Of all the tools available for growing your business, one of the least understood is outsourcing. It allows you to expand capacity without having to formally hire large numbers of new staff; without having to invest in new capital equipment, without leasing a larger commercial space; and without having to invest in development costs for non-core parts of your business, increasing your fixed overhead.
Simply, outsourcing is taking a function, activity, or need of your business and hiring an outside company to do the work instead of doing it in-house. This includes: contracting with a fulfilment company to stock and ship all your customer orders; hiring an online marketing company to manage and run your pay-per-click ad campaigns for you; turning over your payroll to a professional employment agency; etc.
Here are 7 secrets you can can use to leverage outsourcing to scale your company.
- Scale an area of your business that would be costly or difficult to expand quickly.
For instance, that fulfillment company you hire already has the capacity to handle 10 times (or even 100 times) the order volume you currently have.
So ask yourself, is there some part of our business that currently holds us back because we’ve been slow to scale it internally?
Then ask, would an outsourced solution provider help dissolve that limitation in a stable, scalable, cost effective manner?
Then make sure you think of the part of your business under the microscope for potential outsourcing is core to your business.
2. Skip all the development costs and trial-and-error learning that the outsourced service provider had to go through to build the solution you’re buying (or renting) from them.
In most cases, outsourcing lets you skip all developmental costs and tap directly into a proven business system and team in that area of expertise.
In essence, the outsourced service provider has liquidated all the significant development costs over its base of customers, of which you are one.
A decade ago, before there was an outsourced solution for an e-marketing platform, a certain company invested $500,000 to build a platform for its 100,000 person e-list. Once built the ongoing maintenance costs were in the low six-figures. Compare this to the roughly $10,000 per year they spend today on their current e-marketing platform, a solution that is literally 100 times better for pennies on the dollar of what they spent to build in-house!
3. Take advantage of expertise your outsourced service provider offers that your business lacks.
Many companies miss out on opportunities like these because they let pride or ego get in the way.
The fastest way to gain access to expertise that would otherwise be too costly in time and money to gain on your own is to simply outsource it to a provider with such an expertise. For example, rather than employ more Creatives (e.g. graphic designers, web designers) to meet with increased demand on your agency, outsourcing on a platform like eWorker will be a more cost effective decision.
4. Ride along with the ongoing and future investments your outsourced provider makes.
One of my favourite ways to benefit from an outsourced provider is to let them invest in the ongoing development and training costs to keep their solutions cutting edge in the market.
5. Beware the costs of choosing a mediocre outsourced provider.
Increasingly the world is winner take all so make sure you pick an outsourced provider who will be in the top 3 so that they will be around to continue to develop and mature over time.
6. Only use outsourcing when it lowers your real cost.
Make sure you factor in the direct and indirect costs of keeping the work in-house as well as the direct and indirect costs of outsourcing the work.
Indirect costs to keeping it in-house include: loss of staff time and focus to perform the work; increased overhead to both perform and manage the work; and more complexity for your business to manage.
Indirect costs to outsourcing include: the cost to find and implement an outsourced solution; the cost to replace any failed outsourced relationship; and the costs to integrate the outsourced service with your own company systems.
7. Beware of outsourcing an area or function that is core to your business.
If the area or function you’re outsourcing is the main way you create value in your business, then outsourcing puts you at risk.
In fact, disruption in the outsourced solution can kill your business, leaving you vulnerable. You lose the capability internally.
While it can be appropriate to outsource a core area or function of your business, be much more cautious about doing so.