Knowing when to outsource rather than hire employees helps stretch your limited resources but only if you do it at the right time. By outsourcing your staffing needs and parts of your strategy to companies that specialize in that skill means you not only save the immense costs associated with hiring, training, and managing employees but have the flexibility to expand and contract quickly as your needs change. You not only spread the cost of skilled employees by paying for only the fraction of their salary that you need but you also spread the cost of expensive tools, including software, across multiple firms rather than paying all the cost yourself. Below, you see an example comparing outsourcing digital marketing talent with hiring internally.
No matter what industry you work in, hiring the right people is instrumental to the growth of your business. However, hiring is also expensive. In fact, a recent study found that “the average cost to hire an employee in the U.S. is around $4,700,” and that’s before you begin to factor in other expenses, such as their salary and benefits that add a big chunk of change to the wages you pay workers.
At a time when many businesses are struggling financially, this is money that many business owners do not have, despite needing to grow their teams. Fortunately, outsourcing can prove to be a beneficial solution to both of these problems. After all, outsourcing is cheaper than hiring somebody full-time, and you’re not depriving your business of the necessary skills and talents, either.
Similarly, your business might not need workers full-time or, worse, you need the flexibility to quickly scale up and down as your needs change. You can’t do that with employees, even using gig workers to fill the gaps, and usually, the most highly skilled employees aren’t willing to work part-time, so you’re forced to hire workers with less skill, resulting in poor performance and lower productivity that increase the actual cost involved in hiring these workers. A bad hire can also sink your business, especially in a forward-facing position such as marketing where a single bad post can damage your brand beyond repair. That’s what happened with the post below from Asus, which garnered worldwide ire and was picked up by the global news as an example of its tone-deafness.
With that in mind, here are some areas of business where you should always consider outsourcing.
When to outsource
Potentially, any area outside your core business is the place to consider outsourcing. This allows you to focus your resources on delivering on your business while trusting companies specializing in an activity to perform peripheral activities that support your core business. When to outsource is usually early in a process before you gear up to full steam, such as in the startup phase and when moving into a new product or market.
According to Forbes, there are eight signifiers pointing to when to outsource. They are:
- When innovation is needed. By outsourcing mundane tasks, your staff can focus on the innovation process without the distractions of normal business operations.
- If you’ve maxed out your existing capacity. Many businesses face high fixed costs associated with growing, such as building a new plant or adding a new assembly line. In these fixed-cost dominant industries, once your business hits capacity, the cost of adding a single unit is astronomical. By outsourcing to a company like a contract manufacturing firm, you can add capacity without the high fixed cost. In other industries, you might find workers stressed by too much work, which leads to discontent, increased absentee rates, and turnover. By outsourcing, you reduce the stress on your staff.
- The need for special skills. In the example above, you can’t just have your admin or your niece do your digital marketing because it’s a specialized skill that takes years of training and experience to get good results. Outsourcing is preferable to hiring these highly trained (and expensive) workers, especially if you don’t have enough work to keep them busy.
- When there’s no advantage to having in-house staff perform a job, it’s best to outsource. For instance, highly repetitive tasks like payroll are important but there’s really little advantage to having the task performed by in-house staff until you reach the point where your size justifies it.
- Flexibility to scale up and down as needs change in another situation when to outsource as a means to increase flexibility. For instance, a marketing firm may outsource some tasks when they take on a large client or several small ones that strain the ability of the firm. Outsourcing in this situation reduces the chances that customers or clients will be unhappy with your business in terms of the quality of the work or meeting delivery deadlines.
The admin staff is crucial to the smooth running of any business, whether they’re manning the company phone, scheduling appointments, or responding to emails. The more your business grows, the more you’ll rely on them to manage your workload, as you’ll simply be too busy to carry out this work yourself. As such, outsourcing these duties, such as by hiring a virtual assistant, can contribute greatly to your success.
Furthermore, you can hire virtual assistants with specific expertise related to your industry instead of those with more general administrative skills. For example, if you run a healthcare company, you could hire a virtual medical assistant to help with booking appointments, medical billing, and patient care coordination. It’s common to outsource certain administrative tasks such as payroll, tax preparation, accounting, and HR as the rules continually change so you need specialists that can keep up with the changes and advise on the implications of these changes for your company. By the same token, most SME (small and midsized enterprises) businesses outsource legal needs as they don’t use them very often.
According to a recent study, 50% of businesses have no marketing plan in place, which means their chances of long-term success aren’t good. Failing to promote your business online means your market doesn’t know you exist and the old adage that if you build a better mousetrap the world will beat a path to your door is hogwash. You need marketing to both reach potential customers and build a brand image that resonates with them to promote purchases.
However, this could seem like an impossible task for those without marketing skills (i.e., if you don’t know your tweets from your TikToks). I remember once meeting with the VP of marketing for a Fortune 50 company who asked me to send him the outline for a marketing plan because the company asked him to prepare one and he’d never done it before. However, you can quickly remedy this through outsourcing by hiring a marketing firm such as Hausman and Associates. This way, your socials are in the hands of someone who knows how to leverage them for a maximum ROI, whether you’re trying to build your following or boost sales.
Using contract manufacturing operations to test out product ideas before investing in your own property, plant, and equipment reduces the risks associated with innovation, which is critical for the long-term success of your business. Licensing is another great way to outsource your manufacturing that some businesses choose over the long run as a means to focus on other aspects of the business. For instance, Nike does not manufacture itself so it can focus on innovation and marketing.
When to avoid outsourcing
Of course, there are times when you should avoid outsourcing, although these are specific to certain situations. So, a better way to look at when to outsource and when it’s a bad idea is to look at the drawbacks to outsourcing, which are:
- reduced profits as the outsourced firm must recover overhead and management fees
- the danger of losing intellectual property through unscrupulous outsourcing firms
- it makes you vulnerable to the firm controlling your outsourced functions
- you have less control over the quality of the work in the short run
However, you can avoid this by outsourcing an accountant. This way, they’ll ensure all of your finances are in check and provide you with valuable insight into ways in which you could save money too!
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Hausman and Associates, the publisher of MKT Maven, is a full-service marketing agency operating at the intersection of marketing and digital media. Check out our full range of services.