There’s a business craze right now to outsource the hard things your business does.
Be it lead generation, sales or just back office functions there’s a buzz around out sourcing that leads many businesses to think that it’s the way forward.

In my own experience outsourcing works only on a very small scale. Say you need someone to answer your phone line or go through your emails, these are small scale examples of outsourcing that work well.

However in almost all other cases outsourcing can lead to a decrease in productivity and quality, while your costs actually rise.

I’ve previously talked about how small businesses can actually save big businesses or state controlled companies money when their so complacent that they are wasting huge amounts of cash and this still rings true, but for everyone else, who needs to remain lean to survive then outsourcing is simply a bad idea.

The problem with outsourcing isn’t that in principal it’s a bad idea. In actual fact it’s a great idea in principal; find a company who does difficult things really well and benefit from their economies of scale.

But therein lies the first hurdle, getting those economies of scale transferred over to your bottom line. The fact is the outsourcing companies are going to want to make a significant profit on the work they do for you, especially when you’re small and they can’t spread that profit out over lots of work.

As a small business you need every area to work as efficiently as possible, and here is where outsourcing starts to fall apart. There’s actually very little difference between the people you could outsource to and yourself.

What I’ve found in my experience is that time and time again you meet an enthusiastic owner, let’s say a designer, who’s started their own marketing company.

They can talk to you all day about how great they are and show you some fantastic examples that make you want to sign up.

But once the sales done you won’t deal with that person any more, you’ll be passed to one of the team who are nowhere near as multi skilled as the person you thought you were getting.

Without taking the time to understand your business (because time is money) they will start work and you’ll find that you’ve gone from having someone in house that was a bit of a pain to manage to someone who isn’t in house, costs you more money and isn’t even in your office to manage with no obvious skill improvement either.

I find that with a lot of outsourced projects, they also fall down because they bill by the hour. That means they have to account for every little thing. If they make a mistake and you correct them, you will still get charged to correct their mistake!

Outsourcing companies also fail to understand that companies don’t have bottomless pits of money. Quotes are things that matter little in the world of outsourcing, and although immediate impressions might be good you’ll soon start to feel the pinch as the costs unravel.

Because outsourcing businesses seldom exist to serve just you, you’ll find that once your sale is done, their attention will turn to the next big sale and as such your service can go downhill as a result.

If you’re ever considering outsourcing part of your business function, it’s important to be really careful about controlling the cost involved from the start.

Always obtain quotes and get weekly (yes weekly) updates from all providers as to the work done and progress on any projects.

There is a strong argument to outsource things like marketing because the cumulative experience offered by a design team can outweigh the singular experience of a small business; yet in reality all you are doing is gaining access someone else’s to an unmanaged team at a premium rate.

If you’re lacking experience, it’s much more cost effective to manage your projects yourself and contract in designers directly on a per job basis. It sounds like more work, but once you get past the out sources sales pitch it’s exactly the same level of effort involved as you will end up managing the project either way.

You can find freelancers everywhere and because they work on a per project basis they tend to offer much better and cost effective service than outsourcing companies that claim to do it all.

Find the right freelancer and they can become one of the team who when coupled with your unique knowledge of your business will produce a cheaper and better return on investment than the guy with the shiny brochure and fancy office.

Chapter Summary:

• Use freelancers not outsourcers
• Don’t fall for the slick pitch, you’re just the next sale
• You always end up managing your outsourcers
• Outsourcing works on a really small scale or for businesses with huge wastage

Read our next blog post “The most effort goes into the first sale”.