Outsourcing to Win…(circa 2000)
We’ve all seen them. Small business owners whose business cards could include the following job descriptions: CEO, Comptroller, Marketing Manager, Sales Manager, Human Resources manager, Public Relations Manager, Contracts Manager, etc. The end result of these business related efforts is often inevitable…DISASTER, with a capital “D”! There is simply not enough time in the business owners already limited schedule to properly manage all of the needs of a small business. So, you ask, what are the available options? The answer is “Outsourcing, outsourcing, outsourcing.”
What is outsourcing and why does my small business need it?
Outsourcing has been around for centuries. In fact, one could argue that it has its roots in the bartering system, a precursor to capitalism. The early American colonist did not have the time to provide for all of his survival needs. In addition to time limitations, there was no way for him to specialize in and provide for all of the needs of his family. He had two options: meet his survival requirement or die. To satisfy the plethora of survival requirements, he would concentrate on his specialty (fur trapping, farming, fishing, etc.) and trade his goods or services with those who specialized in others. The end result: All needs were met in an efficient manner.
A small business owner, much like the early colonist, simply does not have the time to be the sole provider for all of his or her business survival needs. He or she also has the same two options: meet your businesses requirements or watch your business die. In addition to time limitations, there is no way for the small business owner to specialize in or provide for all of the survival needs of their small business. The small business owner must focus on profit generating lines of business and outsource essential support services.
Al Dunlap, former CEO of Scott Paper, supported this notion of outsourcing in his book Mean Business where he wrote “Outsourcing allows you to be more focused on a few things and not consumed by things that really don’t have very much to do with whether the business succeeds…you should only do, in-house, what gives you a competitive advantage.” Simply put…focus your time and energy primarily on the aspects of your business that make you money!
A major argument in favor of outsourcing vs. direct hiring is the acquisition cost involved. For example, the average small business owner does not require, nor can one afford, a full time accountant or attorney. One could easily extend this service provider listing to include human relations, public relations and even contract management services. Outsourcing is the most cost effective solution to meet the support requirements of your business while maintaining your often-limited budget.
The New Paradigm
The question now transitions from “Should I outsource?” to “What should I outsource?” To answer to this question, you must first define your profit generating business centers (PGBCs). For example, if your PGBCs include accounting services, you most likely would not need to outsource your internal accounting requirements. Likewise, an attorney most likely would not need to outsource internal legal advice. However, an attorney may very well profit from the outsourcing of accounting services in the same manner as an accountant could profit from legal outsourcing.
Once you have defined your PGBCs, the next step is to identify all nonprofit generating services required to support your PGBCs. These are your outsourcing candidates. Now comes the very critical step of selecting an entity to outsource to. Do your homework! Do yourself and your business a huge favor by requesting referrals and references from all potential service providers. Select carefully as this decision could easily affect other aspects of your business to include your PGBCs.
Effective outsourcing is the key to small business success. There is no way for a small business owner to specialize in every aspect of business nor is there sufficient time on a small business owner’s already limited calendar (or Palm Pilot, Handspring, Blackberry, etc.) to adequately address all business requirements. As reported in Fortune Small Business, October 2001, “For small businesses…outsourcing plays a very different role: It enables a small company to get access to know-how, technologies, economies of scale, and resources that previously only the big guys could enjoy–at an affordable price…while giving them the power they need to compete and win.” Simply put: Effective outsourcing is the key to winning as a small business.