If you’ve considered outsourcing, one of your first questions may be, “When should a company outsource?” Maybe you’ve been growing a team or building a program for a while, but haven’t been able to scale, or maybe your back-office admin tasks are finally taking a toll on your in-house resources. Whatever the reason, outsourcing your non-core functions could free up time and money to grow your business. But when should you make the leap? When should a company outsource? We break it down below.
Knowing when it’s time to make the leap can be confusing. After all, there is no one-size-fits-all list of when you should be outsourcing. In this article, we’ll break down five signs it’s time for your company to outsource.
Key Takeaways
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The decision of when a company should outsource often stems from a need to cut costs and focus on core competencies.
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A major sign is the "player-coach" dilemma, where leaders spend 88% of their time on transactional tasks rather than strategy.
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Outsourcing is a solution for the talent shortage, specifically in accounting where graduates have decreased by 20%.
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Scalability is key; outsourcing allows you to ramp up teams from one to 100 without the $4,700 average cost of hiring a new internal employee.
Table of Contents
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You Need Greater Cost Control
Everyone knows that lowering costs is one of the top benefits of outsourcing. Really, it's up to you whether now is the right time, but whenever you are ready to remove unnecessary costs and make back-office operations more efficient, it’s time to outsource.
Scenarios vary as to why cutting costs has become a priority, but one thing is constant: outsourcing allows companies to focus on what matters by reinvesting dollars where they will make the most impact. Maybe you need to pour more money into sales and marketing to increase revenue, or perhaps you've had cuts already and are looking to fill the gaps, or it could be that you need to add tasks to your team's plate, but hiring is not in the budget right now. Whatever the reason, if you need to cut costs, outsourcing is a precise solution that fits the bill.
Let's take accounting as an example. When CFOs and controllers look at the budget, many will find that too much is being spent on back-office tasks. The problem is that these back-office F&A needs -- whether accounts payable, accounts receivable, general accounting, or admin -- are vital to the success of the organization. And in many cases, the accounting team responsible is already pushed to its limits as it is. When a need for increased production meets a need to lower costs, outsourcing is the logical next step.
Looking to Cut Costs? Check out our Outsourcing Worksheet to find out how.
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When a Company Should Outsource to Focus on Core Activities
Adding people to your team to do skills not part of your core business can be daunting, time-consuming, expensive, and limiting to your business growth. By taking the time to attract, hire, train, and retain talent in areas outside your core competencies, you're also using up valuable resources that you need to focus on your business-critical tasks. In this case, outsourcing may be your best bet. Many companies outsource their back office, accounting, digital, customer service, and more, so they can stick with what they do best-- and do more of it. Recent data suggests that 65% of companies in a recent survey agree that outsourcing helps them focus on core functions.
Many outsourcing providers stand ready to help with tasks outside your core competencies. Even if you are really great at accounting or customer care, is that what your business offers? If the answer is no, going to a third-party makes a lot of sense and can allow you to focus on your core offering, scale your operations, create additional services/products, and even get more business. As this article makes clear, timing is everything, and as small businesses start to scale to mid-size, many find that they simply do not have the time to focus on strategy and growth when having to constantly hire back- and front-office team members that could be outsourced.
Look at customer experience (CX), for example. If you serve customers (who doesn't?), you'll likely have need of a well-defined CX strategy that includes agents, systems, certifications, office space, scripts, training, equipment, and more. Developing the proper backend CX function (especially while scaling) is quite a difficult and expensive task for anyone not in the customer experience space. This is why call centers are so common among larger, B2C companies and have been for decades. But the thing is, you don't have to be a large business or B2C with a need for hundreds of agents to outsource CX. You also don’t need scores of accountants to outsource F&A. In fact, you can start with a team as small as one offshore. With a provider like Personiv, you can start with a small team and grow from there, all while getting the same outsourcing benefits that the large enterprises have used for years.
Listen In: [PODCAST] When Is Outsourcing Your Accounting the Best Move?
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Your Company is Growing…Fast
Anyone who has led or helped lead a startup or business in growth mode knows the excitement that comes when things really start rolling. Your production has picked up, your customers are increasing, and you see big growth on the horizon. It's an amazing feeling that also comes with a side of "What do we do now?" Growing fast brings a certain set of challenges, and many organizations find that this is when they need help from a third party. Once again, now is the time to outsource.
Starting a relationship with a BPO provider when you see the need to scale can help you organize what can be outsourced and what should be kept in-house while building an outsourced program that will last (and grow with you). For outsourcing providers, scaling IS their core business. Whether you need a team of one, ten, or 100, all with specialized skills who can work in your systems, outsourcing is a viable option. What better way to scale than with an outsourcer that builds large teams day in and day out with incredible efficiency?
Watch the Video: Smart Outsourcing for Startups - Scale Fast & Grow
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When Talent Shortages Mean a Company Should Outsource
Attracting talent in this market and going through the hiring process can pretty much stall operations in other parts of the business. Hiring takes time, and with a hiring shortage out there (looking at you, accounting market), this task often drags on with less-than-favorable results. In fact, over the past few years, there has been a significant decline in the number of new accountant entrants, with the number of accounting graduates decreasing by 20% since 2010. At the same time, retirement numbers in the accounting field have increased, with 75% of CPAs in the Baby Boomer generation approaching retirement age.
Even if you aren’t hiring for an accounting position, it can take months, and you may still be stuck with a candidate that isn't quite right, or, unfortunately, quits on you, causing the process to start all over again. Constant turnover isn’t just frustrating; it’s costly. The latest data from SHRM estimates that it costs $4,700 to hire a new employee.
Did you know that we have hired over 600 people, all with technical skills in design, SEM, website building, and more -- within six weeks for a client in the past? It's a task we are comfortable with because this is what we do. So, if the thought of hiring a new team in a non-core skillset is holding you back from growing at the speed you'd like, outsourcing is a great solution.
Want to Hear More: Scouting for Accounting Talent with Cliff Edwards
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When Strategy Time Is Limited: Your Company Should Outsource
How much of your day is dedicated to admin tasks? We wondered too, so we asked CFOs in our F&A Leadership Survey (get the final report here) how much of their time is spent on transactional vs. strategic work. Would you believe that 88% of CFOs said they didn't have time for strategy because they were stuck doing transactional tasks like AP, AR, and closing the books? That's a lot of business leaders who are in the weeds every day.
The problem with leading a small- to mid-size company is that you're wearing a lot of hats, and when you're in player-coach mode, strategic work is what falls by the wayside. However, strategy is also what will get your business to surpass your goals and hit those margins.
Rather than focusing time and attention on non-core tasks that have to be done with deadlines looming, hand those tasks over to an outsourcing provider so you can focus on your priorities and engage in meaningful work again. Imagine not having to worry about the details because you have a trusted team ready to provide you with standardized KPIs and organized reports on a regular basis. This is the beauty of outsourcing -- removing those back-office, admin tasks that zap your time and energy so you can focus on what matters most.
What About Quality? Ensuring Quality While Outsourcing: Top 5 Rules to Live By
Start Small to Scale Fast
If you recognize these signs in your own organization, you might be wondering where to begin. You don't need to outsource everything overnight. The best approach is to identify high-volume, transactional tasks that consume your team's time but don't require their strategic expertise.
For many organizations, the safest and most impactful place to start is the back office. Functions like accounts payable, invoice processing, and general ledger maintenance are prime candidates for a pilot program. If you want to see exactly how this works for finance teams, read our outsourced accounting complete guide to understand which specific tasks move the needle most.
Whether you are looking to cut costs, grow your business, hire qualified talent, or re-align your strategy and schedule, outsourcing is a solution that can wear many hats. If it sounds like your company can benefit from outsourcing, check out our post on choosing the best outsourcing provider.
Already see the signs? Don't let administrative tasks hold your growth back any longer. Talk to a Personiv expert today to get a custom strategy for your business.
Frequently Asked Questions
