Outsourcing for SMEs
For many Small-Medium Enterprises (SMEs), outsourcing is the practice of using external firms to handle work and tasks that are normally performed within the company itself. Small companies will sometimes look to outside firms to perform tasks such as payroll processing, accounting, distribution and many other important functions. Most of the time, it is because the company itself does not have a choice.
Many larger companies have also turned to outsourcing to cut costs. In response to those needs, there have been entire industries that have evolved to serve the needs of the companies’ outsourcing needs.
But not many businesses thoroughly understand the benefits of outsourcing. While it is true that outsourcing can save money, that is not the only or even the most important reason to do it. As many companies realised during the outsourcing ‘outbreak’ in the early 1990s, outsourcing too much can lead to an even bigger mistake that not outsourcing any work at all. A flat economy has caused many companies to resort to huge lay-offs and subsequently outsourcing functions that were better kept in-house. Well timed and managed outsourcing however, can provide a number of long term benefits.
For a company to be capable to do everything themselves, they will incur a much higher research, development, marketing and distribution expense, all of which will be passed down to the end user. An outsourcer’s cost structure and economy of scale can give your company an important competitive advantage.
Cost cutting many not be the ONLY reason to outsource, but it is certainly a very important one. Outsourcing converts fixed costs into variable costs and allows you to avoid large spending in the early stages of your business. Outsourcing can make your company more attractive to investors for the simple reason being that you are then able to channel more funds into revenue producing activities.
Reduced Labor Cost
Hiring and training new employees for short term projects can be very costly to a small company and casual employees can be a challenge to manage. Outsourcing allows you to channel all your focus to where your business needs it most.
Focusing On Core Business
Every business has limited resource and it is even more pertinent when it comes to small enterprises. Following the same vein, every manager also has a limited amount of time and more importantly, attention. Outsourcing can help the business shift its focus from low value activities toward the kind of work that will bring the best results for the company and the customers they serve. It can also help greatly for managers who are trying to get their priorities right.
Get New Projects Off The Ground Quickly
A quality outsourcing company should have resources to help their clients start new projects right away. If a business were to handle the said project in-house, it might involve weeks to months of planning, strategizing and finally implementing. This will take even longer if do not have the human resources required for that project as hiring and training will take additional time. The startup process can be made further complicated if it requires major capital investments.
Most if not every business investment will carry with it an element of risk. Markets, competition, government regulations, financial conditions and technologies all change very quickly. When you appoint an outsource company, they will assume that element of risk and are generally much better at deciding how to avoid and alleviate the risk in their area of expertise.
Level The Playing Field
Generally, small medium enterprises experience great difficulty to match the in-house support services that the larger companies can afford. By outsourcing, smaller companies are able to act “big” by being enabled to access to the same economy of scale, efficiency and expertise that large companies enjoy.
It is always easier for large businesses to expand, because they have bandwidth and resources to make things happen. But when we try to expand and perhaps BOOTSTRAP in a smaller business, then hiring full-time employees may not be the best strategy.
Maresa Ng – Asia’s Top Business Growth Specialist
Maresa Ng is a Passionate Entrepreneur who helps business owner grow their business to a stage where it is commercial and profitable and can continue to work without them. Maresa has worked with thousands of business owners and she has been turning around businesses since 2008. She was a corporate and investment banker, but now she is the leading Business Growth Specialist & Business Advisor in South East Asia. She always believes, as entrepreneurs, you can have Great Quality of Life through Great Business!