When to Stop Outsourcing for Your Small Business

Post Date: September 15, 2020

Everyone knows that too much of a good thing isn’t always a good thing. Small businesses have gained competitive ground against bigger companies by outsourcing critical business functions.

Outsourcing critical business functions helps small businesses scale up quickly while reserving funds for other areas of the business. However, at some point, outsourcing can weaken a company and backfire, potentially causing problems with products or services that can harm your brand. This article explores some of the pitfalls of outsourcing to help you determine when it’s time to hire in-house.

When Outsourcing Goes Wrong

Outsourcing by its very nature requires that you relinquish some control to the third-party vendor and while that often works in favor of the business, it can also cause problems. Supply chain issues or talent problems can cause a once-trusted vendor to begin to lose favor. And while a business owner can offer input, for the most part control in the particular area has been entrusted to the vendor. What happens when that trusted vendor relationship starts to fail?

Take communication as an example. Time zone challenges can prevent you or your customers from receiving the care you deserve. Or the quality of the product you’ve outsourced can start to decline. If you are reselling a manufactured product from a third-party vendor and the company starts to have issues, your business will bear the brunt of the reputation damage. At what point do the lack of customer service and the failure in the quality of the product make you decide to bring the process in-house?

Your plan may have been all along to eventually bring subcontracted work in-house. Outsourcing can backfire and lessen customer loyalty if you’re trusting another vendor to deliver and they do not. 

Another big issue in outsourcing is labor. Investopedia says, “Customers can also be turned off by outsourcing.” In the U.S., this is especially true when the outsourcing appears to be taking away jobs from Americans.  A business that opts to outsource to cheaper foreign labor risks a negative backlash from the consumers and employees alike.

The bottom line is this—outsourcing can work well for a company early in its career. It may even make sense later on. But at some point, your business may determine it’s safer to bring critical components of your business in-house. When that happens, you’ll need a resource for small business funding and education on non-traditional lending sources like 401(k) funding. That’s where we can help.

Woman sitting in front of her computer

Small Business Funding to Hire In-House

Whether you are employing the talents of outsourced resources or you have an in-house staff, you will need adequate funding to launch, sustain and grow your business. Benetrends has been funding America’s small business for over 35 years, with our innovative 401(k) rollover funding strategy (ROBS), SBA loans and more.  With a customized plan based on the needs of the business, we help entrepreneurs not only meet, but exceed their goals.

To find out more, schedule a consultation.

Categories: Blog

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