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Outsourcing for your small business Through mid-2005, six out of every 10 companies with fewer than 500 employees expect to spend $1 million to $5 million on outsourcing, according to The Outsourcing Institute, a professional association based in Jericho, N.Y. But the outsourcing process requires some time and investment to find the right vendor, build a working relationship, and allow your employees to adjust. In this article, I'll help you decide whether outside experts can perform better, faster or more cost-effectively than your in-house staff. I'll also help you chart a path through the come-hither promises often made by outsourcing services. On This Page

First, define your core

Move slowly and commit incrementally

Examples of functions to outsource

Outsourcing dos and don'ts

Know the outsourcing ABCs First, define your core Generally, the smart strategy is to hold on to operations or areas that define the core mission of your business. Then, consider outsourcing the other operations that are not as strategic.

If, for instance, your point of difference is customer service, make sure you have enough friendly and attentive full-time employees to make good on that. If, however, you promise rock bottom prices, then relying on an outsourcer, such as a Web-based virtual assistant, an automated phone system or a call center overseas, might make more sense. Also, think through potentially outdated conventions about on-staff specialists, especially given the reach and effectiveness of today's desktop technology. Traditionally, small businesses have outsourced payroll and human resources services (see this related article). But owners can now tap outside facilitators for a much greater range of services. For instance, entrepreneurs with strong sales often assume they need a full-time bookkeeper to oversee the books, says Darin Webb, founder of The Bookkeeping Company, which offers a network of bookkeepers for small businesses in New York. "The reality is that you can own a $5 million company and still not need a full-time bookkeeper," Webb says. "It has nothing to do with sales and everything to do with the amount of activity in invoicing, bill paying, payroll and so on." Companies with a full-time bookkeeper can save about $30,000 a year by instead using outsourced bookkeeping services for a half-day each week, says Webb. Move slowly and commit incrementally Outsourcing's advantages will vary with the services, the kind of business you run and, of course, the quality of your provider. It's worth your while to move slowly and commit incrementally. Don't sign two-year contracts before testing performance and the relationship. To get a feel for the process and to accustom your staff to the idea, first try outsourcing one stand-alone project, and then move on to hiring professionals for other areas or ongoing needs. "With project professionals, there are no long-term contracts for unnecessary services and companies," says Chris Hagler, national director of strategic services for Resources Connection, a Costa Mesa, Calif., concern that provides specialists in finance and accounting, information technology and human resources. "Project professionals are 'executers' as opposed to traditional consultants who do not necessarily roll up their sleeves and get the job done." Examples of functions to outsource The roster of choices for high performing, affordable outsourcing services keeps growing. Here are some examples of functions you might consider outsourcing, to boost your day-to-day operations. • Specialist and expert help. Elance Online (elance.com), based in Sunnyvale, Calif., for example, recently launched the Everyday Outsourcing Center. It provides access to about 10,000 professionals in 100 or so specialized fields to help small businesses with such services as graphic design and multimedia presentations, engineering, sales and marketing, writing and translation, and more. • Public relations services. Most small businesses cannot afford a PR pro full-time and likely don't need one. Much of the news or publicity that smaller companies seek is generated when a new product launches or to support the chief executive officer's profile as an expert in the industry, or to call attention to expanded services or new hires and so on. To find a PR company that can work well for you, look for someone who understands your industry and takes on smaller-company clients (also see this related article). • Virtual assistants. Virtual assistants — independent entrepreneurs who provide administrative, creative or technical support — are a growing phenomenon. They work on a contractual basis via online or electronic communications, handling functions such as keeping your schedule or your files or your customer intelligence database up to speed. You can find out more by visiting the nonprofit International Virtual Assistants Association (www.ivaa.org). Expertising, based in Newton, Mass., uses virtual assistants for a variety of projects. "We're a small company that helps people achieve media attention for their businesses, and have recently outsourced a lot of work to several virtual assistants," says CEO Fern Reiss. "It has completely changed the way we operate. We meet 'live' once a month for a long catch-up, and in between correspond via email and occasionally by phone. We have increased productivity by about 30% to 40%, and have finally gotten many of our back-burner projects out the door." • Outsource brokers. When you outsource services or projects, you still need reliable managers to track progress and monitor results. Increasingly, there are third-party services that will manager your outsourcers for you. These brokers, exchanges and networks can recruit, interview and manage the services you need. For instance, Computer Repair Systems based in Boca Raton, Fla., runs a Web site (www.computerrepair.com) that lets businesses quickly find inexpensive PC support services. The company claims cost savings of 50% for IT service procurement. • E-commerce solutions. An online service such as Microsoft's Commerce Manager can quickly turn your business Web site into an online store. Your e-commerce platform includes an online catalog, online shopping-cart software, 24/7 access for customer orders, secure transactions for credit card purchases and payments, plus continuous tech support — all for about $25 a month. • E-mail marketing. Similarly, Microsoft List Builder can produce customized permission-based e-mail marketing campaigns for you, whether your goal is to find new customers or retain existing ones. For about $30 a month, you can use HTML templates to produce professional-quality e-mail newsletters or offers and announcements. You can rely on List Builder to send targeted and personalized messages to distinct customer segments. List Builder also tracks results for you in real time, so you'll know, instantly, what works and what needs re-jiggering. Outsourcing dos and don'ts When hiring or working with an outsourcer, heed this advice: • Try fixing whatever's not working on your own first. You may have internal resources that can work better than you think. • Carefully evaluate what really can be outsourced. Generally, projects that require team interaction or brainstorming don't work too well. Self-contained tasks or projects do work well. • Put in the time and effort, upfront, to find the specific expertise you need. • Consider management costs. Sometimes services look good on paper but you end up eating the savings in training and oversight costs. • Be prepared for challenges. It takes a while to build the relationship and synchronize the timing. • Don't walk in blind. Start with some paid consulting, if need be, so you can ask the right questions in choosing a vendor and keep knowledgeable tabs on performance. • If you outsource significant hunks of your operations, consider having a staff employee(s) to act as a liaison. You want to outsource functions but not accountability. • Watch out for hidden costs. These may include paying layoff-related expenses, overtime costs for remaining employees who may now have more work to do, and telecommunications costs for remote workers.

Know the outsourcing ABCs Before you ramp up your outsourcing services, learn these outsourcing ABCs from Kevin Gregson, chief executive officer of Sherwood Solutions, a business advisory firm. Alignment: Is outsourcing the right move for your business? Business case: Have you taken all costs into consideration? Culture: Can you bridge the cultural difference between your company and the outsourcer? Delivery: How will you define success? It might take a bit of time to get right, but the benefits of outsourcing can be enormous. Check out your operation to see how it can work for you.

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