How to Outsource Your Way to Lower Costs and Fatter Margins

anagentile's picture
779
BFF Manager
14/01
2015

Does this situation sound familiar? Your business has an ongoing need for a specific type of work. Maybe it’s graphic design or data management or maybe it’s just someone to answer the phones. For simplicity’s sake, let’s say you need someone to respond to customer service emails and to forward issues on to the appropriate department.

There’s just one problem - You don’t necessarily have enough work to fill that role full time. What do you do? If you’re like a lot of business owners, you combine that role with other roles that you need to be filled. You hire someone to respond to customer emails, but also answer phones, and maybe also fill in with the invoicing department from time-to-time.

outsource your staff

Problem solved, right? Not so fast. There are two problems with that approach. The first is that you’re hiring someone to do work that may not fit their skill set. How many people out there are great at both customer service and accounts receivable? Not that many.

The bigger problem, though, is that you’re creating work to justify hiring someone. It’s the real-world equivalent of that old story about the government breaking windows to create window repair jobs. If you do this too many times, you’re going to have bloated payroll expenses, which could cause serious problems the next time revenue slows down.

Rather than over-hire for work that may not justify a full-time team member, consider an alternative. Outsource.

Many people hear the word “outsource” and think of jobs and companies being moved overseas. That’s one type of outsourcing, but it’s not the kind we’re talking about here. Rather, consider leveraging the vast power of the internet to find individuals who can complete specific jobs without you having to make a full-time commitment.

This is easier than it sounds. There are entire websites devoted to matching freelancers with business. Freelancer.com and oDesk.com are just two of the biggest. A simple search on Google can also provide a wide variety of outsourcing options, some of which specialize in specific niches.

Don’t think your job can be outsourced? Think again. Here’s a quick list of a dozen jobs that are outsourced all the time:

outsourcing benefits cost savings better margins
  1. Web design and maintenance
  2. IT support
  3. Customer service
  4. Receptionist services
  5. Inside sales
  6. Email management
  7. Assistant services
  8. Bookkeeping
  9. Graphic design
  10. Copywriting
  11. Data management
  12. Fulfillment and distribution

You may think that it’s always better to have someone internally handle your work. After all, if the worker isn’t in your building or hasn’t went through your company’s training, couldn’t that hurt the work’s quality? Maybe. You’re certainly losing something by not having the worker in your facility.

However, there are also a lot of benefits to using an outsourced worker rather than an internal employee. Here are some of the biggest:

You only pay for the time that you require. The biggest benefit to using a contract worker is that you’re not their only source of income. They have other clients, which means you don’t have to create work to fill their schedule and you don’t have to pay them a full-time salary. If you only need them for a few hours a week, you only pay them for a few hours a week.

You stay lean and flexible. The next time you have a cash crunch, you can easily scale back the work you’re doing with your outsourced contractor. They can simply move on to other clients. That flexibility could help you make payroll and prevent you from laying off full-time staff.

You’re not responsible for payroll taxes. When you outsource, you have a 1099 relationship with the worker. They handle their own taxes. You only pay the amount agreed upon for the work.

You don’t have to offer health insurance, retirement, or anything besides pay. Just like taxes, you don’t have to offer costly benefits to outsourced workers. Their health insurance and retirement are their responsibilities; not yours.

You can negotiate flexible payment structures. With outsourced workers, you’re not locked into a preset pay schedule like you are with full-time staff. That can come in handy if you hit a rough patch. You can negotiate your payment terms with the worker. Maybe you want to pay them monthly or weekly. Maybe you’d rather only pay them as work is completed. That’s up to you and the worker to negotiate.

You’ll work with a professional who specializes in the exact work that you need done. This probably the biggest - and most overlooked - benefit to outsourcing. When you hire an outside contractor, you’re usually hiring someone who specializes in the exact work that you need to be done. If you need a complex spreadsheet model built, you can hire someone who only builds complex spreadsheet models.

That level of specialization helps ensure that you’ll get a high-quality result in an efficient timeline. That also eliminates the problems that come with some full-time employees, in which you hire them for one job, but they end up doing others that are far outside their skillset.

Nobody’s saying you should only work with outsourced contractors. You probably have many roles that can only be performed by full-time employees. However, you can be strategic about it.

The next time you need to hire, think about whether or not you need a full-time employee to do the job. Also, explore some of the outsourcing services available online and compare those to the costs of the full-time employee. You may find that outsourcing lowers your costs, provides you with more financial flexibility, and even gets you a higher-quality result.

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