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Home | Blog | Outsourcing Companies for Small Businesses: Things You Need to Look Out For

Outsourcing Companies for Small Businesses: Things You Need to Look Out For

By J. Saenz-Key

Updated on June 27, 2024

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Small businesses need extensive work.

The first few years are crucial for every business, especially when funds are still being raised. Business owners want to ensure that their hard-earned capital goes into suitable investments that will reward them with growth. One avenue worth exploring is the potential of outsourcing companies for small businesses, which can provide specialized support to help optimize operations and drive success.

As the name suggests, small businesses are almost always composed of a smaller number of staff with many different functions each. While this is the norm, miscommunication, human error, and mismanagement can often lead to poor services and operations.

While an efficient workforce is one of the best investments a business owner can make, there are many ways to use your staffing budget. Outsourcing companies for small businesses ensures you get the best value when it comes to business process outsourcing (BPO). By outsourcing small business tasks and functions, you can save time and funds without compromising the quality of your services.

Say you’ve decided to outsource. Where do you start?


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Factors to Consider in Outsourcing

There are many factors to consider, such as your business type, number of staff, services offered, industry demands, etc. It helps to look at your business and its problem areas to ensure you get the right solutions.

  1. Expertise in your Industry—When considering outsourcing, it is crucial to consider your specific business type. It is advisable to seek an outsourcing company that has demonstrated experience in your industry and is familiar with your country’s regulations and practices.
  2. Number of Staff Needed – The number of staff you need is an important factor when outsourcing. You can lessen expenses like payroll taxes, benefits, and office space for new hires. You can also scale your workforce up or down depending on your workload.
  3. Services You Want to Avail—BPO (Business Process Outsourcing) companies cater to specific industries or sectors, and you might find it beneficial to partner with an outsourcing firm specializing in a wide range of processes. By clearly understanding the services you require, you can make an informed decision when choosing the most suitable outsourcing company.
  4. Cost – Outsourcing has the potential for substantial cost savings, particularly in labor expenses. However, it’s crucial to assess the full spectrum of associated costs thoroughly. This includes the initial setup fees, ongoing management expenses, and possible challenges that may arise when working with external partners.
  5. Data Security – If you share sensitive data with the outsourcing partner, you must be confident in their security measures. Make sure they have robust protocols in place to protect your information.
  6. Contract Terms – A meticulously crafted contract is imperative when considering outsourcing. This contract should comprehensively detail the specific tasks and deliverables to be outsourced, such as:
    1. Intricacies of the pricing model, including any potential variations or incentives.
    2. The precise quality benchmarks and the mechanisms to ensure adherence to them.
    3. Service level agreements (SLAs) regarding the expected performance and response times.
    4. The terms and conditions for termination, including any associated penalties or exit strategies.
  7. Communication and Culture Fit—Effective and unambiguous communication is vital in establishing and maintaining a successful outsourcing partnership. Potential challenges such as time zone disparities and language barriers should be considered.
  8. Reputation of the Outsourcing Company – When outsourcing, the reputation of the outsourcing company is crucial for several reasons:
    1. Reduced Risk: A good reputation indicates a history of successful partnerships, client satisfaction, and reliable service, reducing the risk of problems.
    2. Quality and Consistency: A reputable company consistently delivers high-quality work with established processes.
    3. Reliability and Trust: A good reputation indicates reliability, commitment, and responsiveness throughout the project.
    4. Mitigates Potential Issues: A poor reputation can lead to problems such as communication breakdowns, delays, or unexpected costs.
    5. Brand Protection: A reputable partner reflects positively on your company’s image and standards.

Evaluating these factors is essential for making a well-informed decision about outsourcing.

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The Advantages of Outsourcing Small Business Tasks

Aside from the time and money saved, outsourcing has many perks, especially for small businesses like yours. Have professionals handle your day-to-day business tasks to reduce risks and save more than money.



The room for error is always more significant when your staff is overworked or spread too thin. Small businesses and startups often have to make do with the team that they have due to the lack of more significant funding. However, there are always creative ways to get work done without spending too much or risking the quality of your services.

Having staff context switch to different roles often gets things mixed up in your operations. An accountant doubling as an administrative assistant might not be as skilled in communicating – one of the essential skills for an administrative professional – and might be at risk of not relaying messages properly or having trouble scheduling meetings, given that these tasks aren’t part of her expertise.

Outsourcing providers offer a wide range of services that cover many business tasks. From data management to virtual assistants, these providers hire professionals with the knowledge and background to handle your functions expertly, saving you time and hassle.

Cost Effective


One of outsourcing’s best value points is its cost-effectiveness.

While hiring in-house staff seems to be the more affordable option, you’d be surprised at how much the combined cost of hiring and housing staff will cost you, training, and other development programs excluded.

When you outsource, your outsourcing provider includes training and other recruitment costs in the package rate. Apart from this, most outsourcing providers are responsible for running your offshore staffing solutions with you, helping you train staff to fit your business and your company culture.


Reduces Overhead Costs

Raising capital is one of the biggest challenges a small business faces. Funds are essential, especially for running operations smoothly and providing top-quality services.

Outsourcing staffing reduces recruitment, hiring, housing, and training costs. You’d be surprised how much you spend on office space alone, plus utilities. In fact, many small to medium enterprises (SMEs) have no physical headquarters, conducting business purely through online transactions.

Operational costs are included in the rates offered when you outsource staff. You can rest assured that your funds are giving you the best value.


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The Disadvantages of Outsourcing Small Business Tasks

When a company outsources a function or process, the company hands over direct control of that function or method to a third party. As a result, it is not without its associated risks. Here are some of them:


1. Poor Quality Work

While this cannot be said for all providers, many outsourcing providers are often unable to deliver the quality of their services. Whether it’s issues regarding recruitment, qualifications, human error, or other incidental errors, not every operation is as smooth as expected.

Every business relationship needs to benefit both sides. If you think you aren’t getting the services you’ve been paying for (the quality of service your business deserves), maybe it’s time for a switch. Make sure to choose a provider who shares your vision for your business and your expectations regarding the quality of work.


2. Loses Partial Control over the Process

One of the pitfalls of outsourcing is poor communication. Poorly communicated instructions and details lead to errors, which may have severe repercussions for your business. Plus, due to the distance, language, and cultural differences, it’s easy to feel like you’re losing control of the situation.

While issues are inevitable, you can minimize the risk of losing your processes by discussing this with your provider. Outsourcing providers want to ensure you get your money’s worth and the best quality of services. So, they’ll help you track your outsourced service’s performance and ensure it meets your standards.


3. Miscommunication

Miscommunication may be a minor error, but the repercussions can be more significant than you imagine. No business is safe from this, especially those who rely on it heavily, like outsourcing.

Having team members around the world requires clear, concise, error-free communication. Every business runs on a chain of commands, which, when miscommunicated, can result in the process falling apart. Many outsourced services fall prey to this due to certain factors like technical errors and errors in human judgment.

Make sure the chain of command is always relayed clearly to avoid miscommunication. Develop a system to help team members confirm they’ve received instructions. And keep the lines open if you need to elaborate. The more prepared you are, the less likely you are to encounter issues.



Outsourcing can be a great way to reduce the strain on small businesses. But it would be best if you were masterful about your chosen companies. As the outsourcing market grows, it’s easy to get distracted by all the competing deals. So, carefully select a provider to help you grow your business and maintain smooth operations. Get quality services with a shared oversight at an affordable price with Magellan Solutions.

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      Outsourcing Companies for Small Businesses: Things You Need to Look Out For

      J. Saenz-Key

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