5 Signs You Need to Stop Hiring and Start Outsourcing
In the past, I’ve talked about the benefits of outsourcing, but I understand that not every company needs to jump on the outsourcing bandwagon. Many companies have everyone that they need for day to day operations on their payroll, and larger companies especially have different departments dedicated to specialized positions.
But many small companies don’t have the resources to specialize like that, and every now and then, something pops up that requires special attention. When that time comes, you could either hire a new employee or outsource the position to another company. Many times it’s obvious when an internal hire is the way to go, but how do you know when it’s the right time to outsource?
1. The skill required is so specialized that it’s impractical to have a regular employee do it.
Consider just what it is that you business does. Are you a tech company? An accounting firm? A retail business? Chances are, no matter what kind of company you are, there’s going to be a call for a specialist at some point or another. I referenced hiring construction companies in my previous blog as one of the more commonly known examples of outsourcing, but it’s not the only one.
This chart from rockfordconsulting.com lists the most frequently outsourced jobs on the market.
Tech consulting companies, accounting firms, and retail businesses are all examples of business that can outsource their jobs! A startup tech company, which is full of computer-savvy but inexperienced entrepreneurs, might hire an accounting firm to handle their books. Or maybe they need promotional swag and advertisement for networking events but don’t have the ability or overhead to train a full-time marketing professional.
Similarly, a retail business might have an accounting department for all their book-keeping, but they don’t have a regular IT department because they’ve needed to hire for different, more omnipresent needs. The important thing to remember about outsourcing is that it’s there to supplement the departments you already have, not take them over or replace them.
2. The task is a need that’s only temporary or that recurs in cycles.
Like that retail business that doesn’t need a regular IT guys, if you only need someone to check on your servers and do routine backups once or twice a month, it doesn’t make sense to hire someone full-time to do the job. It just isn’t cost-effective. You’d end up spending more on that employee’s down-time than you do for their actual work. Contractors and consulting companies only charge for the work they do, giving you the most bang for your buck. This also applies to one time projects, such as designing or updating a website, payroll, or yearly taxes.
3. The job ends up wasting valuable time and energy.
Bookkeeping is becoming one of the more popular jobs to be outsourced, along with payroll. In addition to being jobs that require specialized knowledge to complete – one minor miscalculation can trigger expensive tax audits – they’re delicate jobs that require a lot of time and attention to detail. Not many business owners have time to handle the finances themselves, especially if they’re trying to manage multiple projects at once. Some like to try, because it makes them feel in control of the business, but after a while, it might start to feel like more time is being spent managing the books, rather than managing the project.
But managing the books isn’t the only thing people are outsourcing these days. The use of virtual assistants is on the rise. Virtual assistants, or VAs, do a lot of the same jobs as an executive assistant or office manager: scheduling, administrative tasks, organizing meeting notes, sending out thank you cards, and managing emails. It might feel a little bit like cheating when you consider how small the tasks seem, but you’ll want to keep it up with all the time you’ll end up saving.
4. The activity isn’t one that employees enjoy doing.
Okay, let’s be honest, few people enjoy all parts of their job, but that doesn’t mean it needs to be outsourced. For this one, it’s important to look at your strengths and weaknesses of your employees before deciding a job is going to be excessively draining upon them. You don’t want to be outsourcing something that’s central to your business model; it’s important, especially for small businesses, to focus on their own core competencies and goals. A web designer would not want to outsource the creation of their own website, after all.
However, a great example of this would be a tech company full of programmers who would rather be coding in front of a computer than doing something like marketing or lead generation. Software engineers just aren’t going to be comfortable fishing for sales, making this the perfect job to be outsourced.
It’s natural to want to do everything yourself, but as this graphic from approveme.com says, sometimes, that’s not always the best option.
5. The cost of hiring a new employee is greater than it would cost to outsource.
Many times, the thing that stops small businesses from outsourcing is concern about the cost. Since many outsourcing companies present a lump-sum bill, the numbers can seem awfully large and daunting. Fortunately, cost reduction is one of the benefits of outsourcing, as I’ve talked about in the past.
Although it may not seem like it because employee salaries are broken down over the course of a year, employing a single person still costs a lot of money. In addition to salaries, most companies are also responsible for an employee’s insurance, payroll taxes, and benefits.
This infographic from aktrionfoods.com covers both the pros and cons of outsourcing. Click the image above to check it out.
This says nothing of the expense that goes into training and start-up costs, or the money spent making sure they have the materials and tools they need to do their job. Finally, lunch breaks, doctors’ appointments taken during working hours, or anything that interrupts their daily work flow can also add to the cost of employing someone full time.
An outsourcing company’s fee covers all this, usually for much, much lower than it would cost to hire an employee. Don’t believe us? IQ BackOffice, a California based outsourcing company, has created a calculator that can help a company determine the ROI on outsourcing something out to another company. In many situations, the value gained per dollar ends up being much higher when taking on a contracted team of professionals compared to starting with onboarding a single hire (or team) from scratch.
As I said at the beginning, outsourcing isn’t for everyone. Companies with stable business models and diversified departments aren’t going to have the same needs that a small business or a startup would have. However, for businesses entering a stage of growth, or even just preparing for a growth stage, it’s important to recognize the signs that hiring a new employee or muddling through isn’t the best solution. Outsourcing may seem daunting at first, but in the long term, it can help fill in the gaps and keep your company afloat.
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