Outsourcing has probably done more to professionalize small businesses than any other recent trend or invention, including information technology. The concept is a simple one: your business should focus on its core function and hire specialized firms to do everything else. For instance, a public relations agency should stick to doing public relations and farm out its personnel, finance, and support work to other firms. The theory is that those other firms would also be concentrating on their own core function, enabling them to do the work more efficiently and better than you ever could. The net result should be that by outsourcing you will get better results for less money: an unbeatable combination.
In most cases, the theory works when put into practice. I know a person whose small advertising agency saved more than $40,000 a year by outsourcing every function that wasn’t directly related to advertising. My own office has saved more than $10,000 a year by outsourcing accounts payable. And along with those savings the job is being done better.
Obviously to eliminate potential problems you need to do your research and shop around to make sure you’re getting the best firm for your dollar. But you also need to keep an eye on the outsourcing firm and yourself.
Just as an employee can get complacent, so too can an outsourcing firm. You need to keep them focused on doing their best for you. While it will require less hands-on management than if you were doing the job in house, you’ll still need to do some periodic oversight. And don’t just focus on the work they’re doing. Make it a practice to regularly solicit new bids for the outsourced work. While you don’t want to switch providers every six months, you also don’t want to pay more than the market price.
Watch out for your own complacency, too. It’s very easy to stop paying attention to areas of your business that you’ve outsourced. For instance, when all my bills were paid in house I scrutinized every invoice before it was paid. I was able to instantly spot even small problems. Once I had outsourced the function I stopped being as vigilant. The firm I’ve hired is very good, but they’re used to looking for larger problems, they look after the dollars rather than the cents. As a result I found my bills slowly creeping upward. Since spotting this trend myself I’ve started being more vigilant. I don’t check every bill as I used to, but once a quarter I take the monthly bills home and spend a weekend studying them.