Outsourcing is when a company delegates certain tasks, services, or processes to external third-party providers, often to reduce costs, access specialized expertise, or focus on core activities.
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Last Updated: March 25, 2026
It can be almost impossible to run a business well without a good team. Most business owners need someone to handle administrative tasks, fabrications, and other tasks. But do all of these tasks need to be handled by the company’s employees? No.
Outsourcing is a great way for a business owner to create a productive business team without breaking the bank. But what is outsourcing, exactly? This guide walks through the essential facts of outsourcing, including its advantages and disadvantages, and more.
Outsourcing, by definition, is using individuals who aren’t the business’s employees, officers, or co-owners to handle the business’s tasks and needs.
Many think of manufacturing goods overseas when they hear the word “outsourcing.” This is only one type of outsourcing. A business owner can still outsource non-manufacturing business tasks that a traditional employee might handle, such as deliveries, accounting, and IT.
Outsourcing can have many advantages, especially when a business is just starting out. The outsourcing benefits can include:
For business needs that an entrepreneur doesn’t regularly handle, outsourcing can be ideal.
Most business owners have a long to-do list of tasks that need to be completed in order to keep the company running. But some of those tasks don’t get handled on a daily basis; some tasks might happen weekly or monthly, or even quarterly. It could be unnecessary to hire a full-time or part-time employee for those tasks. Outsourcing those tasks might be a better choice.
For example, many small businesses don’t need accounting services year-round; they just need help with quarterly taxes. Most business owners wouldn’t need to hire a full-time accountant; many could outsource this task. It might even be easier to hire a seasoned accounting professional who’s willing to handle the business finances a few times per year, rather than a part-time employee.
A business owner who manages their own team of employees often has lots of obligations to oversee employee work and manage interoffice relations. But if a business outsources, the owner doesn’t have the same obligations to manage shifts, check hours, review payroll, handle HR matters, and so on.
Some business tasks might require costly software or equipment. For example, a business might need a special printer for making merchandise or fancy (and pricey) accounting software to create quarterly reports. If an employee (or the business owner) completes those tasks in-house, then the business has to buy the software or equipment. But those purchases aren’t necessary if the business outsources those tasks.
Outsourcing isn’t the answer for every business. Depending on a business’s characteristics, it might be better to outsource very little or not at all. The drawbacks of outsourcing include:
A good question for entrepreneurs considering outsourcing is how much oversight and control the owner needs for a particular project.
An entrepreneur with in-house employees can quickly pop by to ask questions and give feedback on the work they’re doing. But if they outsource that task, they might not have that same control and access to the worker doing the task. A quick question that might take minutes to get an answer from an employee could take a whole business day when the business outsources.
In many states, a business owner has the right to fire an employee at will (at any time for any non-discriminatory reason). But if the business outsources, ending the working relationship might be trickier. An outsourced relationship is dictated by a contract, not the owner’s whims. If the terms of the contract haven’t been broken, the independent contractor (the person doing the outsourced work) might require payment for the owner to end the contract prematurely.
Business owners should take care to understand the terms of an outsourcing contract when hiring third-party help.
Not all business needs have to be fulfilled on a regular basis. If an owner has important business projects that come up only a handful of times per year, outsourcing can be a great way to have a professional complete those tasks without needlessly paying for employees or equipment. A business owner can also save themselves time normally spent on managing employees if they outsource their work only when they need it done.
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Here’s a task to outsource: starting and maintaining a business entity. And ZenBusiness is dedicated to doing just that; they have a large catalog of business formation and maintenance services that make starting and running a business a breeze. ZenBusiness has already helped over 850,000 businesses get off the ground, and they’re just getting started.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
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