Sometimes there just aren’t enough hours in the day. Small business owners wear several different hats at once, trying to keep up with the mundane admin of running their enterprise. And each employee in a smaller company juggles several roles to get everything done.
But there comes a time when many SMEs decide to give up some control over their business processes, and they consider outsourcing to external experts. Whether it’s PR, payroll or IT services, contracting out some back office jobs to third parties can free up valuable time for a growing business to pursue activities that actually generate profit. Plus, companies benefit from specialist expertise. Add to that rapid advances in technology such as cloud computing, which are changing how and where work is done, and more firms are realising they don’t have to manage everything themselves.
The decision to outsource isn’t an easy one. Bosses worry about giving up managerial control, want to maintain the quality of work and company reputation, and protect proprietary knowledge. But fans of outsourcing often cite greater flexibility in business practices, lower costs, better quality work, and more reliable outcomes. And the increase in professionals offering their services on a freelance basis via websites such as Freelancer.co.uk, Guru.com, oDesk, and Elance has made finding experienced contractors easier than ever.
Even the tiniest firm can punch above its weight using outside help, but, typically, SMEs start thinking about outsourcing when they begin to expand. About a third of companies turning over more than £5 million outsource some business activities, compared with just 14 per cent of smaller firms – those with a turnover up to £100,000 – according to research from the Open University Business School (OUBS). But when companies do decide to outsource, they like to keep it local – 82 per cent work with someone in the same city or region, while a fifth use people within the UK. Just five per cent send processes overseas.
So, what are the key areas that many SMEs opt to contract out?
This is the function most commonly outsourced by firms, as small companies often lack the capacity to keep up with larger rivals and produce all the items they need, or they lack the capital investment to buy machinery. Others are simply swayed by the huge cost savings of having products made in countries like China rather than at home. The Manufacturing Advisory Service can provide manufacturers with information on outsourcing and other alternatives.
Accounting and payroll
Outsourcing bookkeeping and payroll is very popular with many SMEs who want specialists to handle these important functions, as well as ensuring that a company complies with all pay-related and tax legislation. It’s vital to find an expert who is suited to the needs of your business, with the right experience and industry nous. Your local chamber of commerce should help you locate a payroll provider, ask your accountant, or the Chartered Institute of Payroll Professionals also has a list of qualified practitioners.
Information technology or website services
Technology is a key part of any business these days, but many SME bosses can’t keep up with the rapid developments of the digital world. Whether it’s designing a website, keeping your servers running, or basic IT support, small firms frequently turn to tech experts for their computer and technology needs. Outsourcing processes can also be attractive for cash-strapped SMEs who can’t afford to upgrade hardware and software constantly. Using an outsider also means you only pay for the services you need rather than having a permanent employee.
Customers are becoming ever more demanding. People expect to get in touch via email, Twitter, text message and phone 24 hours a day – a level of service that many small firms struggle to provide. Step forward the new generation of outsourced contact centres that offer SMEs day and night response to customer queries. But choosing the right partner is vital and the cheapest option – often low-cost overseas providers – is not always the best. This is the front line of your business and bad customer service can cause irreparable damage. Again, check the reputation of any service provider. Potential partners can be found through the Call Centre Clinic, the UK section of the Call Center Directory, or the Customer Contact Association.
Human resources and recruitment
People management is often at the bottom of the list of priorities in many small companies, and keeping up with ever-changing employment law can be a major headache for SME bosses. For this reason, there can be real benefit from using outside expertise for personnel issues – and for the recruitment process. External HR professionals can ensure that a business’ policies and contracts comply with current legislation, plus they can handle any employee disputes. It’s rare for a firm with fewer than 50 employees to have a dedicated in-house HR person, but having access to such a figure is helpful to avoid staff issues escalating and causing major problems.
Social media, public relations, and marketing
Social media has become a key plank of any business’ marketing and PR drive. A new trend is for SMEs to contract out their social media activity, though some experts say it’s inappropriate to farm this out to a third party if you want to have an authentic voice. Any social media freelancer must really know the company for which they’re providing content, they need to understand how a business works day-to-day, and they must grasp what the owner really wants to achieve. The same is true when hiring a PR professional – what message do you want them to relay? What’s the goal and who is the target audience? Businesses that want to give their operation an extra push may also turn to outside marketers, and online marketing experts can be particularly useful at helping firms get to grips with search engine optimisation (SEO). Again, set clear, measurable objectives, and agree ownership of work and intellectual property before the contractor starts the job.
If you do opt to outsource any of your business processes, take steps to protect your enterprise from the inevitable risks involved. Don’t sign long contracts, and insert clauses to give yourself a way out if the agreement becomes unworkable or inefficient. Insist on non-disclosure agreements to protect your company and its intellectual property. Do due diligence on outsourcing providers to make sure that they’re reliable and can deliver the work at the right cost. And once the outsourcing relationship is established, review it regularly to make sure the freelancer knows who is responsible for what and where accountability lies. The National Outsourcing Association offers some further tips on what to consider when deciding how and when to outsource work.
But don’t forget the value of keeping some functions in-house. Permanent workers bring commitment to a task and training them up is good for the business all round. Customers expect a company to be as efficient as possible, but they also often appreciate the continuity of service and cultural coherence that comes from engagement with in-house employees. Get the balance between internal passion and external expertise right and you’ll have a winning combination.
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