Will Outsourcing Create Higher Profits?

When we think of outsourcing, we immediately think of manufacturing goods overseas or customer service reps with thick accents reading from a script. Even with all of the negative images of outsourcing, should you still outsource parts of your business or even vital functions? Here are some pros and cons:

Pros of Outsourcing:

Potentially lower costs and better service: Most small businesses do not have the need or resources to have an in house bookkeeper, biller, receptionist, administrative assistant, IT professional, or even your business operations. When outsourcing these roles you can generally get a high level of expertise without the cost of having a full-time or even part time employee. There are probably many businesses that you interact with that outsource some or all of their operations that you are not even aware. Examples include: dry cleaners outsourcing all or some of their operations, restaurants outsourcing their desserts, professional services firms outsourcing to other firms or overseas, and online retailers outsourcing their distribution and fulfillment centers to Amazon. Even your local ice-cream shop probably doesn’t make its own ice-cream.

Continuity: If you choose a good outsourcing partner then you do not have to worry about staffing issues or purchasing and repairing equipment. This helps to ensure that your business operations do not experience major hiccups.

Cons of Outsourcing:

Ironically, some of the reasons for outsourcing can also be the same reasons for not outsourcing.

Potentially higher costs and worse service: An outsourcing partner may actually cost you more than having the task or operations in house, and a cost-benefit analysis should be prepared to see if it makes sense to outsource. Other outsourcing factors to consider are the quality of the task or operations being performed, lack of knowledge of your particular business, and a lack of customers knowing and interacting with your staff.

Continuity: What if a major outsourcing partner makes a change to their policies that adversely affects your business so that you cannot rely on them anymore? If you don’t have another alternative then you may not actually be in business anymore. Also, company culture plays a large role in the success of your business, which is generally lacking from your outsourcing partner.

Outsourcing may be beneficial to the growth of your business after carefully weighing the pros and cons. Sometimes outsourcing may just be a temporary solution until you have the capability to perform the outsourced function in house.

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