Outsourcing – having external parties handle one or more in-housecompany-related tasks – is nothing new to many entrepreneurs. However, not a lot of businesses fully understand just how good this practice is when done correctly. Let’s take a look at some of its long-term benefits:
Improved capital cost management
Whilecost-cutting is not necessarily the sole reason to outsource, it is definitely a key consideration. In essence, outsourcing enables you to direct more capital into profit-generating activities by turning fixed costs into more manageable variable costs. This does not only make your company more desirable to investors, it also allows you to significantly lower your company’s expenses.
Doing everything in-house means you’ll have to spend more on research, production, marketing and even distribution – and these costs arepassed on to your customers. A service provider that specializes in handling outsourced tasks would have a better cost structure and economy of scale, ultimately giving you a vital competitive advantage.
Lower labor costs
Hiring and training employees can be extremely costly. Outsourcing allows you to just keep a small team to handle the jobs that actually create value for your business and customers. Everything else is delegated to an external service provider.
Starting new projects can easily take several weeks or even months, especially if it requires you to hire and train people and set up the necessary infrastructure. A decent outsourcing company, in contrast, would have all the required resources in place so you can start immediately.
Outsourcing gives you the power to allocate your limited resources to doing your core business and providing excellent products and services to your customers.
A more level playing field
With the economies of scale, efficiency and expertise provided by outsourcing firms, you are essentially getting the same capabilities as bigger companies without having to actually increase your company’s size.
Simply put, outsourcing firms are generally better at recognizing and managing risks in their fields of expertise than you are, so it’s a good idea to let them do it for you.