Which business functions to outsource?

Effective outsourcing of certain non-critical business functions will enable a SME to focus resources on key tasks for growth. Which aspects of the business should be outsourced and which to keep in-house?

For most SME owners, you are most likely wearing a lot of hats in the business. You are most the likely the Chief Officer of everything in your company. For new business start-ups, it’s common for the business owner to provide a lot of sweat equity and elbow grease in the initial phases of the business.

Into your small business’s second to fifth year, you likely have experienced some traction and growth. Your small start-up might be growing into an operational nightmare and you soon realized managing the business is sucking more and more of your time.

What started as a passion project could slowly drain you emotionally and mentally. You realize that you have less time for your family and personal social circle.

At this stage, you’re probably looking into outsourcing some business functions to stay lean and manage your time more effectively.

It might be difficult to let go initially since you’re used to overseeing all aspects of your company. However, without letting go and delegating some roles, it’s tough to scale up and regain sanity over your work-life balance.

Which business functions should be outsourced out?

 

Advertising, marketing & branding

You should already have a deep understanding of your key markets and ideal customer profile. With this basic info, you can begin outsourcing your advertising and marketing functions to an agency to manage.

A competent marketing agency should be able to enhance your company’s brand image and market positioning with proper customer segmentation. They should also be able to come up with ad messages that resonate well with your target market.

By outsourcing your marketing function, you could tap onto the agency’s creative resources to either help you penetrate deeper into your market niche or open up new adjacent markets you can serve.

Do not outsource this function if you’re a brand new start-up. Reason is because most companies will need one to two years to slowly iterate their key product offer and scope out their ideal buyer persona after spending time and money in the trenches.

If you’re a brand new start up, do not expect the marketing agency to know how best to position your company message, key product and market positioning if you’ve not tested it in the market yet.

Customer service

Let’s be honest…

Customer service is always a function most businesses hate to handle. You could be passionate in the chase for new business and pursuing the next big ticket client. The hustle is what some entrepreneurs thrive on.

However, when it comes to the customer service and retention work that comes after on-boarding, not all companies are actually allocating sufficient resource to this aspect of the business. The competitive and on-demand nature of our time pushes many SMEs to keep selling, pushing and hunting.

Customer retention has been cited in numerous business studies as being cheaper and much more cost effective then customer acquisition. Every one would know it’s easier to fix the patch in the leaking boat then to continue bailing water out.

The challenge for smaller companies is they need to acquire a large enough base before having the resource to deploy in providing effective customer service and retention strategies to keep existing customers happy. That’s why this portion of the business is usually neglected.

Consider outsourcing customer service to a team that specializes in this area so you can direct your limited resources to acquiring a larger customer base. Once your base is stable, you can then build up your own in-house team to provide better retention and customer care policies to increase existing customer’s wallet share and life time customer value.

If you’re in a highly competitive and increasingly commoditized industry such as fashion retailing, try not to outsource away your customer service function.

In highly commoditized industries where consumers are price sensitive, an exceptional customer service culture is a powerful differentiator between you and your competitors.

Unless your company is a monopoly or oligopoly in your industry and consumers do not have much choices (i.e. telco market), it might be cost effective to consider outsourcing your customer service department.

Software development

To improve productivity, you might start exploring the idea of developing customized software solutions such as CRM (customer relationship management) or inventory management software.

For such highly technical services such as software development, you should definitely outsource to external vendor instead of hiring an in-house IT team.

With the popularity of the gig economy and gig market places such as Upwork, it’s not challenging to find specialized talent globally that you can outsource your app or software development work to.

Investing in a customized software development that could reap potential positive ROI is something to consider. Quality IT consultants do not come cheap and if you’ve done the sums deeming it a net positive investment, consider obtaining a working capital loan to fund the development costs upfront.

However if you are a high tech innovation start-up, contracting out software application design and development could be a big error- particularly if that’s core to your product and services.

Recruitment

This is another job function you could outsource out especially if your company’s headcount is not high and you don’t have a need to upkeep an internal HR department.

For senior positions that you’re hiring for, recruiters might be able to tap onto their extensive candidate’s database to help you source for a suitable hire.

Most recruiters also do not charge upfront fees and placement fees are only charged when they managed to source suitable candidates that you like.

To further save costs on recruitment fees, you can also consider placing vacancies on job boards such as Jobstreet instead of advertising directly.

Outsourcing recruitment will save you hours of your precious time filtering un-qualified resumes.

Business loan application

You might require external financing at certain stages of your business to expand and size growth opportunities.

Applying for a SME business loan either for working capital purpose or additional capital to fund expansion could be a tedious process.

If you’re not familiar with all the banks’ various credit criteria and process, it might be more effective outsourcing this function to a SME loan financing specialist.

A SME loan consultant could help you source and identify the lowest business loan interest rate and suitable banks for your financing needs. Tap onto the vast banking network of these brokers and connect with multiple lenders via just one point of contact.

Save time and hassle of approaching multiple banks to check the lowest rates and the tedious application process.

Accounting and bookkeeping

If you’re running a small SME, you should definitely outsource your accounting and bookkeeping roles to a qualified accountant.

Accounting is not a core function for many SMEs and delegating this role will save you weeks, if not months of numbers crunching work.

However, it is still good practice to meet up with your accountant at least half yearly to review the company’s figures and have a good overview of key financial figures.

All SME owners should know their biggest expense item, revenue trajectory for the last 3 years, current business valuation and liquidity ratio.

Getting a good accountant on your side could also save you hours of work dealing with regulatory and compliance issues that does not add to your company’s top line. An experienced accountant would also be able to advise you on potential cash flow gaps so you could plan ahead if there’s a need to obtain a Temporary Bridging Loan to plug the gaps.

Conclusion:

Effective outsourcing and delegation of non-core activities will ensure that your company does not become too bloated and remain competitively agile.

As the company owner, you should also identify which areas of the business you enjoy working in the most. Do not outsource this area but instead, immerse yourself and deploy most of your resources into it

This will help you prevent burn out while keeping your passion for the business thriving. If you’re the sales type, designate yourself as the chief business development officer. Maintain all key accounts and buyers with your own personal touch. Concentrate on growing revenue while delegating administrative functions to external parties.

If you’re the product development type, assign the role of product development head to yourself. Use your time effectively by researching and developing the innovative and ground breaking product that will smash the competition.

Outsource and delegate smartly and you soon find that you have more time on your hands. By effectively channeling this extra time to more productive areas of your business, you will build up momentum over time for your business to thrive and scale effortlessly.