How to Successfully Outsource Business Functions as an SMB
Two-thirds of American companies use outsourcing to streamline operations, cut costs, refocus resources, and access specialized skills. Although once available only for large enterprises, strategic outsourcing is now practical for small-to-medium-sized businesses (SMBs). A recent LinkedIn survey found that 29% of businesses with less than 50 employees now outsource at least some operations.
For SMB managers, outsourcing is not just about cutting costs; it is about creating a workforce plan that aligns with business goals and supports growth. This article will explore how SMBs can develop a successful outsourcing strategy—from identifying the right functions to outsource to selecting the right outsourcing partner to managing performance for optimal results.
The Benefits of Outsourcing for Small-to-Medium-Sized Businesses
Outsourcing offers a range of benefits that make it an appealing option for SMBs. One of the primary advantages is cost savings: by outsourcing specific tasks to external service providers, SMBs can reduce overhead costs, such as payroll, benefits, and office space, while gaining access to specialized skills that may not be available in-house.
Another key benefit is the ability to focus on core competencies. When SMBs outsource non-core activities like data entry, bookkeeping, administrative tasks, or information technology, they can dedicate more time and budget to growth-driving activity and investment.
Outsourcing also provides flexibility, allowing businesses in industries such as hospitality and retail to scale up or down for seasonal surges or other changes in business volume. Flexibility to scale is especially valuable for operations with fluctuating demand, such as reservation booking, social media marketing, payroll administration, technical support, and network management.
Identifying the Right Functions to Outsource
Successful outsourcing begins with identifying the right functions—usually tasks that are repetitive and time-consuming, or those requiring niche expertise. Certain tasks that are ideal for outsourcing include data entry, appointment setting, lead generation, human resources administration, tax preparation, and customer service.
By delegating these specific functions to an outsourcing partner, SMBs can direct their more experienced and costly internal resources toward core business operations like product development and enhanced customer experience.
When identifying business process outsourcing tasks, consider both their cost-effectiveness and their potential to enhance operational efficiency. For example, if an SMB needs help with search engine optimization, software development, or financial analysis, outsourcing to a partner with specialized expertise can yield better results than struggling to handle these complex tasks in-house.
Selecting the Best Outsourcing Partner for Your Business
Finding the right outsourcing partner is critical. This begins with thorough research to identify partners with a proven track record in business process outsourcing and experience working with businesses of a similar size and industry. Look for a partner with positive reviews from previous clients and a demonstrated ability to meet quality standards.
Assessing an outsourcing partner’s reliability and communication style is equally important. Since outsourcing tasks often involve external companies handling sensitive tasks or intellectual property that can influence your brand reputation or competitive position, be careful to select a partner that values business integrity and aligns with the values and culture of your business.
Evaluating Potential Partners: Skills, Experience, and Culture
As you identify potential outsourcing partners, assess each candidate for the depth and specialization of their skills and experience.
- Can they meet your needs for specific tasks like translation, contact center management, or payroll and benefits processing?
- Do they offer a high level of expertise in data security and risk management, ensuring that your sensitive data is protected?
- Can they provide specialized skills you have not developed in-house, such as software development, content creation, or financial analysis?
- Is the potential partner using the latest AI technology and do they have the specialized skills to adapt AI tools for your tasks?
- Can their systems and staff resources be scaled up or down based on your changing needs?
- Does the potential business process outsourcing partner take the time to understand your values? Cultural differences can cause partnerships to fail.
- Is communication transparent? Clear goals and frequent feedback facilitate smooth collaboration, effective problem-solving, before minor details become major issues.
Building a Successful Outsourcing Plan for Your Business Functions
A well-defined plan is essential for successful outsourcing. Start by outlining clear goals and the scope of outsourced tasks for immediate or eventual consideration. Include budget allocations, timelines, key performance indicators, and milestones for achieving plan goals.
Make sure to clearly define quality expectations, communication protocols, and performance metrics for monitoring progress. Defining these parameters will help you keep the outsourcing arrangement organized, aligned with your business goals, and clear to your outsourcing partner.
Setting Clear Goals and Expectations for Outsourcing Success
Clearly defined goals are crucial for ensuring a successful outsourcing strategy. Before entering an arrangement with an outsourcing partner, identify your must-have objectives—whether they are cost savings, access to specialized skills, or enhanced efficiency.
Use a comprehensive service level agreement (SLA) to document costs, set clear expectations, agree on timelines, define performance standards, and clarify desired outcomes.
Setting measurable targets from the establishment of a new partnership will also make it easier to track the effectiveness of the overall outsourcing project. Your partner is the outsourcing expert, but you are the authority when it comes to interpreting the needs, concerns, and ultimate goals of your business.
Regular meetings to review progress will ensure that both parties are aligned with staffing, training, expected deliverables, quality standards, and definitions of success.
Overcoming Common Outsourcing Challenges
Working with an outsourcing partner presents unique challenges, especially for small business owners who may be new to the process. Common issues include managing time zone differences, ensuring data security, and protecting intellectual property rights. To mitigate these challenges, work with an outsourcing partner experienced in risk management and data security practices. Establish strict security protocols and ensure all legal agreements include clauses to protect your intellectual property.
Clear communication protocols can help bridge language barriers and ensure your expectations are understood. Regular updates and scheduled check-ins can keep the collaboration with our outsourcing partner running smoothly.
Solutions for Quality Control, Security, and Compliance Issues
Maintaining high quality standards is essential, especially when you are entrusting critical business processes to an outside company. Implement a robust quality control system to monitor performance, including regular audits and performance monitoring.
Tasks involving sensitive data -- such as information technology outsourcing, customer satisfaction metrics, human resources administration, or financial analysis -- require stringent data security and compliance with industry regulations.
Security and compliance should be part of your service level agreement (SLA), along with protocols for addressing any quality issues that may arise. Clear communication on this subject will ensure a structured and consistent approach, safeguarding the reputation and legal standing of the business.
Maximizing the ROI of Outsourcing for SMBs
Fo r SMBs, maximizing return on investment (ROI) can be a primary goal of outsourcing. To achieve high ROI, monitor your outsourcing partner arrangement hidden costs and adjust your use of services as necessary. Comparing your current costs to the long-term benefits, such as payroll and overhead savings, productivity gains, and enhanced core competencies, will help you assess whether your outsourcing goals are being met.
Regularly review the value realized through your outsourced tasks to ensure your savings align with strategic business objectives. If you find that certain tasks could be managed more efficiently in-house or by another partner -- make proactive adjustments to the plan.
How to Measure and Adjust for Optimal Performance Over Time
Ongoing performance measurement is essential for any effective outsourcing strategy. Set up clear performance metrics to track the quality and timeliness of deliverables. Hold periodic reviews to ensure the outsourcing goals are being met -- and to assess desired outcomes like increased efficiency and cost savings.
Metrics for evaluating expected outcomes through regular feedback, performance monitoring, quality control, and periodic audits can provide a comprehensive view of your outsourcing arrangement.
Gather feedback from your internal team and your customers. Then adjust your outsourcing strategy as needed. By doing so, you will continually improve the partnership, maximize your investment, and ensure that your outsourced tasks consistently support business growth.
Convert Fixed Costs into Competitive Strengths
With the right outsourcing partner, any small-to-medium-sized business can outsource tasks to convert fixed costs into flexible new capabilities and competitive strengths. At PrimeSync Solutions, we combine global outsourcing expertise with cutting-edge communication technology, offering customized solutions for SMBs that deliver cost savings, productivity, growth, and profitability. To learn more, talk with the outsourcing experts at PrimeSync Solutions today.
