Business Services, Clutch Report

Benefits of Outsourcing for Small Businesses

January 21, 2021

by Seamus Roddy

Content Writer and Marketer

8 in 10 small businesses (80%) plan to outsource business functions in 2021. Small businesses plan to outsource in order to save time, grow their company, and work with experts across a range of business functions. Overall, outsourcing provides small businesses distinct benefits.

Matthew Bonestroo knows trailers, not TikTok.

But Bonestroo, the owner of Phoenix Mobile Home LLC, wants to use every possible avenue to reach people in Arizona who are interested in buying or selling mobile homes. On TikTok, users share and view short-form videos, often set to music and featuring dance routines.

Many young people are on TikTok, and some companies now use TikTok to promote their products. Bonestroo's small business is about to become onze of them: He has outsourced to a videographer who will edit Phoenix Mobile Home's TikTok content – all for $50 per hour.

By outsourcing a business function, Bonestroo is behaving like most small business owners and managers. In 2021, 80% of small businesses plan to outsource business tasks.

80% of small businesses plan to outsource business tasks in 2021.

Outsourcing involves contracting out work to a different firm or freelancer.

Clutch surveyed 500 small businesses in the U.S. and learned that they plan to outsource in order to realize a host of benefits, including improved efficiency, business growth, and the chance to work with experts.

From social media to IT to legal affairs, outsourcing will be a significant part of small business success in 2021.

Benefits of Outsourcing for Small Businesses

  1. SAVING TIME: 27% of small businesses are most motivated to outsource in hopes of improving their efficiency and saving time.
  2. GROWING A BUSINESS: 19% of small businesses with 251 to 500 employees primarily outsource in order scale their business. Outsourcing is an important component of growth for many small businesses.
  3. SUPPORTING VARIOUS BUSINESS PROCESSES: 80% of small businesses plan to outsource in 2021. Part of outsourcing’s popularity is due to the range of business tasks it can help support, including IT, finances, legal, and public relations.
  4. ACCESSING FLEXIBLE RESOURCES: 33% of small businesses outsource in order to access flexible resources, indicating that small businesses value short-term and seasonal workers.
  5. WORKING WITH EXPERTS: 26% of companies with 10 employees or fewer outsource mostly in the hopes of working with an expert, demonstrating how expertise is a valuable commodity for the smallest businesses.
  6. COLLABORATING WITH DOMESTIC OR INTERNATIONAL PARTNERS: 56% of small businesses that plan to outsource in 2021 intend to do so onshore, demonstrating that companies find value in working within their own country.

1. Outsourcing Increases Business Efficiency

Every businessperson knows the phrase “time is money,” and many businesses consider that sentiment when deciding whether to outsource.

Outsourcing specific business activities can help any small business improve their efficiency.

In fact, more than one-quarter of small businesses (27%) primarily outsource in order to work more efficiently.

27% of small businesses outsource to increase efficiency.

For some small business owners, outsourcing certain tasks is a must.

James Surrey, founder of Review Home Warranties, a company that helps buyers find the best home warranty, uses outsourced workers to write, fact check, and publish home warranty reviews.

“If our staff were to publish every review piece by ourselves, the publication rate of new reviews would be a snail’s pace,” Surrey said. “This would significantly delay our ability to reach new readers and potential customers.”

Surrey’s business relies consistently providing new reviews to existing customers and reaching as many new customers as possible. Outsourcing review writing makes both achievable.

However, some small business owners find it challenging to relinquish control of certain components of their company.

“As an entrepreneur, trying to do everything yourself can slow down the growth of your business,” said Chelsea Kane, the founder and sole proprietor of First Cup Morning Series, a daily mindfulness audio program.

Kane learned how to use audio software when starting her business, but found that she was still spending nearly 30 hours per month editing audio clips.

So that she could use her time more wisely, Kane hired an expert that edited the same amount of audio in less than half the time. Now, Kane has time to focus on other priorities and her listeners hear higher-quality audio clips.

“Outsourcing has enabled me to focus on the parts of the business I love, and leave the other parts to respective experts in their own field,” Kane said, noting that she has since decided to outsource bookkeeping and graphic design responsibilities as well.

Now, Kane devotes her time to working directly with customers and performing the long-term planning necessary to grow the business.

For small businesses, outsourcing provides the substantial benefits of improved efficiency.

2. Outsourcing Can Help Scale a Business

Efficiency makes a business more valuable for its customers, and a company that provides value to customers is better suited for growth.

Outsourcing helps businesses increase their sales and grow their market share without reducing revenue or the quality of their product.

About one-fifth of small businesses (19%) who have 251 to 500 employees use outsourcing primarily to scale their business.

what small businesses use outsourcing to scale their business?

In comparison, only 4% of businesses with 10 or fewer employees are most motivated to outsource by the opportunity to scale.

Companies targeting growth use outsourcing to access short-term consultants.

“During our growth years we didn’t hesitate to hire short-term consultants and experts to help complete certain work,” said Akram Assaf, co-founder of Bayt, a job-search platform for workers in the Middle East with more than 200 full-time employees. “Outsourcing is very powerful for scaling and growth, and more companies should do it.”

For companies that are growing quickly, outsourcing some tasks may benefit both the businesses and its customers.

Mac Fadra, president of MAXIM, a hair restoration company, has overseen his company’s growth to 10 American markets and 5 international markets since its founding in 2015. Now stretched across multiple time zones, MAXIM uses Voice over Internet Protocol (VoIP), which hosts all of the company’s phone communications online.

MAXIM is able to reduce the costs of calling and texting internationally and now hosts their call center team at one location, allowing for a single set of supervisors and a standardized customer experience.

Overall, outsourcing helps companies grow by offering their services to more customers and a wider pool of locations.

3. Outsourcing Can Support a Variety of Business Functions

The value of outsourcing is rooted in the range of business functions it can help support.

Businesses plan to outsource a number of business tasks in 2021, including IT services (27%), finances and accounting (23%), legal work (21%), digital marketing (20%), and human resources (10%).

what business tasks do companies plan to outsource in 2021?

Small businesses have different motivations for outsourcing each of these processes.

IT Services

More than one-quarter of small businesses (27%) plan to outsource information technology (IT) services in 2021, making it the process small businesses are most likely to outsource.

27% of small businesses plan to outsource IT services in 2021.

IT encompasses anything involving computing technology and requires significant technical expertise.

It’s no wonder that IT is so frequently outsourced: A regional law firm with 100 employees, for example, might have a full-time expert on internet law but nobody on staff capable of setting up a computer system.

IT will likely be a popular small business process to outsource in 2021 and beyond.

Finances and Accounting

There may seem to be something counterintuitive about spending money to manage your money, but plenty of small businesses pay experts to handle their finance and accounting processes.

Twenty-three percent of small businesses (23%) plan to outsource finances and accounting in 2021.

23% of small businesses plan to outsource finance and accounting in 2021.

Small business owners who have outsourced their accounting say it saves time and provides peace of mind.

“Believe it or not, outsourcing accounting is worth the money,” said Stefan Ateljevic, founder of AhoyGaming, a resource for the best online British gambling and gaming activities.

Ateljevic says that by outsourcing his accounting, he saves time and avoids the sorts of accounting mistakes that could cause legal liability and further costs in the future.

Legal

Few business processes are as sensitive as legal matters, and small businesses are willing to consult experts to make sure their legal affairs are in order.

More than one-fifth of small businesses (21%) outsource their legal needs.

21% of small businesses plan to outsource their legal tasks in 2021.

Patrick Garde, co-founder and technical director of ExaWeb Corporation, an SEO company, says that his company outsources activities such as business registration and document notarization.

Through outsourcing, Garde and other business owners can be sure that their legal affairs are being handled correctly.

Digital Marketing

Companies selling the product online need to direct customers to their web pages. Some small businesses outsource digital marketing to make sure that happens.

Exactly one-fifth of small businesses (20%) outsource digital marketing tasks.

20% of small businesses plan to outsource digital marketing in 2021.

Ateljevic of AhoyGaming also decided to outsource digital marketing after determining that hiring full-time specialists would be too expensive. “We found that outsourcing link builders and content writers for guest posts is something that can help us achieve our goals and be cost-efficient,” Ateljevic said.

For digital marketing tasks, outsourcing can both save money and produce tangible results.

Staffing

Hiring for a new role is time-consuming and intense, which explains why small businesses may choose to outsource it to an HR expert.

1 in 10 small businesses (10%) plan to outsource staffing in 2021.

10% of small businesses plan to outsource staffing in 2021.

Small businesses who already outsource hiring and HR responsibilities say it allows them to focus on running their business and finding new customers instead of constantly expending energy to find the newest teammate.

Caroline Lee, co-founder of CoCo Sign, an electronic signature software, says that outsourcing hiring saves her the time spent headhunting for a new employee and coordinating interviews.

Instead, Lee is able to offer thoughtful and targeted feedback about a candidate without being responsible for the logistics. Plus, each candidate has a standardized, professional application experience.

Outsourcing staffing allows managers such as Lee to make good hires without devoting additional time to human resources.

4. Outsourcing is Effective for Seasonal or Need-Based Work

Business needs shift depending on the business climate and calendar.

For that reason, outsourcing is effective for businesses looking for seasonal or need-based work.

One-third of small businesses (33%) are motivated to outsource in order to access flexible resources.

33% of small businesses use outsourcing to access flexible resources.

Such flexibility allows businesses to find short-term workers when they are needed. An accounting firm, for example, might use outsource help during tax season.

Milosz Krasinski, managing director at Chilli Fruit, a web consulting company, usually hires a short-term social media manager for the months of November, December, and January, which are crucial months for social media marketing. He also sometimes hires promotional staff when his company hosts live events.

Other companies consistently outsource tasks that are simple but time-consuming.

Kim Chan, is founder and chief executive of DocPro.com, which provides online legal documents and templates. She says her company uses interns to help with legal documentation and has been able to find top talent during the COVID-19 pandemic.

“There are a lot of bright university students who are sitting at home doing nothing,” Chan said. “They are willing to work hard for little money to gain work experience for their future career.”

In this way, outsourcing allows DocPro.com to address business needs without stretching the budget.

In general, outsourcing provides companies the opportunity to find flexible, affordable resources for short-term work.

5. Outsourcing Allows Small Businesses to Work With Experts

Nobody knows everything, and it’s unlikely that a company of 10 employees or less is going to possess expertise about every important business process.

For small businesses specifically, outsourcing provides a valuable opportunity to work with subject matter experts.

In fact, more than one-quarter of businesses with 10 employees or fewer (26%) say that their company’s main motivation for outsourcing is to get help from an expert.

what small businesses use outsourcing to get help from an expert?

Companies with 11 to 50 employees (17%), 51 to 250 employees (14%), and 251 to 500 employees (16%) are less likely to indicate expert help as their primary motivation for outsourcing.

Some tasks particularly lend themselves to professional assistance.

Marissa Tilley owns Lady Black Tie, an 4 employee formalwear business that sells online and operates a retail showroom in Andover, MA.

Tilley specializes in formalwear but not in photography, graphic design, or digital marketing. So, she outsources photoshoots to an agency in Florida that hires models and takes photos for social media accounts. An outside vendor handles graphic design and another creates, edits, and places ads on Google and Facebook.

Now, Tilley can focus on her strength and passion for formalwear.

Other small businesses outsource business tasks that require specific credentials.

Akhil Handa, chief executive and founder of Earth 51, a sustainability consultancy, outsources legal and financial services.

Handa says that outsourcing to degreed lawyers and accountants is a “low-risk” option that prevents a small company from making serious mistakes with the law or their finances.

For the smallest businesses, outsourcing is a valuable opportunity to leverage expert knowledge and ability.

6. Companies Can Outsource Onshore, Offshore, or Nearshore

As globalization changes business, companies must decide whether to outsource business tasks to firms in their own country or outside of it.

Businesses say that a major benefit of outsourcing is the ability to contract with companies both domestic and international. Most companies (56%) weigh their options and decide to onshore.

where do small businesses plan to outsource?

In comparison, less than 1 in 5 companies plan to nearshore (15%) or offshore (18%).

Three geographic categories describe where companies choose to outsource:

  1. Onshoring means outsourcing to a firm or contractor in the same country where your business is headquartered.
  2. Nearshoring means outsourcing to a neighboring country with similar or identical time zones.
  3. Offshoring means outsourcing to a distant country with significantly different time zones and culture.

Experts say that deciding between these 3 outsourcing techniques requires a careful consideration of specific business needs.

Caleb Riutta, owner of Dusk Digital, a web design and SEO firm, says that when business managers are deciding where to outsource, they should ask themselves the following questions:

  • Is it a simple project or task?
  • Will the freelancer be working with sensitive data of confidential information?
  • Do I need to meet physically with the freelancer?
  • What is my budget?
  • Is coordinating across different time zones achievable?

Riutta says that projects where he needs to physically meet with a freelancer or work with sensitive company data are ideal for onshoring. Tasks that require a high volume of work but are not complex or sensitive are best for offshoring.

Onshoring also provides benefits when business processes require native language competency and domestic business acumen.

“It’s so attractive to outsource onshore because the contractors or freelancers can typically hit the ground running,” said Shilonda Downing, founder of Virtual Work Team, an American recruiting, staffing, and project management agency. “They are already native English speakers and no doubt top professionals in their field.”

The popularity of onshoring extends beyond language competency, however.

Amit Gami, founder of Card Payment Guru, an online credit card processing vendor in the U.K., makes one consideration when deciding whether to outsource business tasks onshore, nearshore, or offshore.

“If the task relates to our on-shore user base, we go onshore. If the task does not require country-specific knowledge, we go offshore. It is often cheaper and the quality is high,” Gami said.

For example, Gami hires onshore vendors to manage social media campaigns on Google and Facebook. That way, the contractors have firsthand knowledge of the British advertising market.

The fact that companies must consider where to outsource their business tasks is a benefit because it indicates that there is an appropriate vendor and location for any project.

Outsourcing Benefits Small Businesses

Small businesses will continue to outsource some business tasks during 2021.

For small businesses, outsourcing comes with many benefits, including:

  • Saving time and improving efficiency
  • Growing and scaling company operations
  • Supporting various business processes
  • Accessing short-term and seasonal workers
  • Partnering with experts
  • Collaborating with domestic and international business partners

Overall, outsourcing allows small businesses to improve their existing operations and expand into new markets.

About The Survey

Clutch surveyed 500 small business owners and managers in the U.S.

Fourty-three percent of the businesses (43%) have 1 to 10 employees; 25% employee between 11 and 50 people; 18% employee 51 to 250 people; 15% employee 251 to 500 people.

Thirty-five percent of respondents (35%) live in the South; 23% live in the Northeast; 22% live in the West; 20% live in the Midwest.

Fifty-three percent of respondents (53%) are male; 47% are female.

Twenty-six percent of respondents (26%) are between 18 and 34 years old; 50% are between 35 and 54 years old; 24% are 55 and over.

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