Every small-sized business has to make a choice in the road — the decision between doing everything internally or outsourcing certain tasks to third-party vendors. It’s not easy to even to contemplate abandoning control this way. But, there are certain pros and cons to be considered in outsourcing as a business strategy.
In the end, outsourcing can be a great business plan if it’s considered in a thoughtful manner and executed efficiently. Continue reading to learn more about the pros and cons of outsourcing for small-sized companies.
Outsourcing for small Businesses: The pros and cons
Small-sized businesses can opt to outsource a variety of jobs and services. The U.S. Small Business Administration outlines a some of the most popular outsourcing candidates:
- IT services
- Customer service
A good example is an insignificant eCommerce company that decides to utilize drop-shipping instead of sending orders out first-hand. In this scenario the wholesaler or manufacturer will handle every shipping transaction in exchange for a predetermined price, allowing an eCommerce business to concentrate more on the functionality of its website and sales. In the end, they’re in a position to steer clear of the risk and hassle of stocking inventory, allowing them to concentrate their efforts on other areas and are also sacrificing the complete control of the final step of the customer’s journey.
This case highlights the main benefits and drawbacks of outsourcing as an method of business that is:
- Pros Pros: The capability to accomplish more It is generally less expensive than having to employ several full-time employees and allows the leaders to focus on their interests and areas of expertise instead of being stretched too thin.
- Cons Outsourced services come with cost that means your business loses some control over the results and a more regular and efficient communications with the contractors.
As you can see, there are pros and disadvantages to take into consideration when making a decision about whether your company can benefit by outsourcing one or more tasks of your company.
Tips for Effective Outsourcing in the context of an SMB
There are two primary elements to be considered when evaluating outsourcing strategies in terms of cost and quality. The objective is to take the best economical decisions for your company while making sure that you’re getting top-quality work for the cost.
Let’s look back briefly at the eCommerce instance that we discussed earlier. Let’s say that the company partners with an international vendor who will deliver their goods to customers at less than a few dollars for each envelope. While this may sound great initially, it all depends on whether the business can provide the right items within the timeframe that is appropriate to the correct customersand make the delivery to customers without any harm or confusion. If an eCommerce business promises delivery in 4-6 days and the vendor is only getting products to the customers 10-14 days after, the brand’s reputation could suffer.
This is where conducting your research in advance is beneficial, in terms of cost and quality. A reputable expert suggests to Forbes conducting background checks on any contractor you’re thinking of workingand looking for the past history of high-quality work for previous clients. If you can, search for reviews and feedback from previous clients and even call them directly to ask them about their experiences. In the end, quality is something that you should mention in writing before signing any contract with any company.
When it comes to your budget, it’s best to calculate the cost of contracting or handling the task yourself to figure out the savings that could be made. After a couple of billing cycles, analyze the actual figures to make sure that you’re in the right place.
Outsourcing is a beneficial business approach with regards to possible cost savings as well as efficiency of workflow. But, you must be ready to conduct your homework and ask questions prior to signing up.