Does outsourcing make sense for my business?

In a small business, unfortunately, you can't do everything for yourself and still expect to grow. If you're not in a position to hire employees to share the workload, chances are that you'll consider outsourcing.

Companies of all sizes can benefit from sending certain job functions outside rather than dealing with them in-house. Some of those tasks may be infrequent or require special equipment; others may fall into the category ofongoing maintenance, such as accounts payable and receivable, or janitorial services.

Regardless of the type of company you have - service, retail, or manufacturing - not every activity involved in operating your business requires your expertise. In fact, it makes sense to outsource any activity that another individual or company on the outside can do better than you. As the company owner, you then free up your own time and talent for the more profitable aspects of running your business.

Bookkeeping is an example of a job function for which a small business may not require a full-time employee. Unless you yourself have an accounting background, this is an activity that you may not enjoy and consequently put off. Even if you work on your own tax forms, you may not want to keep up with payroll requirements the way an outside payroll management firm does. Computer maintenance is another area where it may make sense to oursource, by buying a small amount of expertise and service that would take you or other employees a long time to master yourselves.

There are also good reasons not to outsource. One is the possibility that the IRS will not view your outsourcing partner as an independent contractor, but as an employee of your business. If that happens, you may find yourself paying that individual's Social Security taes and possibly other penalties....so make sure that you know and follow all the rules in this area.

In addition, the time may come when outsourcing a particular activity is no longer cost effective - because of increased business volume, for example, or a shift in the focus of the business that causes the outsourced functin to warrant full-time attention on site. Or, outsourcing might be the right idea, but you discover that your first choice of contractor is not the right choice. That's a situation that will cost you time (and perhaps other resources) to rectivy before it saves you time.

Time and money are your two most important resources. Outsourcing certain functions may save you both. If you have a clear focus and a handle on your day-to-day management, you'll know whether and when it makes sense for your company.

Richard Strug

Greater Princeton Area SCORE (Chapter 631)

Serving Mercer and Middlesex Counties