Outsourcing Definition

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outsourcing definition

It can be almost impossible to run a business well without a good team behind you. You need people to handle your administrative tasks, fabrications, finances, etc. But do all these people need to be your employees? No. 

A good way to have a productive business team without breaking the bank is to outsource. 

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What is outsourcing? 

Outsourcing, by definition, is using individuals who aren’t your business’s employees, officers, or co-owners to handle your business’s tasks and needs. 

Many think of manufacturing goods overseas when they hear the word “outsourcing.” This is only one outsourcing definition. You can outsource non-manufacturing business tasks that a traditional employee might handle, such as deliveries, accounting, and IT. 

What are some outsourcing advantages?

Especially when you’re starting out, outsourcing can come with many advantages. Outsourcing benefits can include:

For business needs that you don’t have to fulfill on a regular basis, outsourcing can be ideal. 

Outsourcing can be less costly than hiring employees

Think about all the different tasks you must complete to keep your business running. Do you need to complete those tasks on a daily or weekly basis? If you don’t need to complete certain business tasks frequently, it can be unnecessarily expensive to hire a full-time or part-time employee to handle them. 

For example: your business might not need accounting services more than once per quarter. It doesn’t make sense to hire a regular, in-house accountant in that case. And it might be hard to find an in-house accountant who’s willing to receive pay for only a handful of hours of work per month. If you outsource your accounting, you’ll probably have a much easier and less expensive time finding a seasoned professional willing to handle your finances a few times per year. 

Outsourcing can save time you might have spent on employee management

When you manage your own team of employees, you often have more obligations to oversee their work and manage interoffice relations. With outsourcing, you don’t have the same obligations to manage shifts, check hours, review payroll, handle HR matters, etc. 

Outsourcing can save you from spending money on equipment and software

Some tasks your business needs to complete might depend on costly software or equipment. You might need a special printer to make merchandise or a fancy accounting system to create quarterly reports. Instead of purchasing these costly items, you can outsource your tasks to professional firms that already have these items and are experts at using them. 

What are some outsourcing disadvantages?

Outsourcing isn’t the answer for every business. Depending on your business’s characteristics, it might be better to outsource very little or not at all. The drawbacks of outsourcing include: 

A good question to ask yourself when considering outsourcing is how much oversight and control you need for the particular project. 

You might have less access to people doing your work when you outsource

If you have in-house employees working on your projects and you have a question, you can quickly pop into their offices to ask questions anytime during working hours. If you outsource a work project, you might not be able to reach the person working on the project that easily. A question that could have been answered in a matter of minutes might not get answered for a whole business day when you outsource. 

You might have less freedom to end a working relationship when you outsource

In many states, you have the option to fire an employee at any time for any non-discriminatory reason. If you outsource your work projects, you can’t get rid of the person working on your project so easily. This is because an outsourcing relationship is contractual. Another name for the person taking on your outsourced work is “independent contractor.” If your independent contractor hasn’t significantly broken the work contract between you, you’ll likely have to pay them off in some way to take them off the contract prematurely. 

Summary

Not all business needs have to be fulfilled on a regular basis. If you find that you have 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. You can also save yourself time normally spent on managing employees if you outsource your work only when you need it done. 

We can help!

If you’re looking to outsource to someone who can handle many of your business maintenance needs, you can look to us! We have a large catalog of business formation and maintenance services that make starting and running your business a breeze. We know what we’re doing. We have helped over 300,000 businesses get off the ground, and we can help you too. 

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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