The year ahead is set to be a stellar one for the small business community. Despite the challenges many small businesses have faced in the last year, many of them are planning to invest in growing their business in 2022. In a recent JP MorganChase survey, 71 percent of small businesses are optimistic about their business performance this year. As small business confidence increases, they are also exploring alternative financing and labor arrangements to fuel their business growth plans.
When it comes to outsourcing to help your business grow, it all comes down to timing it right and harnessing the benefits of outsourcing for your business scalability.
Reduces Labor and Overheads Costs During a Volatile Time
Strategic cost management is critical during times of business growth. Managing costs and keeping your margins high means your business can employ more capital towards its growth plans- and rely less on financing. For any business pursuing growth, labor and overhead costs are the most common costs that they expect to rise during periods of growth. For instance, if you plan on increasing production capacity or launching a new product line, you will also need to think about hiring additional staff for your workforce.
However, an alternative could be to outsource these aspects during the initial growth period until the company is established in its new markets. The initial months after launching a new product line can be unpredictable as the company gauges the market’s response to its new offering. Keeping production costs and overheads under control means it has a greater chance of maximizing the success of its growth.
Allows Management to Focus on Business Growth Strategy
One of the other benefits of outsourcing that is particularly relevant to businesses in the growth phase is that it frees up critical resources to focus on what they do well. Achieving business growth takes strategic planning, goal setting, and regular monitoring. For the management team of the business, outsourcing can give them enough space in their workday to focus on pursuing the new plans for growth and all that comes with it like risk assessments for new markets, cultivating new relationships in new markets, and exploring commercial opportunities. By outsourcing repetitive or established business processes you can outsource such as IT and marketing, you are freeing up time for the management of your company to focus on driving your company’s growth. By outsourcing promotional activities for your business, your management team can spend more time creating a solid business growth plan.
Tap into Economies of Scale Without the Initial Capital Build Up
A huge driver in business growth is the pursuit of economies of scale. Outsourcing provides economies of scale, which essentially lowers the cost per unit produced in the long run. However, to get to this point often requires a capital investment upfront such as investing in additional labor or machinery. On the other hand, outsourcing can provide a way for businesses to enjoy these benefits earlier in the growth process without the initial capital investment. It can also be increased flexibility, allowing a growing business to scale up and down its resources to match the market response in real-time. For instance, outsourcing production to a factory during a bid to increase production capacity means your business avoids the initial investment for a larger property, machinery, and additional staff. It also means your business can benefit from these economies sooner on in the expansion process.
Outsourcing can be a catalyst for business growth. By enabling a renewed focus on other operations, providing access to specialized talent for lower costs, and carving out time to focus on scaling your business, there is more room to grow your business.