Outsourcing is also known as Business Process Outsourcing (BPO). This is the process of hiring another individual or company, either domestically or internationally, to handle business activities for you. It’s the practice of sending certain job functions outside a company instead of handling them in-house. With the growth of virtual offices and teams, outsourcing continues to grow in popularity. For startups, it’s also a great way to save money by avoiding the costs of hiring employees that may require work space and benefits.
Business owners realize that there are many reasons that companies, both big and small, outsource various jobs, but the most prominent advantage seems to be the fact that it saves money. Many of the individuals or companies that provide outsourcing services are able to do the work for considerably less money, as they don’t have to provide benefits to their workers.
The companies that save the most money with outsourcing are typically startups The most common things that are outsourced are back-end jobs such as data entry/ processing, customer support, payroll processing, etc.
Below I have listed some ways outsourcing can save you money:
Lower Costs: The lower costs are primary reason businesses decide to outsource. The Outsourcing allows the business to get the work done for a lower price. Investors view outsourcing positively as it allows companies to put more capital into revenue producing activities. Outsourcing can deliver significant cost savings in comparison to the cost of in-house services. First, the company can lower the cost of labor. Lower direct salary costs may be applicable if the provider operates from a lower cost location. Second, every month you have to pay rent and utility bills. The recurring cost of renting office space is usually the largest cost on an income statement. You can save by converting your business to a virtual presence.
Time Zone Difference: There can be some challenges to the time zone difference but in the long run it has a great benefit. Even when a business is closed the work is still getting done and productivity is always moving forward.
Increased productivity and Efficiency: Companies that do everything themselves have much higher research, development, marketing, and distribution expenses, all of which must be passed on to customers. Whether it’s managing employees or benefits, meeting payroll, or filing taxes, it’s likely there’s an outside provider specializing in one or more of these functions who can likely handle them with greater efficiency, and thereby reduce the risk of costly errors.
Ability to Focus: Outsourcing to someone and allowing them to handle your back-office operations and administrative work prevents a company from investing time and energy that is needed for more important functions. Entrepreneurs have benefited from outsourcing repetitive and redundant tasks, giving them more time and opportunity to grow their business, it will also have you focus because you’re paying for other people to do the work that you aren’t doing.
Start new projects quickly: A good outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them, and provide the support they need. And if a project requires major capital investments (such as building a series of distribution centers), the startup process can be even more difficult.
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