Written by Joyce Ann Danieles
Limited funding, workforce, and infrastructure can hinder small businesses’ abilities to expand. These factors also challenge them to balance their efforts on streamlining growth and achieving quality.
Thus, small enterprises often prefer to outsource to improve productivity while saving on costs. Outsourcing also allows them to access advanced systems and benefit from skilled workers.
Enhance your operations by understanding what business process outsourcing (BPO) is and why you should adopt it. Find out here the advantages and disadvantages of outsourcing for small businesses.
What Your Small Business Can Get From Outsourcing
Outsourcing involves partnering with a third-party service provider to perform your non-core functions. To prioritize your business development efforts, outsource your back-office and front-office tasks such as data entry, customer service, and information technology (IT) support.
BPO can support any type of small business. Below are the common small businesses that can use this business strategy:
- Grocery Stores. Accelerate inventory management with modernized software from a BPO company.
- Online Sellers. Provide round-the-clock customer and ecommerce support with a third-party service vendor.
- Food Services. Simplify order processing and fulfillment by hiring skilled BPO professionals.
- Local Repair Shops. Ease technical service delivery through outsourcing.
- Pharmacies. Ensure accuracy in organizing medical records and billing with a BPO provider.
If you are one of these small businesses, you can include BPO in the long-term planning of your enterprise growth. You can start this by understanding the benefits and drawbacks of an outsourcing investment.
Benefits of Outsourcing for Small Businesses
According to Clutch, 90% of 1,003 American small businesses intend to outsource their functions this year. In addition to saving time and enabling business expansion, there are plenty of other reasons these entities want to outsource processes.
Here are the advantages of outsourcing for small businesses:
- Reduce Costs. Employing a BPO provider helps reduce expenses for staffing and training. In addition, outsourcing decreases office space costs due to a downsized workforce. Also, you do not have to acquire technology and infrastructure because the outsourcing firm already has them.
- Prioritize Core Competencies. Outsourcing allows you to focus on your core business functions. Because a BPO company handles your labor-intensive tasks, you can work on your strategy to keep up with the competition. You can increase profit and grow fast if you prioritize your main capabilities.
- Work With Skilled Professionals. Although you outsource a non-core process, it remains a critical function for the third-party vendor. Thus, the BPO provider invests in training and certifying its employees to perform time-consuming tasks effectively. Expect to work with skilled professionals when outsourcing.
- Access Modernized Systems. A service vendor owns high-quality technology and infrastructure to boost its BPO offerings. You get access to these advanced solutions as an outsourcing client, allowing you to accelerate and streamline your back-end and front-end processes.
- Increase Flexibility and Efficiency. Working with an outsourcing partner enables you to adjust your in-house resources to match your critical programs and new offerings. You can also save time that you can use to enhance your core capabilities.
Drawbacks of Outsourcing for Small Businesses
Hiring third-party teams still pose risks to your small business despite the benefits. Consider these downsides before deciding to outsource:
- Security Issues. Outsourcing involves sharing sensitive data, which can present some privacy issues and hacking risks. When you choose a provider offshore, expect various security policies and requirements to ensure that your data protection remains strong.
- Communication Challenges. You might encounter language barriers when working with a non-U.S. BPO company. Although almost all BPO employees are fluent in English, comprehension of more idiomatic English may impact communication. This challenge might affect project turnaround time and feedback.
- Service Costs. Organizations often neglect the costs of outsourcing. You might overlook some BPO expenses due to hidden charges. Currency conversions and value fluctuations also contribute to cost underestimation.
- Quality Control. Third-party contractors might aim to gain profit rather than provide high-quality output. The work you delegate might come back quickly but be of poor quality. Your clients might be disappointed if they receive low-quality service.
- Time Zone Differences. Varied time zones can hinder your communication with a BPO provider. You might have difficulty setting regular meetings and other appointments if you do not stabilize your relationship with the outsourcing firm. Sometimes these factors result in project delays and negative results.
How To Kick off Your Small Business Outsourcing
Starting a relationship with a BPO can be extremely advantageous for your company. Outsourcing for small businesses offers many benefits, even with some potential drawbacks. To achieve positive business process outsourcing results, below are practical steps you can take when looking for and managing a BPO company.
Criteria for Selecting a BPO Provider
Small businesses need to ensure that their outsourcing investment will produce positive outcomes despite limited resources. Review these tips for selecting the right BPO provider:
- Experience. Seek a third-party service vendor with years of BPO experience. Investigate how it handles challenges and accomplishes projects effectively. Identify its market reputation to weigh its competitive edge over other providers.
- Workforce Strength. Tap into a BPO company with skilled professionals. Explore how it trains and manages its employees. Align their talents with your management strategy.
- Technology. Technology helps increase productivity and enhance process efficiency. Ensure that your potential BPO provider has the latest tools to streamline back-office and front-office tasks.
- Infrastructure. Select a contractor with excellent infrastructure to seamlessly set up its equipment and accommodate its entire team. For instance, a call center must have high-speed internet and phone connectivity to operate seamlessly. Likewise, outsourcing finance and accounting services require security software to manage financial records.
- Scalability. Examine a provider’s scalability when it comes to the workforce, technology, and infrastructure. Make sure it can cater to peak and low seasons. This factor will help eliminate the need to increase overhead costs.
- Quality Rule. Delegating a time-consuming task to a third-party company does not mean ignoring the output quality. Pick a competent outsourcing partner with high-quality service to its clients.
- Referrals. Accept referrals from trusted contacts and competitors before hiring a BPO provider. Cross-check its background with these contacts. Assess feedback on their experience working with the contractor.
- Security Policy. Ensure that a BPO vendor has a strict security policy when handling confidential data. Learn how it responds to privacy violations, breaches, and hacking incidents. Match in-house and third-party security rules to minimize expenses caused by such issues in the future.
- Turnaround Time. Select a BPO company with proven expertise in meeting project deadlines. It should finish tasks based on identified due dates. This factor is important to avoid delays and achieve your business goals.
- Pricing. Different BPO providers have varying pricing structures that depend on their company status, vertical alignment, and industry category. Compare their pricing to suit your business needs and budget allocations.
20 Questions To Ask a BPO Provider
Evaluate a BPO vendor further by directly asking questions about its strategies, policies, and offerings. Prepare a list of questions to help you save time finding the best provider.
Try asking a third-party service contractor these essential questions:
- How long have you been operating in the BPO industry?
- What are your company’s values and goals?
- Can you detail your outsourcing service offerings?
- What are your most outsourced services?
- Have you worked with another company with the same objectives as ours?
- How do you manage, engage, and retain your employees?
- What makes your company unique?
- What are your strengths and weaknesses?
- What are the industry standards you follow and implement?
- How do you charge for your services?
- Are there miscellaneous fees and hidden costs for outsourcing your service?
- How will you balance project management and completion during our partnership?
- How will you support us during critical days?
- What collaboration and communication tools should we use throughout the contract duration?
- What are partnership challenges you commonly encounter?
- What are your security and data protection protocols?
- Can you elaborate on your data privacy statement?
- How do you manage risks and address threats?
- Is it possible to terminate your services before the end of the contract?
- What are other important terms you like us to know more about?
Steps in Managing Your Chosen BPO Provider
Once you find the right BPO provider, you must know how to manage it to ensure a long-term partnership.
Based on the latest data from Zippia, 86% of executives blame a lack of collaboration for workplace failures. Expand your BPO understanding by adding these steps to handle your third-party service provider to avoid this problem:
- Clarify Goals. Define business objectives with the BPO provider to ensure successful project outcomes.
- Ensure Unity. Unify business goals and action plans with the outsourcing partner to achieve positive results.
- Be Flexible. Prepare for sudden changes in business structures to ensure that everything will remain organized.
- Strengthen Partnership. Implement measures to maintain a good and long-term relationship with the contractor.
- Build Trust. Establish close communication with the BPO company while letting it perform tasks excellently.
- Schedule Frequent Training. Arrange weekly or monthly training to notify the BPO provider about business terms, policy, and procedure updates.
- Hold Calibration Meetings. Conduct calibration sessions to discuss quality assurance scores and service goals.
- Set Proper Escalation Strategy. Develop a proper escalation strategy to help the provider resolve complex problems.
The Bottom Line
BPO is becoming a growing business strategy for most small enterprises because of the many benefits it offers. But just like other strategies, outsourcing for small businesses still has drawbacks.
Following the criteria for choosing the best provider will help you optimize outsourcing non-core functions. Applying tips for effective BPO management allows you to establish a long-term partnership with the contractor. These approaches enable you to minimize negative outcomes and achieve success.