Can Outsourcing Save Your Business Money?

When it comes to cutting costs, many people know that outsourcing can be an effective way to reduce your overall expenses when compared to hiring an entirely new staff member. There’s no need to train them, you don’t have to equip them, and there are no hiring costs involved. However, there are still some situations where outsourcing can be more expensive, especially if you rely on it for too long and fail to recruit new team members to your business.

So how exactly do you balance outsourcing with hiring? What are some tips to follow if you want to continue saving money when growing your business with outsourcing?

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Some things are just better when outsourced

Not everything should be outsourced, but there are some tasks that are generally much better to hand off to someone else. So what’s the distinction? What should you outsource and what should you handle yourself or invest in a new member of staff for?

This is going to heavily depend on the type of business you operate and also your current position. Some businesses can benefit a lot more from outsourcing while others may be in a more suitable position to hire new team members. So here are a couple of things to look out for when deciding if you’re in a position to hire or if you should rely on outsourcing for a bit longer:

  • Tasks that are seldom performed are often good targets for outsourcing. For example, bookkeepers and designers are required every now and then but we rarely require their service for an extended period of time. In most cases, the job we hire them for can be completed and we don’t need to contact them until a few days or weeks later.
  • Tasks that require specialized knowledge are generally better to outsource because hiring someone to handle them can be extremely expensive. For instance, security experts and legal consultants are much better to hire as outsourced services instead of trying to build an in-house team. This gives you a lot more flexibility and can help reduce your overall running costs.
  • Tasks that you want to keep separate from your business should be outsourced as well. This is an industry-specific requirement, but there are times where you may want to completely separate yourself from a specific task so that should something go wrong, your business won’t be responsible for the outcome.

These are just a few situations where outsourcing is the superior option. If you’re mostly interested in saving money as a business or want to hire experts that possess a lot of knowledge in a highly specific subject, then it’s often best to outsource. However, relying too much on outsourcing can lead to some issues if you’re not careful.

When outsourcing doesn’t make sense

Most people see outsourcing as a good way to save money and hire experts, but if you use it for too long it hinders the growth of your own in-house staff. And this is where we start to get problems and it begs the question; when do we stop outsourcing a task in favor of actually hiring and training staff to do the job? At what point does it become more profitable to go in-house for those specific tasks?

Unfortunately, it’s not easy to list certain criteria and just be done with it. Most businesses will need to take a serious look at their financial situation if they want to see when hiring is better than outsourcing. But to help you out, there are a couple of things to look out for:

  • For a simple way to determine if outsourcing is better value than hiring a member of staff, take a look at how often you hire a certain service and compare it to the costs of recruiting and training a new member of staff then paying them a long-term salary. If your calculations show that outsourcing is still cheaper, then you could stick with it for now.
  • However, if you predict that you may need to switch to a more expensive outsourced service or if you need to start hiring them more often in the new future, then it may be time to hire your own member of staff to take care of those duties.
  • Sometimes, businesses require a bit more privacy and flexibility when carrying out specific tasks. For instance, maybe you’d like a bit more control over your website design instead of relying on a freelance designer that you’ve hired. In situations like this, you may want to hire an in-house designer if you know that you’ll be constantly using their expertise on multiple different projects.
  • If you know that you’re going to increase the frequency of outsourced hires, then you may want to invest upfront and hire new employees instead.

In short, it’s all about juggling how much responsibility those new hires will have compared to what you’re already outsourcing. The calculations aren’t simple and you’ll need to forecast what your situation is going to be like in the future if you want to have an easier time judging whether hiring a new staff member is better than outsourcing.

The conclusion

Outsourcing can save your business money and there’s no doubt about that. However, hiring a new member of staff, training them, and helping them fit into your business workflow is much better for long-term growth. This is especially true if you plan to grow your business and if you’ll be making heavy use of their expertise in the near future. However, if your company is still relatively small and you don’t have the means to recruit and train a new member of staff, then you may be forced to rely on outsourcing a bit longer.

While having in-house team members is usually the better option, an argument can still be made for specialized services such as those that involve legal fields or technical knowledge that would otherwise take years of study to learn to a competent level.

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