When people think of “outsourcing,” they often think of jobs being shipped overseas. But outsourcing can also mean delegating key business operations to a local third-party specialist; this type of mutually beneficial outsourcing is becoming especially important during the ongoing COVID-19 pandemic.
How COVID-19 Has Changed the Business Landscape
The coronavirus has been devastating for the U.S. and world economies. As of this writing, the U.S. unemployment rate is nearly 15%, with 23.1 million Americans out of work. But where there are challenges, there are also opportunities. The pandemic has forced us to rethink how we invest our revenue as businesses, and the ultimate solution may include greater reliance on outsourcing ancillary services.
Small businesses especially are feeling the sting of COVID-19. Many simply do not possess the resources to weather months of revenue loss. Some have tragically had to lay off employees, and others are struggling every day to pay the rent.
Even if a vaccine becomes viable in the coming months and everyone is allowed to return to business as usual, it may take years for the economy to fully recover. Businesses need a game plan that allows them to operate with minimal overhead—not just through the course of the inevitable coming recession, but as part of a standard operating procedure.
Because as this virus has reminded us, the economic landscape can shift in the blink of an eye. The best time to take action is before the storm, not right in the middle of it.
What Productive Outsourcing Entails
If the goal is to reduce overhead, outsourcing can be a godsend for struggling businesses. Here’s an example:
Widget Corporation is operating on a shoestring budget. But as they now have multiple employees, they need to employ a dedicated human resources professional. If they hire an HR director, they’re looking at a minimum $60,000-a-year expenditure when accounting for salary and benefits.
However, if they instead contact their local HR outsourcing company, they can fulfill all of their HR needs (including hiring, health benefits administration, and workers’ compensation) for just $1,800 a month. That’s a savings of almost $40,000 per year.
HR is just one example. There are outsourced accounting and bookkeeping services, outsourced marketing and social media services, and outsourced sales providers. You can find an agency for just about every unique skill set.
How Outsourcing Helps Struggling Businesses
Outsourcing, when done the right way, is a mutually beneficial exchange. The business saves money on an essential service, and the provider earns a steady cash flow.
During times of economic hardship, the benefits become especially apparent. If a business is already outsourcing some of its day-to-day operations and is suddenly unable to pay the bills, the business owner doesn’t have to make the difficult decision to lay off employees. If the budget is especially tight, they may simply be able to reduce or suspend service with their ancillary providers until things pick up again.
If an employed bookkeeper is laid off because the business is struggling, the effect can be devastating for the employee. In most cases, the individual has lost their sole or primary source of income.
However, if a bookkeeping firm loses a client because of economic hardship, the firm only takes a minor financial hit. Outsourcing companies maintain numerous clients and are constantly recruiting new business, so they’re able to weather the storm more effectively.
So if you’re a small- or medium-sized business looking to keep your overhead under control in the face of economic uncertainty, you can benefit tremendously from outsourcing just two or three important services.
Likewise, if you are one of these service providers and you offer a skill that businesses require, there are distinct advantages to working for an agency or even going into business for yourself. When you’re able to work with multiple clients, you’re far less expendable.
How to Know if a Position Should Be Outsourced
The only remaining question is: Which positions should you outsource? If you’re trying to decide whether to hire a dedicated employee or work with a third-party provider for a specific position, ask yourself the following questions:
Do you need less than 40 hours a week?
Would hiring a full-time employee present a possible financial hardship?
Would an economic downturn likely force you to downsize?
Could your business benefit from the service even if the provider isn’t in-house?
Is the service offered by independent or third-party providers?
If you answered yes to all of the following questions, the position may be a good candidate for outsourcing. Doing so could minimize the financial strain on your business and allow you to more effectively weather economic uncertainty.
Choosing an Outsourced Service Provider
Whether you’re looking for outsourced accounting services, marketing services, or even customer support, always look for the following qualities:
A solid reputation. Consider online reviews, referrals, and testimonials. Ask fellow business leaders for recommendations.
Ample experience in the industry. How long have they been around? What kinds of case studies can they offer? Also note the years in business. A newer operation isn’t always a red flag, but you have to be careful. You want to ensure that you’re not working with a fly-by-night agency that will leave you high and dry when you need them.
Relevant credentials. Anyone can offer a service, but do they have the education to back it up? If you’re hiring an accounting firm, you’ll ideally want a certified public accountant. If you’re considering a marketing team, look closely at their marketing background. The credentials are critical.
A domestic presence. While you can often save money by outsourcing overseas, this can present risks in certain industries—such as if you’re sharing delicate personal data or navigating complex international trade laws. By working with domestic—and especially local—providers, you not only help to support your own economy, but you can enjoy added assurance. On top of that, you never have to sit through 9 p.m. meetings with a service provider in a far-away time zone.
We don’t know how long the COVID-19 pandemic will stick around nor when the next financial disruption will occur. But you can be prepared. Outsourcing can be a valuable aspect of that preparation. Consider your own options—whether you’re running your own business or looking to put your skillset to good use.