Small Business Outsourcing

Outsourcing Advice for Small Business Owners

Written by Andrew Goldman for Gaebler Ventures

Many small businesses outsource various functions of their business, typically paying a premium. In order to gain a competitive advantage, small businesses must get creative and find a path to efficient and cost-effective outsourcing.

There have been significant trends in American industry toward outsourcing.

Outsourcing Advice for Small Business Owners

With manufacturing and larger companies, outsourcing becomes a simple matter of dollar and cents. Big business can produce items in a third-world country for labor costs a fraction of the U.S. minimum wage.

It is unlikely that small businesses, however, can produce enough volume to outsource production internationally.

Despite this, outsourcing is still a key component of small businesses. Services such as accounting, marketing, advertising, computer graphics and a slew of other functions are often outsourced to other companies, usually at a premium.

Since the small business is paying more for these outsourced functions than those with in-house departments, outsourcing can be a critical area of cost control. If you're paying more than your competitors for the same thing, they have the competitive advantage, not you.

Identify Cost-Effective Outsourcing Areas

In order to flip the tables, small businesses need to identify the proper areas to outsource.

Certain business functions, such as graphic design, are often seen as a necessary outsourced department. Many businesses feel graphic design work does not warrant hiring someone full-time, or that graphics hardware and software is too expensive. While these are valid reasons, they still do not justify paying absurd premiums for graphics design.

Do Your Research Before Outsourcing

When you pay a premium for anything in your business, you want to ask yourself: "What am I really getting for the added cost?" In the example of outsourcing graphic design, you're paying for the luxury of not having to buy hardware and software, or to hire someone.

Many small business owners may be intimidated by computer technology, thus alienating entrepreneurs from really knowing what graphic design is all about. With a little research and few conversations with some "techies," an entrepreneur can easily gain enough information to better understand the actual cost of necessary software. This will help you determine if outsourcing is really right for you.

Know That You Have Options

Another serious issue with outsourcing is the limited number of options that entrepreneurs feel they have. With graphic design, a small business owner may feel they have two options: hire someone and purchase the needed software, or use an outside company.

When thinking about outsourcing, it is of the utmost importance that you seek and explore multiple options. For example, there are students in every city studying graphic design. Use college campuses to find a student willing to gain experience, and offer an internship. You'd be surprised how many candidates you'll likely get.

Keep Track of Your Outsourcing Expenses

Once a small business decides to outsource some aspect of their company, they tend to put the issue on a backburner. Since the area is out of sight, it is out of mind. This is a dangerous way to run any part of your business. As a small business owner, you need to have knowledge and control over all your expenses.

Andrew Goldman is an Isenberg School of Management MBA student at the University of Massachusetts Amherst. He has extensive experience working with small businesses on a consulting basis.