a $5 million company and still not really require a full-time bookkeeper. Such services have little to do with the volume of sales and more to do with the level of accounting activity, such as invoicing, bill paying, payroll and the like. Companies with a full-time bookkeeper can save about $30,000 a year by using outsourced bookkeeping services, say, a half-day a week.

Move slowly and commit incrementally

Outsourcing's advantages will vary with the services, the kind of business you run and, of course, the quality of your provider. It's worth your while to move slowly and commit little by little. Don't sign two-year contracts before testing performance and the relationship.

To get a feel for the process and to accustom your staff to the idea, first try outsourcing one stand-alone project, and then move on to hiring professionals for other areas or ongoing needs.

"With project professionals, there are no long-term contracts for unnecessary services and companies," says Chris Hagler, national director of strategic services for Resources Global Professional, a Costa-Mesa, Calif., concern that provides specialists and contingency experts in finance and accounting, information technology, human resources and legal services. "Project professionals are 'executers' as opposed to traditional consultants who do not necessarily roll up their sleeves and get the job done," he says.

Examples of functions to outsource

The roster of choices for high performing, affordable outsourcing services keeps growing. Here are some examples of functions you might consider outsourcing, to boost your day-to-day operations.

Specialist and expert help. Elance Online (elance.com), based in Sunnyvale, Calif., for example, offers a range of services for small business projects. It provides access to thousands of professionals around the world for services, such as graphic design and multimedia presentations, engineering, sales and marketing, writing and translation, and more.

Public relations services. Most small businesses cannot afford a PR pro full-time and likely don't need one. Much of the news or publicity that smaller companies seek is generated when a new product launches or to support the chief executive officer's profile as an expert in the industry, or to call attention to expanded services or new hires and so on. To find a PR company that can work well for you, look for someone who understands your industry and takes on smaller-company clients.

Virtual assistants. Virtual assistants, or independent entrepreneurs who provide administrative, creative or technical support are a growing phenomenon. They work on a contractual basis via online or electronic communications, handling functions, such as keeping your schedule or your files or your customer intelligence database up to speed. You can find out more by visiting the nonprofit International Virtual Assistants Association (www.ivaa.org).

Expertizing, based in Newton, Mass., uses virtual assistants for a variety of projects. "We're a small company that helps people achieve media attention for their businesses, and have outsourced a lot of work to several virtual assistants," says CEO Fern Reiss. "It completely changed the way we operate. We meet 'live' once a month for a long catch-up, and in between correspond via email and occasionally by phone. We have increased productivity by about 30% to 40%, and have finally gotten many of our back-burner projects out the door."

  • Outsource brokers.
When you outsource services or projects, you still need reliable managers to track progress and monitor results. Increasingly, there are third-party services that will manage your outsourcers for you. These brokers, exchanges and networks can recruit, interview and manage the services you need. For instance, ComputerRepair.com based in Boca Raton, Fla., runs a Web site that lets businesses across the country quickly find inexpensive PC support services. The company claims cost savings of 50% for IT service procurement.

Outsourcing dos and don'ts :

Try fixing whatever's not working on your own first. You may have internal resources that can work better than you think.

Carefully evaluate what really can be outsourced. Generally, projects that require team interaction or brainstorming don't work too well. Self-contained tasks or projects are more suited to outsourcing.

Consider management costs. Sometimes services look good on paper but you end up eating the savings in training and oversight costs.

Be prepared for challenges. It takes a while to build the relationship and synchronize the timing.

Don't walk in blind. Start with some paid consulting, if need be, so you can ask the right questions in choosing a vendor and keep knowledgeable tabs on performance.

If you outsource significant hunks of your operations, consider having a staff employee(s) to act as a liaison. You want to outsource functions but not accountability.

Watch out for hidden costs. These may include paying layoff-related expenses, overtime costs for remaining employees who may now have more work to do, and telecommunications costs for remote workers.

Know the outsourcing ABCs

Before you ramp up your outsourcing services, learn these outsourcing ABCs from Kevin Gregson, chief executive officer of Sherwood Solutions, a business advisory firm.

Alignment: Is outsourcing the right move for your business?Business case: Have you taken all costs into consideration?Culture: Can you bridge the cultural difference between your company and the outsourcer?Delivery: How will you define success?

It might take a bit of time to get right, but the benefits of outsourcing can be enormous. Check out your operation to see how it can work for you.

 
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