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3 Ways to Reduce Operational Costs with Outsourcing

3 Ways to Reduce Operational Costs with Outsourcing

At various stages of a business’s lifecycle, costs need to be cut. In the start-up phase, during a business slow-down, and even in a rapid growth phase, financial pressures can demand that business owners seek ways to reduce operational costs. This article outlines three effective strategies to relieve financial stress these times.

How To Reduce Operational Costs

1. Reduce your employment costs

Employment costs are often the largest financial burden on a business. Examine your payroll, on-costs and benefits and ask these questions:

Do I really need all the staff I have, or can I reduce numbers?

If you have three staff who are not working at full capacity, you may be able to trim to two, providing them with a learning opportunity to acquire new skills from the departing staff member.

Have I over-hired? Do I have expensive, talented people performing low-value tasks?

If you are paying a couple of expensive sales managers and they are spending time in the office generating reports, consider reducing your sales team and hiring a junior administrator to take on the simpler tasks. Have you hired qualified accountants when a bookkeeper would suffice? Realigning your workforce to the tasks at hand can offer considerable savings.

Do I offer benefits that exceed what is offered in the market?

In prosperous times, business owners often increase staff benefits to reward their staff for hard work in the leaner years. If you find yourself back in the lean years, it may be time to cut back. This can include expense accounts, reducing travel in favour of conference calls and trimming the kitchen supplies budget.

Am I carrying dead weight?

As businesses move through their lifecycle, effective employee management can slide in favour of bigger goals. Underperforming staff or loyal but lazy workers remain on the payroll long beyond their usefulness, representing a layer of inefficiency and wasted funds.

2. Reduce your real estate costs

Costly rent bills are another area to examine when belts need tightening. Ask yourself these questions:

Do I have spare office space that I’m not likely to use in the near future?

Check your lease, you may be able to advertise and sublet your free space to a small business or start-up either as a block of space or on a single seat basis. Watch for hidden overheads, such as security, if you sublet to multiple parties.

Can I move my staff to a teleworking model?

Do you have sales staff spending a lot of time in the office each with their own desk? You could consider a shared desk arrangement to encourage them to be out of the office more often. Could your finance or development staff work from home a few days per week? If these options enable you to reduce your rent bill, or free up space for expansion, they may be worth exploring.

3. Outsource selected functions to specialist providers

A common trap for business owners is to think they need to do everything themselves, hiring full time staff for functions that never require that full time manpower. Or hiring a jack-of-all-trades to perform a range of functions that really require specialist skills. Here are some quick wins in terms of outsourcing for consideration:

Stick to your core business.

If you are a small accounting firm, you don’t need to have full time IT staff supporting you; a specialist IT outsourcing firm can provide more flexibility, specialised skills and lower costs. Similarly, if you are an IT support firm, you can outsource your financial activities. A law firm on retainer can provide you with legal guidance and take on larger pieces of work when required. A marketing firm can set and execute your social media strategy.

Use freelancers for minor adhoc work. Online freelance sites such as www.freelancer.com or www.upwork.com are invaluable for burst capacity of admin tasks. You can hire a data entry clerk to re-enter all your Excel data into a new system, to convert PDF documents into Word format, or clean up your newsletter lists. Resources on these sites are low cost and diligent for short term projects, though their dedication can lapse for longer term work.

Move core functions to an outsourcer in an offshore location.

Working with a trusted partner in an offshore location can save considerable operating costs. Even for your core functions, a full managed service provider can deliver 50% savings on staff salaries alone, and you avoid the real estate, management overhead and other costs involved with staff in your location. Regardless of the size of your business, you can gain benefits. Accounting firms can have a small, highly experienced workforce in their home office, with a team of qualified accountants working offshore as part of the back-office. IT outsourcers can run their entire Service Desk or Development and Test teams offshore.

Like to know more about finding an Outsourcing partner to reduce your operating costs? Contact us today.

About the Author: Michelle Fiegehen is the CEO of Yempo, a boutique offshoring company in three locations in the Philippines. She has lived and worked in the Philippines and India since 2009, building offshore capability for clients in Australia, United States, Canada, United Kingdom, Singapore and Hong Kong.

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