by Jennifer Lonoff Schiff

6 outsourcing tips for small businesses

Jun 22, 2016
IT Leadership Outsourcing Small and Medium Business

Experts discuss the pros and cons of outsourcing and what business owners should consider when thinking about outsourcing and choosing a vendor.

outsourcing checklist
Credit: Thinkstock

As most (if not all) small business owners know, you can’t do or manage everything. And some tasks (HR and accounting spring to mind) are often better left to the experts.

Of course, not every small or midsized business can afford to outsource functions, though in many cases the benefits outweigh the upfront cost. But whether you are planning to outsource or are just thinking about it, it pays to do your homework and due diligence before giving over part of your business to a third-party. Here are six things to consider before you choose a business right partner.

1. Understand your core competencies and limitations. “Outsource functions that are time-consuming and can easily be performed by someone outside the organization,” says Sara Slettebo, president, ReMilNet, which helps businesses improve efficiency and effectiveness. For example, “ReMilNet has outsourced [its] HR functions (payroll, w-2, taxes, benefits, etc.) since 2008. With employees working in several states, it is more cost effective to have an external staff available to prepare, process and file our state documentation than manage it internally,” she says. “As a result, our filings are compliant and submitted on time, we stay abreast of new policies that impact our employees in each state and all our records are available online in a secure environment. This has been the most beneficial outsourcing decision we have made.”

2. Define goals/metrics upfront. “Clearly define the outsourcing goals: cost savings, quality improvement, efficiency, augmenting skills,” says Adrienne Johnson, corporate communications manager, CorpInfo, which provides cloud, consulting, infrastructure and managed services. “Clarifying goals, needs and expected outcomes aids in selecting the right partner and outsourcing agreement.”

“Set performance metrics and specific outcomes for your vendor prior to committing to a relationship,” says Aalap Shah, cofounder, SoMe Connect, a digital marketing agency. “Most outsourcing relationships fail because expectations are not clear, the owner is in a hurry to get it off their plate, or the firm is too busy selling to know what to deliver on.  Working on these metrics upfront ensures a mutually beneficial, long-term relationship.”

3. Find the right partner.“Outsourcing any part of your business is a big deal and not something to consider lightly,” says Maria Black, president, ADP TotalSource. “It’s important to consider the company you’re going to engage as a partner, not just as a vendor [but as someone] that you think you’ll be able to have a long-term strategic relationship with.”

For example, she says, “If you’re considering outsourcing your human resources function, it’s important to explore a potential partner’s level of expertise in payroll, tax filing and employment and benefits compliance, such as minimum wage and overtime requirements and the Affordable Care Act.”

[ Related: From IT vendor management to strategic partnerships ]

Also, be mindful that “the process of selecting a partner may take some time,” she says. “Dig deep on capabilities. Ask a trusted advisor, [colleague and/or fellow business owner] what they know about the organization [and] check out [the company’s] social media platforms and request references.” While this will take time, it’s worth it as “the right company will offer increased efficiencies and allow you to focus on your business objectives,” she says.

“Seek a provider that is a good fit philosophically with your organization and that will work with you as a true partner,” adds Andy Childs, vice president of marketing, Paychex. And “pay close attention to their service model. Ensure that [the] provider excels at personalized, responsive customer service. The provider should offer a single point of contact and/or a knowledgeable, service-oriented representative, accessible at any time your business needs support.”

[ Related: Request for Solution: What some enterprises really want from outsourcing providers ]

“The partner should understand the client’s business, mission and objectives,” says Johnson. “The client should feel that its account is important to the partner and that the partner has adequate bandwidth to properly service the account.”

4. Make sure you have someone internally who can manage the relationship full-time. “It’s critical to understand that outsourcing requires oversight,” says Michael Beck, head of growth and marketing, Earth Class Mail. Businesses considering outsourcing need someone in house who can be the point person, who can provide “detailed, explicit instructions” and be available to answer questions and sign off on things, so projects stay on track.

[ Related: How to detect if you’re in a relationship with the wrong software outsourcing company ]

“Committing to a weekly or monthly schedule of meetings to review and sign off on items is [also] a must,” says Shah.

5. Maintain control/ownership of data. “Web and mobile development can easily be outsourced, [for example,] but…don’t allow all of your code or product to be 100 percent controlled by an overseas [or third party] company,” says Mark Tuchscherer, cofounder & president, Geeks Chicago. “If something goes wrong, you’ll have no control over your product. You could also lose your code [or your website] and have a very hard time regaining control.”

“Get a guaranteed SLA [service-level agreement] and determine how performance and customer satisfaction will be measured and monitored,” says Johnson. “There should [also] be a predetermined transition process in the event the agreement is terminated, and comprehensive documentation should be maintained. The client should consider if it will have ownership of the tools and processes being used to support the environment.”

6. Be vigilant about the security of your data – and outsourcer. Be extra careful about outsourcing “anything related to the security of your website or product,” says Tuchscherer. “If something is built incorrectly and you have a breach, you don’t want to risk client or customer data. In the end, you are responsible for what happens, even if [an outside] company made an error. This can open you up to a legal nightmare, and cost the company dearly.”

[ Related: How to build cybersecurity into outsourcing contracts ]

So, again, be sure to vet third-parties to ensure that they are in compliance with industry best practices and will keep your data safe and secure.