One of the most understood tools is available to grow business is outsourcing. This allows you to expand capacity without having to:
– Automatically employ a large number of new staff;
-Invest in new capital equipment, larger commercial leasing;
-Invest in the cost of developing for non-core business parts of your business, increasing your fixed overhead.
Outsourcing is when you take your functions, activities, or business needs and hire an outside company to do work rather than doing it at home. These include: contracts with fulfillment companies to provide and send all your customer orders; Rent an online marketing company to conduct pay-per-click advertising campaign for you; Flip your salary list to professional employment agent; etc.
4 reasons for outsourcing giving large leverage
1. You get an instant scale in your business field. E.g., the fulfillment company you hire already has the capacity to handle 100 times the volume of orders that you currently have; The payroll service you use can immediately handle all the staff you rent, etc.
2. You benefit from all development and learning trial-and-error costs that must be passed by outsourcing service providers to build the business. You missed all this and knocked directly into the business system and a proven team in the special area. In essence, outsourcing service providers have been amortized all significant development costs on their customer base, where you are.
3. Outsourcing service provider You offer your business skills. E.g., the shipping company and distribution that you outsourcing may have a few decades of experience for what might be very new for you; The advertising agency has created hundreds of previous television advertisements, while you might just get involved in one or two, etc.
4. When the outsourcing provider grows and trapts its business, you get direct access to the company’s upgrade in knowledge, system, and staff.
3 criteria for determining when to be smart for outsourcing
1. When outsourcing reduces your real costs. Make sure you take into account direct and indirect costs to keep work at home and direct and indirect costs from outsourcing works. Indirect costs to keep it in-house include: loss of staff time and focus on doing work; increased overhead to do and manage work; and more complexity to manage your business. Indirect costs for outsourcing include: costs to find and implement outsourcing solutions; Cost to replace the failed outsourcing relationship; And costs to integrate outsourcing services with your own company system.
2. When outsourcing increases the value you provided to your customer and your client. For example, it will outsourcing give you faster and more reliable shipping services for the same or less money? Will outsourcing give you access to better technology in this field than you are able to buy or rent yourself?
3. When the outsourcing area or function is not the core for your business. If the area or function you outsourcing is the main way you create value in your business, then outsourcing makes you risky. In fact, interference in outsourcing solutions can kill your business, make you vulnerable. Although it can be right to outsource the core area or function of your business, be more careful about doing it. Perform a thorough thorough test on the service provider you hire. Make sure you have a contingency plan to handle the worst scenario of a failed outsourcing relationship.