Katie Porterfield [1]

To outsource or not to outsource? These days, whether the task in question is accounting, IT services, marketing or payroll, many small business experts almost always say it’s best to contract with an outside organization that has the expertise to manage those specific functions. “Outsource,” they say—in the name of freeing you and your employees up to concentrate on your business’ core competencies.

“We generally say you need to outsource anything that takes you off-focus,” says Paula Roberts, small business specialist for the Tennessee Small Business Development Center at Tennessee State University.

But can small business owners be too quick to jump on the outsourcing bandwagon? What are some tasks that entrepreneurs can do in-house that may improve the bottom line without jeopardizing the business?

Jeff Cornwall, director of the Belmont University Entrepreneur Center, says doing more business functions in-house can coincide with bootstrapping—finding ways to achieve the same results with fewer resources. Businesses may be able to create their own marketing materials, for example.

“You don’t have to hire designers,” he says. “There is a time and a place for that, but some people just can’t afford it.

Design resources, including how-to information and free templates, are readily available online to assist in developing brochures, business cards and other marketing materials. In addition, entrepreneurs typically can print documents in-house to save money, as outsourcing print jobs can be costly, especially when small businesses require only a small quantity of the print product.

Another function that Cornwall says small businesses owners sometimes ship out the door too quickly is bookkeeping.

“[Business owners] need to understand the financial structure of the business and understand cash flow because they’ll have to make decisions based on that information,” he says.

Pat Geho, executive director of the Tennessee Small Business Development Center, says understanding the financial aspect of the business is vital.

“I say, ‘Get it done right,’ and the best way to get it done right is to learn the mechanics,” he says. “Once you learn it, if you want to outsource it, that’s fine, but too many people are way too trusting and don’t understand financial statements.”

Cornwall recommends using QuickBooks, the bookkeeping software program. The Small Business Administration offers free online classes on basic finance and accounting that may also be helpful.

As businesses grow, Cornwall says business owners tend to hand off human resources functions. While he says it’s cost-effective to outsource payroll and other time-consuming HR functions, it may not be necessary to outsource all HR responsibilities. HR outsourcing firms allow businesses to outsource components of HR functions or even services by the project.

Generally, however, outsourcing is key to business growth. Small businesses don’t have the time, money or manpower to do it all, and, in fact, trying to do it all won’t be cost-effective in the long run.

“You have to determine: Is this cost-efficient for me to do, or am I taking my eye off the big picture of the core business?” Geho says. “This is the big dilemma businesses have. It’s not that they don’t have the smarts to learn new skills; they just don’t have the time. Saving time equates to money.”

In addition to marketing, accounting and HR services, commonly outsourced functions include logistics, IT services and public relations. But decisions regarding what aspects of the business to outsource are business-specific and involve thought and planning.

“It depends on the owner’s skill set and comfort level,” Roberts says.

Jeff and Rich Sloan of StartUpNation, a Web site the Sloan brothers launched to provide information to entrepreneurs, advise taking the time to analyze how the business adds value to your customers and where you, as a business owner, focus your efforts.

“Are you spending too much time on areas outside your expertise? Many times, it’s more cost-effective to have someone outside of the company take care of these non-core activities,” the Sloan brothers write.

Cornwall says today’s customers are concerned with more than just the price of the product or service you provide.

“They come to you because of how you operate and provide that service to them,” he says.

If the business’ vision and customer satisfaction are beginning to suffer, it may be time to outsource some of the peripheral tasks that don’t require a personal touch. Ultimately, though, businesses should run a cost analysis to determine whether a particular function belongs in or out.

“It should be a cost/benefit/time decision,” Cornwall says.

Geho agrees. “Is this outsourcing paying off? Will it cost me more to do it in-house because of the fixed cost of my labor? These are questions you need to consider,” he says.

Finally, though, once the decision to outsource is made, experts warn that out of sight should not mean out of mind. When businesses outsource a particular function, they have to be careful not to lose control and oversight. Roberts says it’s important to research service providers to determine if they are small business-friendly and familiar with a particular business’ industry. The Sloan brothers advise arranging regular reporting with contractors to ensure accountability and effectiveness.

Business owners also need to remember that outsourcing strategies may change over time.

“If a firm can justify the additional time and skill set training internally to take on what’s being outsourced, then it may justify bringing it back in,” she says.

Although Geho says he’s not aware of any of his clients who are, in a sense, reversing the trend and taking on previously outsourced tasks in-house, he says it’s possible that as technology develops and continues to becomes more user-friendly, small businesses may determine that more tasks can be conducted in-house.

“There may be more that I can do for myself based on improvements in technology that wouldn’t steal time away from other tasks,” he says.

The bottom line—it’s all about boosting your bottom line. While it’s possible that there are tasks that could and should remain in-house, farming out some responsibilities so that you and your employees can devote more time to your business’ core competencies could be the difference between riding a wave and being engulfed by it.