As an SMB, hiring more people will never be an easy decision to make. After all, is there enough of a workload increase to justify hiring more people, or is it just a temporary fluke? Are you competent enough to start a department in a field that you know next to nothing about, or is this idea going to be too expensive to execute? Fortunately, you can always outsource as an alternative.
Here are some pros and cons of outsourcing as an SMB that will make it easier for you to make a decision.
Advantages of Outsourcing as an SMB
Even as a small or medium enterprise, there are numerous advantages to outsourcing various services. Here are the top three benefits you should start with.
Why is having fewer employees considered an advantage? Well, every employee is an asset, but they’re also a liability. Each person that you directly employ further complicates your payroll. Now, add to the mix the number of overtime hours, and it all becomes even more complex. To make the long story short, outsourcing simplifies your accounting by quite a margin.
Also, organizing people by shifts, remembering who celebrates which holiday, and giving everyone a day off at the appropriate time is quite complex. Then, managing sick days, replacing employees who just quit, etc., can all be quite challenging. When outsourcing, direct employee management is someone else’s job.
With outsourcing, you’re not directly managing anything. You just pay a flat fee and have all of these issues taken care of in your stead. Sure, you might not save the money upfront, but you save the effort of managing all of it.
Lower labor costs
This one may sound a bit controversial, but it’s quite accurate. Sure, in the long run, it might be more cost-effective to have an in-house staff, but it’s not even close when it comes to short-term investments in starting a department. Outsourcing has substantially lower short-term costs.
We’re not saying that it’s cheaper to outsource to a 10-member team than to hire 10 people on your own. However, is the effectiveness of your newly-founded team going to be the same? The hiring process is quite expensive and what if they need professional equipment and licenses that the outsourcing agency already has?
The truth is that even those agencies that are handling things in-house are not doing it because it’s cheaper to do so. The only thing that you get by handling things in-house is more control. Sometimes, this is worth the investment, but it won’t always be the case.
Objective quality control
Handling your quality control in-house will give you sub-par results. This type of quality control may even be dismissed by clients and partners. Why? Well, because it’s biased.
Even if it’s not biased, chances are that it’s inaccurate. The reason why beta-testing is so popular as a concept is that it’s performed by outsiders. Even if you’re trying to be unbiased, the knowledge of how the process works can taint your experience. What you need is to rely on someone with zero insight and zero interest in portraying your product/service in the best light.
Remember, quality control is not about marketing but quality (as the very name suggests). Ignoring this is the simplest way to degrade your company and ruin it in the long run.
Cons of Outsourcing as an SMB
Of course, it’s not all sunshine and roses in the world of outsourcing either. You see, as a small business, there are two things that you’ll struggle with while outsourcing.
As we’ve already mentioned, the problem with outsourcing is that you don’t have direct control over the department. This makes communication more difficult and less reliable. The main thing you need to keep in mind is that this depends on the nature of outsourcing and the form of reporting that you establish early on.
Another big issue is that you probably lack the necessary knowledge of the field to determine which information is worth reporting. What we mean by that is that when you have an in-house department, the department head is there to provide you with a report, a summary, and a clarification on various topics. Here, things might not go as smoothly.
Also, with the right communication tools, this can become a lot less troublesome.
This problem, as well, is quite situational. The agency that you’re working with is not necessarily as vigilant with its vetting process as you are. Sure, they may have a stellar record (so far), but the new hire might botch the entire thing.
However, to consider this a con, you would have to believe that all your employees are 100% reliable (which is never the case). You would also have to be sure that your cybersecurity measures are infallible (which is also highly unlikely). In other words, security issues surrounding outsourcing are both situational and greatly blown out of proportion.
While these two cons may sound a bit intimidating, the truth is that you can easily overcome them. For instance, if you decide to outsource tasks to virtual assistants, chances are that you’ll improve the overall communication within your company (instead of it being the other way around).
Also, it’s important that you understand that security is a complex issue that deserves your continuous effort. Just because things are solid now doesn’t guarantee that they’ll remain so in the future. The majority of security breaches have never happened in that company before, which means that they didn’t have a reputation for the bad security.
The most important thing is that you do your research on the agency in question. With the right vetting process, you’ll get a better idea of what you’re dealing with.
Outsourcing is a shortcut to having the effects that you need without having to make too much of an initial investment to get them. Also, when outsourcing, you get a competent and experienced team on the task as soon as possible, which allows you to skip a lot of the team-building and onboarding. Lastly, outsourcing is the simplest way to handle a task. You, as an entrepreneur, will have to have very little agency in these tasks, but this can be both positive and negative thing.