Outsourcing: The secret weapon to scaling

How today’s small businesses use outsourcing to scale up

16Jul

At one point or another, every small business owner is faced with a decision: to settle or continue growing. Most choose the latter. But in order to give your business the best chance of being successful, you can’t just grow without rhyme or reason. You need to scale up in an efficient manner that maximizes resources and avoids wasteful spending.

The challenges of scaling up

You’ll be hard-pressed to find an entrepreneur who does not have a desire to grow. In fact, growth is often one of the key driving forces in their sustained focus and effort. But just because growth is desirable doesn’t mean it comes without some risk. Some of the key challenges of scaling up include:

  • Cash flow problems. You can’t scale up and maintain the same budget. If you’re set on growing, you’ll have to come up with a very specific plan for your cash flow. A failure to do so will come back to hurt you on the financial front.
  • Tidal markets. “The tide comes in; the tide goes out,” entrepreneur David Finkel says. “Many rapidly growing businesses get burned by investing in more capacity and taking on higher fixed expenses, not realizing that their growth may be a temporary thing.” This is particularly problematic when it comes to staffing. It’s easy to bring on a bunch of new employees when things are busy for a stretch, but once things come back down to normal, you’re left with high payroll costs and not enough revenues to justify the expense.
  • Loss of focus. One of the most prevalent risks with premature or fast growth is a lack of focus. Instead of keeping your eye on the prize - i.e. satisfying your customers - you begin expending all of your energy and effort on growth (often for the sake of growth and nothing more).

This isn’t to say scaling up is a bad thing. It’s necessary if you have your eyes set on bigger and better things. However, you can’t scale up without a plan. You need to do it as efficiently as possible, which may mean taking a slow and disciplined approach.


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Using outsourcing to scale with efficiency

Because the human resources aspect of scaling is often the most challenging, this is where you should focus a lot of your time and energy. More specifically, you should give outsourcing a try.

The beauty of outsourcing is that it allows you to increase output without increasing your fixed costs. You get the additional productivity that an employee brings without the added commitment (financially or practically).

In today’s market, it is possible to offload just about any aspect of your business to a contractor or service provider. But if you want to maximize your resources, it is smart to focus your efforts on areas of your business that are most conducive to outsourcing.

Here are a few specific ways you can leverage outsourcing with scaling in mind:

  • Gain instantaneous scalability in an area of your business that would be too costly or challenging to expand in an efficient manner. For example, you will probably find it easier to outsource your fulfillment to a company that has 100-times the capacity that you currently possess - rather than making a costly and lengthy investment in growing your own capacity 100-times over.
  • Use outsourcing to eliminate the most time-consuming tasks from your team members. For example, you may use a call center like AnswerFirst to provide 24/7 inbound customer service - something that would require an extensive and expensive investment if you were to handle it in-house.
  • Outsourcing should be used when you lack expertise in a particular area and have the ability to work with a partner that has the skills or knowledge you need to grow your business in a key area.

There are also a number of areas where you should not outsource. For example, never outsource an area or function that’s core to your business - regardless of the cost savings. It is also not smart to outsource everything, lest you end up with no brand identity or core company values.

Putting it all together

When it’s all said and done, outsourcing allows the average business to scale up in a much more efficient and straightforward manner. If you have growth on your mind, be on the lookout for these opportunities. You won’t regret your disciplined approach.

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