Outsourcing Services: Are They Important for Startups?

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Outsourcing Services: Are They Important for Startups?

In recent years, the number of companies using outsourcing services is increasing. The majority of these are start-ups looking for ways to scale their businesses with limited funding.

Hiring an outsourcing company gives them the ability to work with people with specialized skills, delegate repetitive tasks and focus on core business functions at a fraction of a cost, making outsourcing a crucial player to their growth.


What is an outsourcing company?

An outsourcing company provides businesses with human and technical resources to handle certain job functions instead of employing people to do this in-house.

Today, more and more businesses are outsourcing jobs to Business Processing Outsourcing(BPO) companies and offshore service providers. In the US alone,over 2 million jobs were outsourced, most within the IT and customer support sectors. Startups consider outsourcing as an important part of their business operations because of its benefits.


4 benefits of outsourcing


1. Focus on your business core functions

According to the Pareto principle, only 20% of your business operations provide 80% of your business’ revenue. These are the core processes and tasks within your business. These are the ones that you need to focus all your time and effort to scale your startup quickly.

Of course, that’s easier said than done. As a small business owner, chances are you’re in-charge for all the activities and tasks that come with growing a business. However, the majority of these are repetitive functions that are time-consuming but not generating your business any revenue. As a result, you lose time or energy to focus on the most crucial aspects of your business.

This is one of the reasons why outsourcing is valuable for your business. Outsourcing companies take care of handling highly repetitive tasks like providing after-sales customer support, data entry, and even tracking your inventory and distributing them to your customers.

When all these repetitive tasks are out of your way, you’re now able to focus on business processes and tasks that help generate revenue for your business.


2. Cost-effective business operations

Reducing operational costs while being able to benefit from the skills of top-quality talents is why 87% of IT companies choose to outsource many of their corporate activities. A good outsourcing company helps you achieve this in two ways. 

First, it helps you allocate your capital more efficiently. A good outsourcing company can give you a comprehensive range of services based on what you need for your business at a set price. As a result, you’re able to allocate the rest of the capital you have to revenue-producing activities while avoiding potentially significant expenses during the early stages of your business.

Second, outsourcing helps cut costs by increasing efficiency in your business. Let’s face it: you’re bound to make a lot of mistakes in the first few years of your business. Unfortunately, these come at a price, often a hefty one. While there’s no way to prevent these from happening, working with a company that’s provided outsourcing services for several years can reduce these instances significantly.


3. Scalability of your business

Outsourcing companies give your startup the capability to scale faster by providing you an extensive pool of human and technical resources, making it possible for you to start any project quickly.

They can also help you quickly grow your business by leveraging the playing field. Competition in today’s marketplace is extremely fierce, so it’s important your startup can stand up against your competition. Through outsourcing, you’re able to offer your customers access to the same—if not, better—service, expertise, and support they’d get from your larger competitors.


4. Reduce risk

Although starting a business does come with a fair amount of risk, it’s always better to find ways to minimize the risk. Outsourcing providers help by assuming and managing potential risks your business may face in the different operations you outsource since they’re experienced in these areas.

As you can tell from these benefits, it’s clear to see why outsourcing is important for startups.

Now, it’s important to point out that not all outsourcing companies are created and managed equally. If you want your business to enjoy these benefits, you need to find the right outsourcing provider to handle your business operations.


5 steps to finding the right outsourcing company


1. Set a goal

Before deciding on an outsourcing company, you need to to have a clear goal for your business. That way, you can focus your search to finding an outsourcing company that can provide the resources you need to achieve this.


2. Understand how your business works

Not all operations should be outsourced. Take time to review your business model to find which business processes do you consider as low value, or those not directly involved in generating revenue. These are the only kinds of tasks that you should let an outsourcing company handle.


3. Know your budget

Since you’re working with limited capital, it’s important to make sure that you’ll still have enough financial resources to fund your revenue-generating activities adequately. Take a moment to review your startup’s financial statements to determine how much can you allocate for outsourcing services without compromising other aspects of your startup.


4. Experience and credentials

When choosing an outsourcing company, it’s important to make sure that they’ll be able to do the job.

Take some time to review the range of services they offer. Inquire about their work process and how they intend to fulfill the requirements of your startup. Try also to ask them about their previous clients, and whether they’ve worked with clients within your niche or industry. Not only will these pieces of information help you gauge their experience level, but also determine if there’s a possibility for a conflict of interest.


5. Request for a quote

Many outsourcing companies will be happy to give you a free quote without any obligations. Take advantage of this. That way, you can compare the offers made by different providers, and you can choose the one that best matches your needs and budget.

No doubt, outsourcing plays a crucial role in helping startups scale their businesses by providing cost-effective solutions that help entrepreneurs to focus on revenue-generating activities.

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