Pulling the trigger
Some of the most daunting decisions company owners and managers must make is when to pull the trigger on hiring outside help, whether in response to company growth or the need to cut costs by replacing an internal employee with an outsourced professional.
Randy Melzer, account manager with RanderCom and chairman of the Fox Cities Service Corps of Retired Executives chapter, advises small business owners to assess their own strengths and those of any employees within their organizations. The weaker skills must either be learned internally or outsourced, he says.
The decision of whether to outsource involves weighing the cost of hiring outside help against the value of time spent unrelated to the business objectives, Melzer says.
"As soon as you determine your time dollars exceed the cost of hiring out, then it’s time to outsource," he says. "A lot of small business failures happen because the person who started the business lost sight of what they were good at, didn’t take the time or spend the money to outsource and then ended up spending way too much time out of focus."
Business owners should also plan for company growth, which may eventually result in outsourcing becoming more expensive than hiring internally. At some point revenues could justify hiring in-house, Melzer says.
As a general rule of thumb, trigger points for small businesses occur at 20 employees and then again at 50, Melzer says.
"The key is planning," he says. "If volume is growing, you’re adding employees and you know you’re close to needing someone in house to do what was previously outsourced, then start looking. Don’t wait until the last minute."
Good business service providers can offer their own assessment of when it’s time to hire in-house. For example, Anderson tells his clients they may want to consider hiring internally if they have a non-project based, consistent need for Tech Guides that amounts to three or more days a week.
When those situations have occurred in the past, Tech Guides has assisted in the hiring and training of new employees, as well as provided support during the transition.
While some business changes might trigger the need to transition from outsourcing to in-house work, technology or other changes may trigger the need to eliminate or restructure a position in favor of outsourced services.
For example, payroll in many cases used to be a manual function requiring a full-time employee, Knutson says. Thanks to technology, most small companies can get by without a full-time payroll position, allowing them to outsource payroll and eliminate or use the position in a more strategic human resources role, she says.
Companies who choose to outsource functions that were previously in-house should remain sensitive to the fact that it will require a cultural transition within the business, Knutson says.
"Employees may be used to going down the hall and talking to Mary in payroll about questions they may have," she says. "Once that function is outsourced, employees might feel like a number. It doesn’t mean it’s a bad decision, but it is something that has to be considered."
The Microsoft Small Business Center recommends companies carefully evaluate internal skills and abilities before outsourcing. Individuals in-house may be capable of doing something managers don’t immediately recognize.
Once the decision is made to outsource, move slowly and incrementally, says Joanna Krotz, co-author of the Microsoft Small Business Kit.
"To get a feel for the process and to accustom your staff to the idea, first try outsourcing one stand-alone project, and then move on to hiring professionals for other areas or ongoing needs," she says.
Krotz also recommends companies carefully evaluate what can be outsourced, sticking to self-contained projects rather than those that require team interaction from others in the business.
Companies should also be aware of any hidden costs, such as paying employee-related layoff expenses in the case of a downsize and overtime costs for remaining employees who might have more work to do, Krotz says.
Sourcing the outsourcers
One of the challenges of outsourcing is finding the right fit in terms of services, business culture and economic value.
Fortunately finding local service providers is easier than wading through Internet listings, which are as numerous as there are points on a globe. Local business groups, such as chambers of commerce, as well as small business support organizations found at the University of Wisconsin–Oshkosh and Fox Valley Technical College are excellent sources for small business owners and entrepreneurs, Anderson says.
The virtual Business Resource Center of the Fox Cities, www.brcfoxcities.com/resources.html, also provides a network of regional business advisors willing to answer questions and develop working relationships related to their areas of service.
Founded by employee benefit plan administrator John Zuleger of Zuleger Advisors Inc., the BRC is designed to serve as an additional resource to area companies.
"Every advisor has agreed to take the time to answer questions and provide information to those who contact them," he says. "If we can’t provide the information, we’ll find somebody to pick up the ball and go from there."
Advisors represent well-established and respected companies operating within the Fox Cities. They were selected on the strength of reputation and an interview-like process, Zuleger says.
SCORE advisors also recommend business owners and managers connect with other entrepreneurs or people within the same industry, Melzer says.
"Ask the people around you who they use for their services and how it’s going," he says. "Most small business people will be happy to do that. They usually love talking about how they do things. It’s a matter of pride."
Some of Willems Marketing’s clients find the company via its Web site, but an even greater number have arrived via word of mouth.
Referrals are critical for companies seeking business services, says Ingala. "You can’t buy that type of advertising."