Small Business Financial Article
|Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.|
Outsource or Hire? 5 Questions Business Owners Should Ask Themselves
Outsourcing has long been considered to be a strategy employed by larger businesses as way to reduce costs. Technology has made it possible for small businesses to utilize outsourcing even in the early stages of the business growth cycle. In fact, many business experts say that fledgling businesses should outsource routine functions so that the owners can concentrate on the strategic or specialized functions of the business.
It's not uncommon for a small business to hit a ceiling as it strives to make gains in productivity and efficiency. It's at this point that the business owners need to ask themselves five key questions:
Are my overhead costs impeding my profit growth?
There may come a time when the investment in employees reaches a level of diminishing returns when overall productivity fails to keep pace with the cost of salaries and overhead. When you consider that the cost of an employee extends well beyond a salary and into benefits, down time, vacation and sick days, the total overhead costs of the employee could amount to 130% of the salary. This doesn't take into account the administrative costs of employment that include record keeping, tax filing, and other human resource support of the employee.
Am I or my key people optimizing our time?
If the business owner and the skilled, key people are utilizing any less than 100% of their time on non-essential or routine functions, the business cannot sustain a growth trajectory. If a business owner who values himself at $200 per hour regularly performs a $15 per hour function, he is costing himself a multiple of the $185 difference considering all opportunity costs. For an immediate boost in efficiency, business owners should tap into one of the fastest growing outsourcing industries - virtual assistants. Offered by home-based entrepreneurs trained to perform any non-essential office function they can communicate effectively via their computers as if they were in the next cubicle.
Could my weak skills actually be hurting the business?
Many business owners wear multiple hats. They are the CEO, and out of necessity they take on the other essential functions of CFO, HR Director, Legal Counsel and Business Development all requiring specialized skills and knowledge without which could land the business in a mess of financial and legal troubles. All of these executive level functions can be performed by seasoned people who offer their expertise on a retainer or pay-for-function basis.
Can I afford to be technologically inadequate?
Technology drives business growth. No matter the type of business or service offered, a business needs to be digitally wired for marketing, sales, PR, recruiting, and customer service. For product manufacturers and technical service providers, the IT function is a business essential. IT functions such as programming, software development, web design and maintenance are all part of an international language that can be provided as easily and effectively by offshore tech gurus as they can by a locally hired IT person, and the cost savings can be substantial.
Am I serious about growing the business?
Everything else aside, business owners are usually in it to win it and the ones that eventually achieve success have done so by overcoming obstacles, innovating, and improvising in the execution of their business plan. Successful entrepreneurs earn their reputation through their ability to make the right moves at the right time by weighing costs and opportunities in every business decision. Large corporations have proven that outsourcing can have immediate, positive results on the bottom line. Small businesses can stand to reap much bigger gains, more quickly when they employ outsourcing as part of their growth strategy.
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