Somewhere out there . . .

When you’re starting a consulting business – or when you’re growing your business – you will need to think about whether to outsource or not.

In tip eighteen of the series of one hundred tips to help people starting a consulting business, I’m asking you to consider the pros and cons of outsourcing.

What is outsourcing?

The most commonly-used definition of outsourcing is that of contracting out. Businesses will contract out a specific function, for example, recruitment or payroll management – or outsource it.

Outsourcing is big business. It’s also a global business.  Large organisations in the UK, in Europe and in North America outsource not just within their own country but to such places as India, the Philippines or to a range of other locations.

Outsourcing and new businesses

You’re starting a consulting business.  You might be working from home.  You might have an office.  Whatever your circumstances you have some decisions to make about how you’re gong to manage the total resource that your business has available to it.

This means you need to think about capacity and capability.

Small businesses, and especially new small businesses, often don’t have the capacity to do everything that needs doing.  As a result owner-managers work long hours.  Even so, sometimes things that need doing don’t get done. A common casualty is long-term planning.

Outsourcing can be attractive to a new business simply because there aren’t enough hours in the day to do everything. Time spent on tasks that need doing, but which could be done by someone else, can take an owner manager away from revenue generation.  An owner manager only has the capacity to do so much, however well motivated he or she is, so outsourcing may be necessary.

When it comes to capability, there are some things that a business – and especially a small business – simply can’t do because the people in the business don’t know how to do them.  Web design and web maintenance often come into this category.  There are things that need doing.  The people in the business are experts in something else.  Therefore, they have choices to make.  They can leave tasks undone, or they can learn how to do those tasks, or they can find a way of getting someone outside their organisation to do them on their behalf.

Thus, capacity and capability issues can drive businesses to outsourcing of necessity.

It’s important to think carefully before adopting an outsourcing strategy more generally and to move beyond outsourcing because of an immediate need.

What are the pros and cons of outsourcing?

There can be savings in time and money, if you outsource.

It’s likely to be cheaper for you to outsource a task or a function than it will be either to learn to do that task yourself or to hire an employee who can do whatever it is you need doing.  Remember, too,  that if you hire someone you must meet the costs of equipping that person and supplying a workspace as well as meeting the costs of employment.

If you choose to outsource, you will also free up time, and time is a valuable commodity.  The advocates of outsourcing focus on this.  You can use the time you gain to build your business and do the things you’re good at.  You can spend more of your time on the things that you believe will lead to long-term business success

In Starting A Consulting Business – Only you can do it I encouraged people starting their consulting business to identify the tasks that only they can do as part of the process of setting up their business and to ensure they spend time on these activities.

When you have completed that activity, you may wish to consider outsourcing some of the work of your business.

Before you do that remember that if you’re not managing a task in-house then you lose some control over the work being done.

You can lose control of important aspects of your business.

This is an issue to think carefully about when you’re considering outsourcing.

A good way to help you to decide on your approach to outsourcing is to think about telephone answering.  Lots of businesses use telephone answering services, and there are call centres all over the world dealing with businesses’ incoming calls and with customer service issues.

Do you want your business to present itself to the world in this way? Are you happy for someone who you don’t know, and over whose work you have little control, to answer your telephone in your company’s name and deal with your customers and potential customers on your behalf?

If you have an answering service do you want to be able to specify how your calls are dealt with?  Do you want to set out specific approaches to be used in different circumstances?

Your answers indicate the type of outsourcing service you’re likely to be looking for.  They also give you an indication of the costs.  If you’re happy for your answering service simply to take names and telephone numbers plus to offer an assurance that you will call back, then you will pay less than if you want a differentiated service that deals with different types of calls in different ways.

In both cases you’re outsourcing, but your approach to outsourcing in quite different.  In the first case you’re outsourcing a function.  In the second example, you’re outsourcing tasks.

Outsourcing tasks and outsourcing functions

The questions about the telephone answering service illustrate one of the fundamental issues surrounding outsourcing.

Are you thinking of outsourcing a task or are you outsourcing a function?

If you’re outsourcing a task you know exactly what you want done.

Example – book-keeping services:

• I want my business’s accounts to be kept up-to-date.
• I want a monthly profit and loss statement.
• I want a monthly cash flow forecast.
• I want to know how much we are spending every week.
• I want my VAT returns completed accurately and on time.

… You get the idea.  In this case I know what I want done.  In the specification I’m establishing how I will monitor success and how I will judge if this outsourced element of my business is being handled well.

On the other hand I might just say:

“I want a website building.”

If I do this, then I’m not really giving a potential contractor enough information to enable him or her to do what is necessary.  I’m not creating a framework in which my outsourced tasks can be completed. I’m not indicating what will be satisfactory to me in terms of the work delivered.

Outsourcing tasks is a good idea, especially when you can measure what’s happening.

Outsourcing a function is a riskier business because you’re handing over more than a task.  You’re handing over an element of your business to someone who is not as committed as you are to your success, nor who knows as much about your business as you do.

Should new businesses outsource?

In my opinion, the answer is: no – or not until:

1. you’re clear what you want to outsource
2. you can create a specification for what you want doing
3. you’re clear how you will measure success.

You shouldn’t really outsource until you know what you want to achieve via your outsourcing strategy,

That knowledge will help you to decide who will be the best people to approach to help you to achieve your objectives

Outsourcing and your new consulting business.

So are you confident you’re ready to outsource?  If so, what would you like to outsource?  Which activities should you definitely keep in-house?

Let me know in the comments.

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This is tip eighteen in the series of one hundred tips to help you to succeed when you start your consulting business.