What is Outsourcing and How to Make It Work for Your Company

Outsourcing is leveraged by many types of companies and organizations from small businesses to huge multinational organizations. It’s easy to see why. Companies of all sizes can benefit from hiring a flexible and agile workforce to take on some of their projects.
This article will cover all the aspects of outsourcing, including:

What is outsourcing and how it’s different from off-shoring?
Why outsource and what are the benefits?
Outsourcing to increase business profitability

Difference between outsourcing and off-shoring

Many people confuse off-shoring with outsourcing. Outsourcing is not about getting a cheap workforce to do as much work as possible at a cheap rate in a developing economy.

You can outsource your social media management to Chicago if you want. The point is to get work off your desk or to get specialist skills that you don’t have yourself or within the team.

Off-shoring, on the other hand, is purely about lowering costs by transferring some business processes abroad to increase corporate profitability.

Traditionally, only big companies are associated with off-shoring, but with the age of the internet, this is also accessible to smaller businesses.

For small businesses, the two certainly overlap, but it’s important to distinguish the difference to better identify your motives for outsourcing and therefore apply the best strategies.

Why outsource?

Often, you’ll find that the growth of your business outpaces the growth of your team. It’s not a horrible problem to have, but it can leave you with a long to-do list. While it’s tempting to try and tackle everything, this can often stunt your business’s growth.

Why you should consider outsourcing

Freelancing and outsourcing expert Matt Keener, author of “Executive in Sweatpants,” talks extensively about when to and how to outsource work in an interview with StartUp Fashion.

“At a certain point, if you’re working one hundred hours a week, you become counterproductive. So that might be a sign that you’re ready to do some outsourcing, as well.”

If you’ve reached this point, the first thing you should do is assess your skill set and figure out what new tasks you can take on.

Remember to keep core competencies in-house! Once you’ve identified what additional work you can handle, check out this helpful guide on commonly outsourced tasks.

This will make it easier to decide what to keep and what to hand off.

The second reason why many people decide to outsource is to gain specialist skills. At the end of the day, your business is only as strong as its weakest component.

If you’re an amazing real estate agent but could use some help on online marketing, don’t be afraid to go and find it!

The above is a good situation where you should be outsourcing. Just remember that the reason why you are outsourcing in such a scenario is to parachute in an expert who contribute meaningfully to your team. So going for the cheapest professional makes no sense. You can even consider hiring a local specialist if you wish to support the local economy.

Outsourcing to increase profitability

Sometimes, outsourcing specific tasks makes a lot of sense from a financial point of view. This can help optimize the business’s profitability or decrease the number of hours a business owner needs to work.

Outsourcing is easy

It’s not uncommon for consultants or freelancers to make as much as $150,000 per year offering their services. In a scenario where such professional works 250 days a year for 8 hours a day, it comes down to a daily rate of $600, or an hourly rate of $75.

It is almost certain that some of the work involved in this will not be related to the main service that the business offers. Rather, administrative tasks such as accounting, bookkeeping, social media updates, Adwords PPC campaigns and so on can be outsourced for less than $75 per hour.

In fact, some tasks, such as Adwords PPC, can be outsourced for as little as $10 per hour. It’s a no brainer to outsource it in such situations unless you enjoy the task.

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