As a small business owner, the process of scaling up your company in order to grow can be stressful, and sometimes counter-productive.
Hiring and training staff, buying more equipment and finding larger premises not only takes up a lot of your time and energy, they are also expensive. It can take years for these investments to pay off and if things don’t pan out quite as you hoped on the sales side in order to get a return on your investment, you could easily find yourself in a situation where you have a bigger business to run, for smaller profits.
None of this is to say that you shouldn’t be aiming for growth: just that you need to make sure you are growing profits, above all. You also need to be careful about your cash flow situation: expanding too quickly can lead to cash flow problems and is a very common cause of business failure.
How Outsourcing Helps Businesses Grow
Many of the business functions that you need to scale up in order to service more and larger orders can be outsourced – this means paying another company to do it for you – or in the case of small-scale activities, perhaps using a freelancer.
The advantage of this is that you can scale up rapidly as and when needed, with little long-term commitment. If there is a service you need to add, or a new function that is suddenly required, you can access the skills right away. In fact, you can hire people who are specialists in that area and can therefore often do things better than you can internally.
At the same time as being quicker and lower risk, outsourcing can also be better for your bottom line. This is because you can make a straightforward calculation as to the extra cost of each new client or delivery, rather than having to ’guesstimate’ future staffing requirements and raise capital to hire people accordingly.
Outsourcing Can be Cost Effective
Outsourcing some of your business functions may seem expensive at first glance, but it represents a saving in other ways:
- You pay only for a service that is rendered, not for staff time while people train, procrastinate or make mistakes.
- You don’t pay any additional overhead costs: no extra office space required, no equipment to buy, and energy bills stay the same.
- You save yourself time and worry, because scaling up a business internally is financially complex and risky.
- You save on business finance too, because instead of having to raise a costly, fixed term business loan for an upfront investment, you can use a nimble form of funding such as Invoice Finance.
In many cases, outsourcing can be cost effective – that’s why so many large companies do it. However, even if you think you can do things cheaper in house, it is worth considering some outsourcing in order to ease your way into growth without putting excessive strain on your cash flow and endangering the whole operation.
Deciding which areas to outsource can be a personal choice: this is your chance to get rid of the areas you don’t like managing, or necessary functions that you feel are outside of your business’ core expertise.
What routine jobs stress you? What areas would you like to improve but don’t know how? Is there a specific stumbling block to your growth plan because of a skills shortage? Is one small thing forcing you to make a big capital outlay?
All these questions will help you determine which areas would benefit from outside expertise. Used judiciously, outsourcing can free the business owner and directors to concentrate on what they do best: winning clients and delivering their core product. They can do this in the knowledge that the back-office business can keep up with their best efforts, while healthy margins are maintained.
The cost of outsourced services as you grow can often be covered via cash flow finance solutions – for example, using flexible Invoice Discounting and/or Supply Chain Finance. This effectively means using your own burgeoning revenues to finance your growth, meaning you retain more of your hard-won profits in the long term. For more information about cash flow finance, take a look at the OptiPay website or call our advisers today.