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The business climate is continuously evolving and changing. It has become more competitive, and small businesses might need help keeping up. Due to budget constraints and limited staffing and resources, small businesses encounter unique challenges.
Many small business owners have achieved significant cost savings through business process outsourcing (BPO).Â
This article explores BPO’s impact on cost reduction for small businesses. Keep reading to learn more.
How BPO Reduces Costs for Small Businesses
First, what is BPO? BPO involves delegating an area or entire business operation to a third party.
Companies that outsource to another country notice up to 70% cost savings. The most obvious way BPO helps organizations save money is by leveraging lower labor costs. Wages are generally lower in offshore or nearshore locations where BPO services are based.
However, the strategy also offers many financial benefits and cost savings in other areas for small businesses. Below are BPO’s impacts on cost reduction for small businesses.
Lower Employee Salaries
Hiring in-house staff means paying for wages, training, equipment, software, and more, which can quickly overwhelm small businesses. Employees can also leave your company at any time, which adds risk to your operations. Internal hiring costs up to seven times more than what you would pay a third-party provider for the same work.
For example, when you outsource call center services, the agents are not your employees but the BPO company’s. You do not need to pay for their salaries and benefits. Instead, you only pay the service provider their monthly fee, reducing labor costs.
Moreover, BPO companies often have lower wages because they operate in countries with low cost of living. For example, the Philippines, a popular outsourcing destination, has a cost of living that is 52.1% lower than the United States. Thus, the BPO provider can offer their services at a more affordable price.
Reduced Benefits
Benefits packages must often be competitive for companies to attract the best talent. However, this is a high cost, especially for small businesses.
Fortunately, you also need not cover benefits when outsourcing with an external provider because employee compensation is the BPO company’s responsibility. You also do not need to worry about paid time off.
Suppose you employ a third-party human resource (HR) officer through your outsourcing partner. You do not need to pay a fee when no work is done.
Less Training Investment
Partnering with an outsourcing vendor eliminates the need to train staff on non-core business functions. Although it seems like you only save on costs related to onboarding and training, BPO’s other impacts on cost reduction for small businesses include the following:
- Removing the opportunity cost of having staff unavailable to handle other functions
- Minimizing the risk of errors and mistakes during the training period, which can cause costly problems down the line
- Reducing employee turnover that often comes on the heels of employees feeling dissatisfied with the training program
None of these are a problem when you outsource. Even qualifications such as education credits and certifications, which you might need to include in the benefits package, are unnecessary, increasing cost savings.
Reduced Security Costs
Data security is a primary concern for most businesses. Cyber threats are severe, and damages can be irreversible.
Investing in security systems costs more than many small businesses can afford to pay. Tapping into the BPO industry for help eliminates extra security costs because service providers have established security protocols and measures.
Small business owners can save money and confidently operate without worrying about security threats that might affect their customers.
Downsized Office Space and Rent
One cost-saving factor that small businesses often overlook is the potential to downsize the office space or utilize it in ways that benefit the company.
Departments such as customer service, accounting, and information technology (IT) support need not be on the premises when you outsource. This results in significant cost savings for expenses such as:
- Rent
- Equipment and furniture
- Utilities
- Facility maintenance and cleaning services
Additionally, remote work reduces your business’s carbon footprint.
Outsourced Management Solutions
As a small business owner, you probably wear a lot of hats, including employee management. However, tracking productivity, milestones, and outcomes is time- and energy-consuming. You could have spent that time seeking more revenue opportunities, adding value for customers, or growing the business instead.
Whether you are outsourcing to the cloud or partnering with a BPO company, outsourcing solutions in general provide performance and productivity reports straight to your inbox using software that records and monitors attendance, deliverables, and key performance indicators (KPIs). The impact of BPO on cost reduction for small businesses is evident since you do not need to pay for additional software licenses to remain up-to-date.
Improved Employee Efficiency
A simple cost-benefit analysis of outsourcing shows that the benefits outweigh the costs. One benefit that lets small businesses save money is enhanced efficiency.
With higher efficiency, small businesses can focus on their core operations. The main objective of outsourcing is to let you focus on the tasks you do best. You and your staff can concentrate on revenue-generating activities with the time saved.
Your small business can save many resources by increasing efficiency and productivity.
The True Cost of Outsourcing for Small Businesses
One cannot deny the cost savings that small businesses reap from outsourcing. In addition to the minimal set-up fee, BPO saves you unnecessary hassle and stress.
Just like any new business venture, outsourcing may seem challenging at first glance. However, with transparency, regular communication, mutual trust, and the right strategy, outsourcing to BPO providers significantly affects cost reduction and beyond.
The Bottom Line
BPO’s impacts on small businesses are all-encompassing, but cost reduction trumps the rest. It reduces operating costs and lets small businesses concentrate on revenue-generating activities.
You can find equally qualified talent, hire fewer internal staff, and improve efficiency by outsourcing non-core processes, lowering costs. Once you find the right service provider, you can use your savings elsewhere and grow your small business.
Unity Communications offers support in customer service, call center, help-desk support, and other back-office tasks. Let’s connect today to find out more.
