Entrepreneurs

Council Post: When Should You Outsource And When Should You Hire In-House?

By Jennifer Barnes, CEO of Optima Office, a firm that provides Fractional CFOs, COOs, Controllers and HR professionals for businesses.

Business owners are usually experts in the core product or service of their company, whether that is cooking the perfect burger or creating an innovative piece of technology. For these key differentiators, the elements of your business that you’ve built your brand around, it makes sense to hire in-house to fill those roles. However, for the work that is done within your business—such as back-office accounting, IT, marketing or HR—that you may not be an expert in, it usually makes sense to outsource these competencies to a firm that specializes in them. Let’s talk about when it’s time to outsource and when it’s best to hire in-house.

When you go to hire an HR specialist for your company, what kinds of technical questions will you ask? Do you even know what you need help with? You may have some major blind spots and not know the right questions to ask or the right things to look for. If not, outsourcing is probably a good fit for your business. It’s important that you can focus on growing your business and developing your core offering instead of trying to do things that aren’t your area of expertise. There is definitely a better use of your time than looking up new rules or regulations.

Another sign it may be time to outsource is the size of your business and how fast you want to grow. Smaller companies seeking to hire in-house for accounting, for example, may attempt to hire just one person to fulfill several roles within accounting, from entry-level bookkeeping to high-stakes financial strategy. This means you are either paying a C-level employee to do routine and easy tasks like bookkeeping and data entry or you’re expecting an entry-level person to handle intricate financial tasks that they will not be able to do. A CFO has that title for a reason and it’s not because they are good at data entry!

Before making a decision, ask yourself if you really have 40 hours of work at one level. If you need 20 to 30 hours a week at one level, and in one role, it is usually best to outsource that position rather than pay for 40 and only get 20 to 30. You want the right person doing exactly what they are good at.

During periods of fast growth, business owners are often focused on scaling their business to keep up with demand and shifting resources to their product or service. While your focus might be on delivering a high-quality offering and building customer relationships, these times are some of the most important to have solid financials in place. Managing cash flow can actually be more difficult during times of high growth and timely accounting is essential to your company’s growth.

Having an outsourced accounting team that can help you scale as your business grows ensures you have the right resources that you will need to have accurate and timely financials without needing to take your eye off your product or service. The same goes for any other outsourced service. You want the marketing experts to help you with marketing strategy, social media and public relations and you want human resource experts to help you with risk and compliance.

Although some might think of “overseas” when they hear the word “outsourcing,” there are many U.S.-based companies offering outsourced services—even local businesses that might be in your neighborhood! The advantage of local outsourcing is that you can have your fractional hires on-site when needed. They also understand the local market and regional regulations. Just because someone is fractional doesn’t mean they can’t be long term.

When growing a business, it’s best you focus on what you are good at, and leave all the back-office tasks to those who are best suited to handle those tasks. For anything high level, such as forward-looking strategy and forecasting, utilize fractional executives to help you make those decisions. Having another adult at the table can only benefit you in the long run. Outsourcing and utilizing fractional services can help properly scale your business with specialized talent and even lower fixed overhead costs.

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