How to decide if outsourcing is important for your business

Outsourcing is about having a secondary party do the things that are necessary but not income-generating for your business.

Whether or not it is important for your business is a conclusion that you arrive at by assessing several factors as detailed below.

Cost vs Benefit

When you outsource, it implies that it is more beneficial to you if another entity does that job. Probably because they are better at it compared to you or because it is not your core business. The benefit of outsourcing has to be worth the price you are paying for it. This is determined by comparing what it would cost you to have the job done internally viz-a-viz outsourcing it. The second comparison is on benefits – what extra value do you get by outsourcing or by keeping it inhouse

The necessity of Assignment

As businesses grow, many owners fall into the trap of creating unnecessary work. This leads them to hire someone to do work that should not be existing in the first place. If and when you decide to outsource, you will be paying someone to do work for you and that is a cost to the business. It is important to make sure that it’s output is an important component of the business.

Available expertise

Before you outsource, it is important to find out if your current team members are equipped to handle the work, probably by merging or expanding roles. You could discover that a team member already on payroll can carry out the work better than the entity to which you are outsourcing.

I have overtime found that when outsourcing is done correctly, it overall serves as a cost reduction measure but more importantly, it releases the business owner and existing team to concentrate more on the core business. A management consultancy will likely outsource its accounting, a professional motivational speaker or coach will outsource his diary to a virtual assistant, etc. This leaves them to focus more on what brings them income.

This article is in response to a question asked on Quora: Is outsourcing important when running your own business? as written by Wangari Maina.

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