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Outsourcing: A powerful tool for growing businesses

November 2, 2022

Contributors: The Rehmann Team

Growing a business is a challenge. It requires you to strike a delicate balance between pursuing aggressive growth strategies and hiring quality talent on the one hand and controlling costs and managing cash flow on the other.

In recent years, outsourcing has become a potent strategic weapon for many businesses. It allows entrepreneurs to focus on critical business activities while shifting the burden of time-consuming administrative tasks to outside providers that can perform them more efficiently and effectively. A number of business functions are potential outsourcing candidates — accounting and bookkeeping, information technology, human resources, payroll, accounts payable and receivable, and background checks.

Benefits of outsourcing

Outsourcing offers a variety of benefits to startups and other growing businesses, including:

Enhanced focus: Outsourcing enables business owners and executives to focus on core business activities and competencies — such as strategic planning, product development, sales, marketing and customer relations — without being distracted by administrative details.

Reduced costs and capital investments: Often, outside service providers are able to perform tasks more cost efficiently and faster than their clients. And they relieve businesses of the need to invest in technology, equipment or human resources.

Scalability: Outsourcing allows a business to increase or decrease services to meet its needs without the time and expense involved in maintaining this expertise in-house.

Higher quality: Outsourcing can provide access to highly skilled, innovative people — as well as cutting-edge technology — that would be difficult or cost prohibitive to develop in-house.

Emergency staffing: Outsourcing can help a business deal with the sudden departure of a key employee.

Outsourced accounting and financial services are particularly valuable. Too often, businesses take a “rearview mirror” approach to accounting. In other words, their accounting systems show them where they’ve been, but provide little insight into where they’re going. Outsourcing can provide businesses with access to cloud-based, real-time financial information and knowledge that enable them to better manage cash flow and address problems before they spiral out of control.

Is outsourcing right for you?

Whether you would be a good candidate for outsourcing — and, if so, which functions you should outsource — depends on the nature of your business. The key is to examine all of your activities to determine which serve your core business purposes and which are ancillary to those purposes. Ancillary activities may benefit from outsourcing if someone else can perform them faster, better and cheaper.

For some activities, the answer may vary dramatically from business to business. For example, a company whose core competency is manufacturing might outsource product design. However, a company that focuses on design or engineering might outsource the manufacturing process. And while technology is a core competency for a software developer or other technology company, it’s merely an administrative function for many other types of businesses.

In some cases, it might be appropriate to outsource only part of an activity. For example, many companies view marketing as a core business function, but they might outsource certain aspects of marketing, such as public relations or social media.