Outsourcing refers to the practice of delegating some of your business tasks to third parties in order to be more efficient with both your money and time. For instance, if you’re not well-versed in accounting, then you may find it a more effective use of your time and money to hire a freelance accountant to help manage your books at the end of the month.
It’s incredibly helpful to outsource certain business tasks, but there are downsides that many small businesses usually aren’t aware of. While it can certainly help you scale your business, there are some considerations to keep in mind before you invest heavily into outsourcing certain work processes.
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Pro: Improves the overall efficiency of your business
One of the biggest advantages of outsourcing is that you’re almost always guaranteed to work with a business that specializes in that specific task. For instance, if you outsource payroll to a third party, you’ll know that they’ll be efficient, cost-effective, and will reduce the potential for mistakes. They’ll also offer a plethora of other financial management services to help you run your business more smoothly.
Con: Leads to a lack of flexibility due to rigid processes
However, using specialists as part of your business can lead to rigid processes. For example, you’ll become reliant on outsourced services and will find it difficult to finally hire an in-house or remote employee that is under your company’s name. Small businesses need to be flexible and while outsourcing seems to offer that flexibility at first, it can ultimately create bad management habits.
Pro: Opens up new opportunities within your business
Outsourcing can open up new opportunities within your business because it gives you access to a variety of specialists that can perform unique tasks. For example, branding and marketing may be difficult to accomplish without an in-house design team, but you could outsource it and create a much more competent promotional campaign.
Con: Can lead to management difficulties
However, relying on outsourced services for important core tasks such as marketing means a lot less control over your business workflow. This can lead to management difficulties and the quality of the work will mostly depend on the outsourcing company itself.
Pro: Predictable monthly costs
When it comes to budgeting for a small business, outsourcing services condenses those difficulties into a single monthly cost. This makes it extremely easy to calculate your finances at the end of each month and you’ll know exactly how much money you’re spending on a particular service. This consistency is appreciated since there are no surprises for your business to brace for.
Con: Potential for instability
Unfortunately, relying on another business for core processes can lead to instability because there are more uncontrollable variables involved. For example, if there are staffing issues at the outsourcing company, then it will negatively affect the regular service that you expect and could lower the quality of work they perform for you. Instability like this can cause a large number of issues and will ultimately cause issues for your business.