What’s your new year’s resolution?
For most of us, it’s probably something to go the gym more, learn a foreign language or travel.
And as a business owner, you’ve probably got a couple unique resolutions of your own: namely, to grow your business.
There are a lot of tools at your disposal you can use to grow your business. Two of the more common ones are outsourcing and offshoring.
One thing a lot of business owners who are hoping to make a change seem to overlook however is that outsourcing =/= offshoring.
To-may-to, tom-ah-to. Outsourcing, offshoring. What’s the difference?
While they may sound similar at first, these are very different concepts. And if you want to make a decision that will save money while expanding your business, it’s important to know the distinction between the two, and how your business can benefit from them.
What is outsourcing?
To make a long story short, outsourcing is the practice of taking an existing business function (or a competency you can’t fulfil with your own staff) and getting an outside company to look after that for you.
In essence, outsourcing involves partnering with a separate company (also known as the external vendor) who takes over part of your business operations. One good example would be Foxconn: while they are responsible for assembly of much of Apple’s product range, they are not part of Apple itself.
And thanks to the miracle of the internet, outsourcing is no longer the sole domain of big multinationals – outsourcing has become a viable course of action, even for small and medium-sized businesses!
1. It’s all about money
When it comes to running a business, costs are always at the front of any business owner’s mind. What do the numbers say? Can you afford to expand? If business isn’t going as well as you’d hoped, what can you do to change things up?
Outsourcing some of your business functions to a virtual staff member (or an entire team) is a very affordable way of qualified people into your team… without blowing your budget. Handing off part of your business to a virtual assistant can significantly cut down on wage expenses – in some cases, by up to 80 percent!
Not convinced? Here’s our sample pricing for both part-time and full-time staff:
The invoice will be for $10 per hour x 40 hours x 52 weeks / 12 months
= $1,733 per month + GST
The invoice will be for $10 per hour x 20 hours x 52 weeks / 12 months
= $866 per month + GST
2. Staffing on a budget
Let’s be blunt: you can’t run everything by yourself. Being in charge of an entire business soaks up time… and unless you hate free time, you will need to hire extra hands to run your business smoothly.
The only problem: bringing in new people costs money.
Outsourcing is a fantastic way of easing your workload and making your business run more smoothly… while also being conscious of your balance sheet. Outsourcing some of your business processes by taking on a virtual staff member (or an entire team) allows you to expand your business and significantly reduce the cost of taking on a new staff member.
3. Need know-how?
Long before it became a trend among multinationals, outsourcing had humble beginnings. Instead of the huge call centres and factories we think of nowadays, companies before would outsource to fill the competencies that couldn’t be performed in-house.
The wheels should be turning in your head about now.
Sometimes, you need a specialist for your business. That might mean an accountant, graphic designer or something even more specialised. If you don’t have the know-how to do it in-house or the money to hire a dedicated member of staff to do it for you, outsourcing presents an affordable and effective solution.
How’s it different from offshoring?
A lot of the times when we think about companies moving jobs overseas, we’re really talking about offshoring, not outsourcing.
Unlike outsourcing where you partner with a external provider to take over your business practices, when you offshore you move your processes to an overseas branch of your business. If you hired a separate company in the Philippines to look after your call centres, that would be outsourcing – if you built a call centre and put your logo on the building, that would be offshoring.
Long story short, businesses that offshore gain access to skilled and experienced workers abroad from overseas while maintaining complete control.
Why outsource instead of offshore?
1. Bring costs back down
While offshoring may be a great way to reduce expenses for a big multinational, for a small or medium business such as yours, the savings can be offset by significant start-up costs associated with offshoring.
Some of the expenses that come with offshoring include:
- Buying or leasing an office
- Capital expenditure (such as computers, furniture and other equipment)
- Utilities like electricity, broadband and water
- Any administrative fees involved in registering your business in another country.
- All the issues involved in establishing the above, in a foreign country – the complexities cannot be overestimated
Needless to say, these expenses can be prohibitively expensive for most small and medium businesses – one of the main goals of outsourcing or offshoring is to save money, after all.
By contrast, when you outsource, it goes without saying that equipment expenses are already covered by external vendors – after all, it’s not your building, your virtual team aren’t using your computers and you don’t need to pay local taxes. You only pay for what you need – labour.
At VirtualStaff365, our home-based staff work from – where else? – their own homes using their own computers, there are no additional costs for rent or utilities. And if your business requires work that isn’t suitable for home-based workers, we also offer office-based staff for only a nominally higher price.
2. “I fought the law and the law won”
It can be hard to wrap your head around your legal and tax obligations as a business owner. If it were easy, professions such as lawyer and accountant wouldn’t exist.
Imagine having to contend with not one, but two different legal codes… talk about a major headache!
Obviously, you don’t want to get on the wrong side of the law. If you’re considering offshoring, that means onboarding a legal expert in the country you’re offshoring to… and lawyers can be expensive, even overseas.
And let’s not even get started on the mountain of paperwork that comes with expanding into another country! Unless you’re a real night owl, be prepared for many a sleepless night poring over paperwork if you decide on offshoring.
By contrast, outsourcing is much simpler from a legal standpoint. Your external vendor will have already dealt with all the paperwork and legal requirements that come with operating in their country. Just sign on the dotted line and your virtual staff will be ready to start working for you!
Save money, start growing – outsource with VirtualStaff365!
While they might sound similar, outsourcing and offshoring are different beasts. If you want to make the right decision for your business (that is to say, the one which helps grow your business), understanding the distinction between these two options is imperative.
Does outsourcing sound like it’s more your speed? If so, get in touch with VirtualStaff365 today! Tell us what you need and we will find the right person just for you.