Tuesday, May 02, 2006

Outsourcing secrets - Part 1

So you are thinking on how you can expand your operation, do more business and make more money? If you are thinking this right now then Outsourcing might be for you.

Outsourcing is a familiar concept to many entrepreneurs. Entrepreneurs and small business people are always looking for creative ways to accomplish more of their business goals for less money.

One strategy that can help you save time, money and frustration as you start and build your business is to outsource as much work as possible to skilled, but cost-effective, external service providers. Many large companies turn to outsourcing to cut costs. In response, entire industries have evolved to serve companies outsourcing needs.

But not many businesses thoroughly understand the benefits of outsourcing. It’s true that outsourcing can save money, but that’s not the only reason to do it. Outsourcing too much can be an even bigger mistake than not outsourcing any work at all. The flat economy caused many companies into huge layoffs and subsequently outsourced functions that were better kept in-house.

Wise outsourcing, however, can provide a number of long-term benefits:

Reduce or control capital costs. Cost cutting may not be the only reason to outsource, but it’s certainly a major factor. Access to outside providers lower cost structure is one of the most compelling short-term benefits of outsourcing. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business.

Outsourcing can also make your firm more attractive to investors, since you’re able to pump more capital directly into revenue-producing activities.

Improving efficiency. Improving efficiency are the most typical reasons that companies turn to outsourcing. An outsourcer, through efficiencies of scale and replicable best practices, may improve efficiency and save money. Companies that do everything themselves have much higher research, development, marketing and distribution expenses, all of which must be passed on to customers. An outside provider’s cost structure and economy of scale can give your firm an important competitive advantage.

Reduce labor costs. Hiring and training staff for short-term or peripheral projects can be very expensive and temporary employees don’t always live up to your expectations. Outsourcing lets you focus your human resources where you need them most.

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, the startup process can be even more difficult.

Focus on your core business. Every business has limited resources, and every manager has limited time and attention. Outsourcing can help your business to shift its focus from peripheral activities toward work that serves the customer, and it can help managers set their priorities more clearly.

Delivering results. No matter how many times you tell them, most salespeople don't do enough prospecting to keep their pipelines full. They frequently don't enjoy cold calling and would far rather be negotiating or closing a deal. This is a sweeping generalization but it holds true in many organizations. By outsourcing you are assured of a steady stream of new prospects.

Level the playing field. Most small firms simply can’t afford to match the in-house support services that larger companies maintain. Outsourcing can help small firms act big by giving them access to the same economies of scale, efficiency and expertise that large companies enjoy.

Reduce risk. Every business investment carries a certain amount of risk. Markets, competition, government regulations, financial conditions and technologies all change very quickly. Outsourcing providers assume and manage this risk for you, and they generally are much better at deciding how to avoid risk in their areas of expertise.

Outsourcing can make your business easier to run and more profitable. You'll free up time and resources so you can concentrate on your core business concerns. Creative firms offer a broad range of integrated services to move your company forward. More than ever, business survival depends upon the ability to effectively market and promote your services, as well as keeping costs down.

About the author::

Peter Dobler is a 20+ year veteran in the IT business. He is an active Real Estate Investor and a successful Internet business owner. Collect more free software and bonus content for your own web site at http://www.online-business-idea.com

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