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Outsourcing — the practice of using outside firms to handle work normally performed within a company — is a familiar concept to many entrepreneurs. Small (and not so small) companies routinely outsource their payroll processing, accounting, distribution, and many other administrative functions because they cannot afford the full-time staff. Many large companies turn to outsourcing to cut costs. In the marketing and sales area, it has been common to see advertising and PR agencies as well as independent sales representatives and outsourced call centers. However, more companies of all sizes are finding benefits in outsourcing more elements of their sales and marketing function such as business development, partnering initiatives, and assembling cross-promotional programs. While it’s true that outsourcing can save money, that's not the only (or even the most important) reason to do it. For example, you have a great idea, but don’t have the necessary resources or expertise to make it happen – right now. Should you wait? Add staff? Reprioritize your workload? Experience tells us that the earlier your concept hits the streets, the sooner you can begin generating revenue. The time required to hire and train staff may be out of the question in order to meet your market goals. Wise outsourcing can provide a number of additional long-term benefits: Control capital costs. Cost-cutting may not be the only reason to outsource, but it's certainly a major factor. Outsourcing converts fixed costs into variable costs, releasing capital for investment elsewhere in your business. Increase efficiency. 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 labour 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 and/or where they can be most effective. 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. 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. 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. |
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The Benefits of Outsourcing Your Marketing & Sales Functions“Do What You Do Best, Outsource the Rest”¹ |
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1. Siems, Thomas F. and Ratner, Adam S., "Do What You Do Best, Outsource the Rest?" . Southwest Economy, Vol. 6, p. 13-14, November/December 2003 Available at SSRN: http://ssrn.com/abstract=480363 or DOI: 10.2139/ssrn.480363 |
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