It doesn’t matter if it’s a small company or a large corporation, success in business is all about reducing costs to increase turnover and drive profitability. You may feel like your startup is too small to outsource certain services, however there are some business functions that are better off outsourced to a third party. Here are a few reasons why you should outsource certain functions and the best services to outsource as a startup.
Why Your Startup Should Outsource
According to Investopedia, 21.5 percent of startups fail in their first year, 30 percent in the second, 50 percent in the fifth, and 70 percent in the tenth year. A common reason given for failure is running out of money. Many startups try to cut costs by doing everything themselves, but this isn’t a feasible option. Neither is hiring entire teams to take on the work. Outsourcing some services can help you cut costs in terms of labor and overheads, whereas in-house services require an in-house team, and spending money on different departments can drain business funds. When growing a business, you want to focus on the fundamental goals rather than throwing money into services that can easily be outsourced. When outsourcing certain business functions, you won’t need to create a permanent role that won’t add a lot of value to your business overall; not to mention that all of the extra staff can eat up money in terms of overheads.
Access To Qualified Professionals
Besides cutting costs on labor and overheads, another efficient reason to outsource includes the access to a larger talent pool. Outsourcing business functions to a specialist third-party company means that your services will be delegated to qualified personnel. You will not be involved in the processes; instead you will simply benefit from a professional service. Furthermore, employing staff means that you can only choose from a limited pool of candidates. This often results in compromise when choosing the right person for your business.
Where Should I Begin?
There are three main areas where you can benefit from outsourcing services. These are information technology services, accounting, and human resources.
Outsourcing IT services can give you an advantage over other small businesses in a technological sense. It involves the use of third-party vendors or cloud-based solutions. Vendors utilize the latest systems to provide quality services to businesses. Companies, especially startup businesses, may not have access to the latest technology. Therefore, employing a third party will ensure your small business receives a high level of support using top-of-the-range systems. Besides up-to-date technology, outsourcing your IT means that you will receive support from a highly qualified team of experts. Some popularly outsourced IT functions include server, network, and computer support, disaster recovery, and data backup.
Accounting and Payroll
After IT, payroll is one of the most commonly outsourced areas within business, and it has been suggested that many businesses cannot afford to do it in-house—with many decision-makers delegating their payroll and accounting function to third-party companies instead. A high level of skill is required when it comes to accounting and finance, and errors can lead to businesses being non-compliant in terms of taxes—a serious offence for any company. Using specialist software, or outsourcing these functions to a third party, can reduce the risk of being penalized.
Human resources encompasses many business functions. It involves everything to do with the employees of a company. Startups may be tempted to save money by delegating the work to existing members of the business, but delegating these tasks is often a waste of resources, as HR functions take time to learn. At the end of the day, offloading these functions can take away the focus from business goals and prevent your business from growing. HR activities include recruitment, training, and employee benefits.
When it comes to specific goals within the business and special, one-off projects, outsourcing the work to a consultant is better than doing it yourself. A specialist consultant with a specific set of skills can do the work for you efficiently, and they can identify solutions and problem areas quickly. Many startups end up wasting time and resources trying to take on the work themselves. Even though you may eventually be able to get the job done to a high degree, your work won’t be comparable to a specialist. Besides, once the project is finished and the goal is achieved, the set of skills you have picked up could become useless. Instead, delegate specialist work to a vendor or a consultant and focus your attention on growing your business and generating income in other ways.