What Does Outsourcing Mean (And When Should I Use It?)

What Does Outsourcing Mean (And When Should I Use It?)
What Does Outsourcing Mean and When Should I Use It?

As businesses grow, they also change. Some changes prove predictable, such as hiring employees for key positions. Some changes prove less predictable, such as making a pivot during the startup phase.

As this growth or pivoting happens, it can expose a need for a particular service. It can also expose that the company no longer needs something in-house.

When you realize that need something you don’t have (or no longer need something in-house), you’ll commonly hear a suggestion that you outsource it. That begs the question, “What does outsourcing mean?”

It also prompts the questions of what benefits outsourcing offers and when to outsource. Keep reading for an overview of outsourcing, its benefits, and when you should use it.

What Does Outsourcing Mean?

The basic outsourcing definition is that a company hires another business for a service of some kind.

For example, a major company that needs a new CFO might hire an executive search firm instead of undertaking a recruiting process itself. Meanwhile, a small business owner might hire a freelance writer to write blog posts or website copy.

How Does Outsourcing Benefit My Business?

Outsourcing can benefit your business in many ways.

Many companies outsource as a way of accessing expensive professionals. For example, the demand for cybersecurity experts far outstrips the supply. A company might hire a managed IT services company for access to a cybersecurity pro.

Outsourcing lets your business keep its focus on core tasks. A chef/restaurant owner excels at making food and managing staff, not at dealing with payroll paperwork.

To free up valuable time, the chef might use an online paystub generator. If you want a service like that, you can read about it here.

Outsourcing can also cut costs. Let’s say the total cost for keeping five in-house customer service reps rounds out $150,000 a year between salaries and benefits. There is a good chance that a third-party company can do the work for substantially less than that.

When Should I Outsource?

Using any outsourcing services runs certain risks, like damaging morale. Still, there are times when outsourcing makes sense.

Outsourcing makes sense when you face a one-time or periodic need, like custom website design or a website update. It also makes sense if it removes a task from your plate that you loathe, such as bookkeeping.

Outsourcing also makes sense when you no longer need or want something in-house. For example, many businesses outsource marketing activities so it won’t distract people from ongoing projects.

Outsourcing and You

A better question than, “What does outsourcing mean?” is “What does outsourcing mean for you?”

As a business owner, you must decide what services or tasks you feel comfortable letting out of your direct control. For accounting or marketing, the choice may prove easy. For something like HR, you may end up keeping it in-house because it touches every employee.

The main question you must always ask is this: “What benefits the business most?” If the answer is outsourcing, you need a strong reason for keeping it in-house.

Want more business insight and advice? Read through some of our other articles in the business section on this site.

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