Outsourcing guide for smaller businesses

Outsourcing is the process of businesses using services provided by an external provider. This guide outlines how it can benefit smaller businesses.

Outsourcing can be beneficial for small companies on a tight budget because it can generally be cheaper than employing your own staff.

Outsourcing also allows smaller businesses to scale by accessing expertise and creativity that they don't have.

You need to be careful when outsourcing and find the right outsourced partner.

Working with the wrong one could mean you lose control over vital aspects of your business, which could damage your reputation with customers.

Types of outsourcing

Many different types of outsourcing can be considered:

Accounting

Outsourcing to an accountant helps small businesses understand financial issues and comply with their legal responsibilities.

Services include completing tax returns, tax planning advice, helping with funding, and setting up payroll systems.

PR and marketing

Outsourcing your marketing can help you grow your business.

Services include public relations, advertising, social media, and email marketing.

Human resources

As a business's workforce grows, having someone focused on human resources (HR) issues is important.

You might lack the budget for a dedicated internal HR expert, so outsourcing can be a good option.

You can outsource all your HR or one-off projects, such as payroll and recruitment.

Administration

When running a smaller business, you have lots to do, so outsourcing to a virtual assistant (VA) can help reduce your workload.

They can handle various tasks, including booking meetings and travel, scheduling social media posts, and replying to emails.

How to find the right outsourcing partner

Before outsourcing, you need to be clear on what you want to achieve.

Decide what areas you need help with and whether outsourcing could be the solution.

You can then take steps to find an outsourcing partner:

• speak to others for recommendations – you can use your contacts, ask your connections on social media, and meet other founders at networking events
• contact outsourcing providers and ask for details of clients to speak to for references
• many business groups provide recommendations for outsourced providers, often with a discount on fees
• use online supplier directories and review websites.

How to procure outsourced services

1. Write a brief

Creating a detailed brief outlining your requirements will ensure you find the most suitable outsourcing partner.

Describe what you are looking for, the type of partner you need, the length of the contract, and when you want the relationship to begin.

You should also provide background details on your business and its goals.

2. Meet several providers

Contact multiple providers to compare their skills, experience, and costs.

Check that each provider meets your needs and ask for references from existing clients, particularly those that are a similar size or age to your business.

Make sure provider are in good financial health.

You can check by looking at company accounts and annual reports filed with Companies House.

Ensure you are clear on the provider's costs and the processes they have in place to guarantee quality.

Once you have shortlisted your top choices, ask the providers to deliver a presentation and submit a proposal based on your brief.

3. Review proposals

Go through each proposal and decide to what extent it meets your needs.

You can use an evaluation matrix to score each pitch and how it meets your brief.

As well as considering what is included in the presentation and proposals, you should also consider whether the supplier is the right cultural fit for your organisation.

Making a success of outsourcing

Agree a contract

Once you've selected a provider, negotiate a clear contract outlining the service that will be provided, the costs, and how and when you will pay.

The contract should also include a Service Level Agreement (SLA) which defines what the provider will provide and the required standard of service.

It should outline what will happen if the expected service level is not met (such as penalties) and an exit strategy should things go wrong.

To draw up the contract and SLA, it is advisable to seek professional legal advice.

Effective communication

Good communication is crucial to a successful relationship with an outsourcing partner.

Stay in regular contact via email, telephone calls, virtual chats, and face-to-face meetings.

Provide follow-up summaries of meetings and avoid any ambiguous language.

Ensure any misunderstandings are dealt with immediately.

You can use various online communication solutions to keep communicating, including project management tools.

Review and evaluate

Hold regular internal reviews to check that the outsourcing partner is delivering the benefits you expect.

You should also hold regular catch-ups with the supplier to discuss any concerns.

Your SLA should include details of penalties imposed on the provider if the expected service level is not met, but regular evaluation can help you avoid having to do this and upset the relationship.

If things are going badly, you may have to renegotiate the contract or, in the worst-case scenario, exit the relationship based on the process you agreed with the provider in the SLA.