What does the word “startup” mean? In the context of business, one probably thinks about a new company attempting to find its appeal to customers in a specific industry. In certain verticals, the phrase “startup” might conjure up images of ping-pong tables and Friday afternoon happy hours with company-sponsored libations.
How can it be that so many startup companies we read about in the news are able to secure millions of dollars in venture capital funding or seed investments? Doesn’t conventional wisdom suggest that many small businesses end up failing within the first two years?
A peek behind the curtain reveals that many so-called overnight successes are anything but overnight. Jeff Bezos once said that “All overnight success takes about 10 years.” Many successful businesses have executives and managers who have years of experience and have learned to work smarter, not harder.
That last phrase can sound cliché, but in the age of outsourcing tasks, this presents a real way for a small business to leverage resources that would have been completely out of their budgets 10 years ago. Since this happens to be an area we excel in, we wanted to discuss a few ways small and medium-sized businesses think about outsourcing NOW to improve their operations in the future.
Where to Focus Outsourcing
A business owner should not consider outsourcing their core competencies. This is the unique value proposition that makes their business stand out from the competition.
If a business installs garage doors, for example, there’s no logic in outsourcing the installation of garage doors because then there is no reason a potential customer would pick that business over the competition. But that same business might spend an inordinate amount of time keeping track of mentions on social media, which might be necessary, but doesn’t help any more garage doors get installed during the workday.
A different way to think about this is to outsource the weaknesses as the business owner sees them. With that in mind, let’s explore some areas that are worth outsourcing for small and medium-sized businesses.
Tax laws change every year. It’s hard to tell the difference between state tax codes and the novel War and Peace. But unlike War and Peace, there aren’t crib notes to give the summary version of federal and state tax laws.
Over the course of a fiscal year, even small businesses produce tens of thousands of pieces of financial data. Compiling this information can be a serious challenge when tax season arrives, which is why many small business owners outsource accounting and bookkeeping to outside professionals.
Depending on the type of industry, a business owner might be able to hire the services of a specialized accountant, one familiar with the nuances of their industry. Finance professionals, dentists, and advertising agencies are just a few industries subject to special rules when it comes to keeping the books. Business owners can hire outsourced accountants and bookkeepers to make sure nothing slips through the cracks – these entities can interface with a CPA at the end of the year and make life even easier for the business owner!
IT Support Services
We wish we could say the days of languishing on the phone with tech support, listening to horrible elevator music and not getting the necessary help are over – but they’re not.
Fortunately, outsourcing IT support is now an option and the services are better than ever.
Businesses that require multiple touchpoints with vendors and customers don’t have time to sit on the phone, twiddling their thumbs waiting for a solution as a service representative reads from a pre-written script. An added benefit of the improvements in technology is that businesses can have custom-made support packages based on their needs. There’s no need for a one-size-fits-all IT support package.
Consider the benefits of day-to-day IT support. Having a partner to call in the event something goes wrong, that understands the business front to back, is far superior to endless tech support loops that likely won’t fix the problem and waste precious time.
A technology partner can help with much more than fixing printers and getting an email server back online. When done correctly, a managed service provider can help install new cloud IaaS capability, provide regular data backup and disaster recovery assistance and even act as a virtual CIO/CTO.
Not every business needs a human resources department.
But like the tax code, employment laws are changing annually, and it can be difficult to keep up with. Since this function does not typically impact the bottom line (generate revenue) it can be an afterthought for small businesses who don’t have the financial resources to employ this position full-time.
While this might make sense fiscally, it can still present some problems. Talent acquisition, for example, is an area that has traditionally fallen under the umbrella of human resources. A business owner doesn’t need to be an HR professional to know that attracting top talent to a business is important, but they won’t always have time to scour through resumes and perform interviews.
An article in The Balance helps provide more context around which functions should be outsourced with respect to human resources:
Any roles HR is currently managing that fall outside of the sweet spot you have identified should be considered for outsourcing. There are good outsourcing firms that can efficiently handle activities like relocation, temporary staffing, background checks, and drug screening. While these processes are very important to the operation of the company, they do not drive the strategic mission of the organization.
Even a critical function like regulatory compliance should be considered for outsourcing. HR compliance requires constant attention to stay up to date on the latest regulations and legal decisions. Most HR departments don’t have that kind of expertise on staff.
What to Avoid When Outsourcing
We’ve outlined some areas where outsourcing can help improve the productivity and efficiency of a business, but that shouldn’t be a cue to should run out and hand over operations to the first provider that comes up in the phone book or an internet search.
In our opinion, it’s helpful to consider any service provider as a partner for the business – not “just” a vendor. A partner should keep the goals of the business and its values in mind when performing delegated duties. They should also be transparent about services performed and what they will be charging for each service.
- Start with an audit – Whether the vendor is providing IT support services, payroll management or even social media, a business owner should get the impression the solution being proposed is unique to their situation. Never sign a contract before the service provider has had an opportunity to examine the business and fully understands the needs. Boiler-plate service packages may include services businesses do not require while neglecting areas it truly does.
- Examine the contract fully – Receiving an invoice far beyond what was initially quoted can come as a shock. Unfortunately, it happens all too often in service-based relationships. If possible, have a lawyer double-check the contract before anything is signed. It’s important to understand what is being paid for, and where the responsibility for the business owner ends and the service provider starts.
- Find reviews – Part of the due-diligence should include reading reviews or testimonials from actual customers. These are usually the best barometer for if the company can do what they claim to be able to.