As a business owner from the Midwest, I’ve observed something about some of my fellow business owners: we Midwesterners are a real do-it-yourself type. If something has to be done, we’ll do it ourselves. I think it has to do with our history. The Midwest was originally pioneered, settled, and then farmed by the people who lived there. If something needed plowing, you plowed it yourself. If the plow needed sharpening, you sharpened it yourself. If you needed to repair a harness, you repaired it yourself. Today, that type of grit comes in handy for business owners … much of the time. But it’s not always possible, or recommended, to do it all. That’s when business outsourcing comes into play.
Sometimes you have to let someone else handle some of the stuff that makes your small business run.
Your business can see big benefits when you outsource certain tasks — especially those jobs you dislike doing and tasks that require experience and skills you don’t possess. Examples might include writing, marketing, inventory management, IT and cyber security, human resources, accounting, and even sales management.
What exactly is business outsourcing?
Business outsourcing is basically where you find someone to do the things that you either don’t want to do, aren’t good at, or will take too much of your time — but you don’t need to hire a full-time employee to manage.
Think of all the basic functions that you might hire someone for: accounting and bookkeeping, human resources, finance, marketing, and even sales. These are all functions that you can outsource to professionals who are better equipped to do it for you.
Years ago, I worked for a small company that always rented a 20-by-40 trade show booth, and we installed a giant trade show display ourselves (it took 10 crates to deliver). One year, we rented a different trade show display and hired a company to do the installation for us. Their installation manager made us leave because we kept trying to “help.”
After about 30 minutes of our assistance, she said, “Look, I appreciate you guys helping, but it will go so much faster if you just let us do it. Alone.” So she made us go to lunch for two hours, and when we got back, everything was done. They did it faster without us around, and they certainly did it better than we ever could have. And we were free to do something else — thanks to business outsourcing (in a sense).
When might a small business need to outsource?
Here are the basic scenarios where you might want to hire someone to handle an aspect of your business for you.
A one-off project with a steep learning curve or specialty equipment/software
Think about projects such as building a new website, installing a new computer network, or doing your business taxes. You’ll only do it once (or once a year), but it could take you 40 or more hours to get it done. Meanwhile, it might take someone with expertise six to 10 hours to do the same thing.
Repeatable projects that require special skills you don’t have
Consider business outsourcing for projects like writing blog articles, monthly bookkeeping, high-tech installation and software programming.
Plus, these projects likely are outside your normal skill set, so you’re either going to struggle or not do them very well.
Work that is way below your hourly rate or value
You might look into business outsourcing for the following scenarios:
- A store owner doing basic inventory counts when they should be dealing with customers.
- An attorney who bills $200 per hour instead spends time filing court documents.
- A sales associate who is packaging orders instead of calling on customers.
These are important jobs, but not worth the cost of the person doing it. You can hire someone for a lower rate than what you’re normally paid.
When you don’t have the budget to hire full-time staff
For example, a real estate agency that needs marketing probably doesn’t want to spend $50,000 per year to hire a full-time veteran marketer. But about $1,000 per month might get you a freelance marketer for eight to 10 hours per week. Eventually, the money made on the additional marketing can justify hiring a full-time marketer, but you’ll have to work up to that point.
The best way to determine whether you need business outsourcing is to make a general list of all the things you have to do to keep your business running: sales, marketing, bookkeeping, inventory management, shipping, writing reports, etc.
If necessary, break down some of the items into their smaller components. Marketing could include trade shows, social media marketing, direct mail, and so on.
Then, identify which of those things actually make you money and which either cost money or don’t generate revenue. Next, identify which of those things you’re good at, you’re acceptable at, and that you hate or you’re terrible at.
My guess is that you’re going to find that the things you started the business for — tool-and-die manufacturing, real estate sales, catering, dentistry — are the things you love, and you dislike the tasks that have nothing at all to do with what you got into business for. And, the things that you love are the things that make you money.
If this is the case, why would you spend hours and hours on the tasks that 1) don’t make you any money, and 2) you dread doing?
In my case, I’m a professional copywriter with a marketing background. I love writing, I’m good at marketing, and I hate accounting — so I hire someone to do my taxes every year.
Business outsourcing misconceptions
Don’t buy into the idea that you have to know how to do everything in your company. Yes, you need to know how to do the primary function of the business — a landscaper better know how to mow lawns and plant trees — but that doesn’t mean you have to know how to do bookkeeping and taxes, the ins and outs of employee benefits, or how to manage your IT system. Stick to what you know and leave the other stuff to real experts — the people who love to do bookkeeping, employee benefits and IT.
Another common misconception is that business outsourcing is an expense. Well, sure it will cost you money. But it’s going to save you money and give you the chance to actually make money.
Let’s say that as a manufacturing consultant, you charge $200 per hour, and you have a capacity of working 40 hours per week. You also need to do a network security installation, which is going to take you 10 hours to complete, which means you lose 10 hours or work — that’s $2,000 of lost income. Or you could hire an IT specialist who can get the whole thing done in 5 hours for $100 per hour. Now, is the $500 an expense, or did you make $1,500 with those now-free 10 hours?
Another misconception: You should hire your outsource partners based on price. Do you sell your products or services based on price? Are you the cheapest option on the market? I sure hope not! You should be one of the higher-priced options, because you do amazing work, sell life-changing products, and you make people’s lives better. (You don’t get that kind of quality by offering the lowest price.)
So why would you hire your business outsourcing partners based on price?
Do you really want to rely on the cheapest accountant to do your taxes? Do you want the cheapest marketer to come up with the lead generation strategy? Do you want the cheapest lawyer to keep you out of jail?
High-quality people are worth the money they charge for a reason. They have years of experience to do the work better and faster than the people who are just starting out. That IT specialist who charges $100 per hour is light years ahead of the new-to-the-job IT specialist charging $25 per hour. That, and the seasoned pro works four times as fast, which means you’ll probably end up spending the same amount of money, but get better work out of the veteran.
Bottom line, if you like to do it, you’re good at it, and it generates revenue, do it yourself. But if it’s not your strong suit, you struggle with it, or if your “helping” is only going to make it take longer, then outsource it. That lets you focus more attention on the things you are good at and the things that contribute to your total sales.
Also published on Medium.