When is the right time to start outsourcing?

Outsourcing can be a powerful tool if implemented properly and timing can be crucial to maintaining your business growth.

Cash flow

It’s the early days of your business. No one wants to give you credit. You’re expected to pay your suppliers either early or on time. You are building relationships with your new customers, chasing for payment will probably be the last call you will want to make. A pound saved is a pound earned so you and your small team become a jack of all trades, covering multiple tasks. It’s a success, it works.

Growth

Small businesses can move quickly, they can adapt to survive. If you have the right service or product, initial growth can be quick. The problem? You, your team and your facilities get stretched quickly.

Options

Recruiting and potentially re-locating would be the obvious solutions and may be the only real option if you manufacture a product. You can maintain in house control and there is a definite ego boost to a growing business. Be warned though, this route comes at a fixed cost. This is all fine whilst you maintain your growth but business has a tendency to plateau and it’s natural to have peaks and troughs throughout the year. Fixed costs are fixed costs.

Outsourcing parts of your business can free your existing staff up to concentrate on more key roles. How much time are you spending on menial tasks that literally anyone could complete? Are you the most overpaid order picker and packer you know? Although outsourcing comes at a cost it’s not a fixed cost so as your business fluctuates throughout the year so will your costs.

Timing

So you’ve decided to outsource but adding the cost of outsourcing into the mix now would mean only two things; 1) your profitability will drop, or 2) you become less competitive as you increase your prices.

The solution

By factoring the costs of outsourcing into your business model from day 1 you will avoid having to potentially change your cost structures further down the line. You can still do everything in-house in the early stages but when you are ready the cost for outsourcing is already accounted for.