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Tracy A. Lee

111 NE 11th Street Map
Grand Prairie, TX 75050
Tel: (972) 602-1478
Fax: (972) 660-2845
tlee@firstexind.com

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June 05, 2008

Outsource Work You're Not Good At

Well-managed outsourcing can save you time and money, freeing you up to focus on growing your business. But the process isn't all beer and skittles. Neglect the relationship and it could be more trouble than it's worth.

Outsourcing has become a major global trend in the last decade thanks mostly to big businesses exploiting cheaper labour and resources overseas. We’re well beyond the novelty of communicating with someone in a call centre in India when we’re being telemarketed to or dealing with an IT helpdesk or 'customer service' department.

Meanwhile, China rules the roost for low-cost manufacturing of bulk consumer goods - but how can small businesses get in on the action?

Time is a valuable resource

The smaller your business, the more aspects of it you need to look after yourself. Every small business has some essential but non-core business activities, such as bookkeeping and financial reporting, or marketing and distribution. For many small business owners, these tasks can eat into time that could better be spent servicing existing customers or developing new ones.

Time for an audit

If you haven’t already done so, spend a week logging where your business time goes.

How much time do you spend on non-core essential support work: answering the phone and dealing with customer enquires, doing paperwork, delivering stock, queuing at the bank or post office, or just getting to work?

Compare this with the number of hours you spend on your core business activities, and ask whether you could improve this ratio.

Why hire a dog when you can bark yourself?

Case 1: You make the best pizza in the world, but have little aptitude or inclination for paperwork. However, the paperwork must be done. You have a choice - do it yourself, slowly, reluctantly and probably irregularly, or offload it to a professional who can do the job quickly, efficiently and correctly.

Your core job is to make pizzas and if your profit margin on six hours of pizza making is greater than the cost of outsourcing six hours a week on administration, then you're throwing good money after bad.

Get on with the business of making pizzas and hire yourself a bookkeeper to deal with the rest of it.

Case 2: You run a service-based enterprise. Dealing with customer enquiries, bookings and schedules can really suck into your productivity. Your potential customers need to be serviced now, not when you can take the time off answering the telephone.

Serviced or ‘virtual’ offices can provide a great alternative. For a small fee, you can have someone answer your calls, deal with your appointments and enquiries, and just let you know where you have to be next.

Many of the government-funded Business Enterprise Centres (BECs), offer this service. Contact your local office for further details: www.beca.org.au.

Ben Dalton runs a business called He Cooks which does just that - teaches men to cook. He runs the business from a BEC serviced office.

"The serviced office has many advantages for small business owners. I share reception, an office, a boardroom and a training room, and have someone to answer and screen my calls.

"I also have all the administrative tools that I need, but couldn't afford to buy for myself, such as commercial printers, fax machines, photocopiers and laminators. In addition, it offers a convenient drop-off and collection point for deliveries. I love my serviced office - it offers the sort of professional façade that I would not otherwise be able to afford. Someone else even cleans it for me."

Case 3: You have a cabinet making business, and have an irregular, but consistent call for a particular spindle that you do not have the machinery to make. You could invest the money to get the machine - eating into your cashflow, or outsource the making of this particular spindle to someone who does have the necessary equipment.

The unit cost may be slightly higher this way, but you've saved yourself a motza on a machine you're not going to use very often.

Avoiding the pitfalls

While there are many good reasons to outsource aspects of your business, there are also potential pitfalls. Outsourcing a job or service can take a big load off your plate, but don’t just pay your money and take your chances. Here are a few tips for getting it right:

Ask around

Get recommendations from other business owners as to who they use for delivery services, laundry, temporary staff, or whatever it is you need. Ask potential suppliers for customer references. Remember that personal references are always more reliable than written ones.

Monitor

Any work that you outsource must be carefully monitored, to ensure that you are actually getting what you’re paying for. Consider using renewable contracts, setting benchmarks and enforceable service level agreements. Good and constant communication is essential.

Protect yourself

Make sure that you have proper protection against theft, fraud or damage that could impact on your business as a result of actions by the outsourcer.

Get good contracts

Money spent on good legal advice when setting up contracts is never wasted. Consider the issues of intellectual property and ownership, and make sure that you’re keeping hold of your product. This can be a particular issue with designers. Who owns the property, you or them?

Insist on confidentiality

If you are dealing with highly confidential material, it may be safer, if not more cost-effective, to keep these things in-house. Otherwise, draw up a tight non-disclosure agreement.

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