The current economic conditions have compelled the majority of chief executives and business owners to cut into their budgets. Declining revenues, doubtful debts, debt reduction, all loom large in the corporate ethos today. The big question has become ‘how to make fewer dollars go further’ The most recent data releases, however show that employers are not letting people go in droves: that would be counter-productive. The danger being that fixing the situation by undergoing a round or two of layoffs only to see your productivity plummet because of reduced morale and your better performing employees jumping ship to other companies or surfing the internet for job postings on your time. More strategic choices are called for.

One of the most important skills for an entrepreneur to develop is an understanding of what to undertake in house and what to outsource. It is the simple question of leverage. If you can get menial, repetitive work done at a nominal rate per unit or per hour, then your time, your resources, are free to add high value work to your enterprise. This is the entrepreneurial perspective that has created some of the great businesses of the industrial age; now also of the information age.

Core versus no core

Most businesses, from tiny to huge, operate from the same perspective. As you add employees, there’s pressure to keep everyone occupied, to be busy. Of course, once you’re busy, there’s tremendous need to hire even more people, which continues the cycle.

This is a time to be a lot pickier in what projects your business takes on and for who you take them on for.

If your goal is no longer volume, you can cherry pick. An architect for example can currently clutter his life and his reputation with a string of low –budget projects, but if he designs just a few buildings a year and digs deep to deliver superb quality, he actually increases his chances of getting great projects in the future.

This is often the challenge for professional practices. What would happen if you sacked half your clients If you fired the customers who pay in 120 days, and who demand an inordinate amount of your time, squeeze you on project bids and rarely refer high quality referrals. Would your profitability increase or decrease It is easy to get to ‘yes’.

While not advocating shrinking the workforce, we are advocating that reducing overheads is good for business. It’s not clear that selling for volume’s sake is always good for business; selling more to an ever larger (as in geographic expansion) audience is not necessarily the best way to business success. When your overhead plummets, the pressure to take on the wrong jobs, the wrong customers, disappears. You’re freer to pick the projects that make the business more money.

Think of business like a lunch buffet: you can’t eat everything on the buffet table. In business, we can’t have everything. Some of the players at the big end of town have tried that and it doesn’t work. Selecting the right projects can make profits go up. It can also dramatically improve the quality of work for the staff. Outsourcing is perfectly consistent with this more thoughtful approach to business.

Outsourcing allows you to concentrate on what you do best, save money, be more flexible and manage growth effectively. It also allows your business to gain access to outside expertise and technologies.

If managed successfully, outsourcing can help your business reduce its costs and make effective use of the knowledge and technical resources of another organisation.

Activities you can outsource

Many businesses now outsource many of their non-core activities or more complex tasks in order to access industry best practice. Processes you could consider outsourcing include:

• IT functions – you can outsource most IT functions, from network management to project work, website development and data warehousing. You may benefit from the latest technology and software upgrades without having to invest in expensive systems or keep up with industry trends.
• Business processes and HR – outsourcing activities such as recruitment, payroll services gives you access to specialist skills, but you only pay when you need to use them.
• Finance – you already outsource auditing, and the management of staff superannuation contributions, so why not do the same with your entire accounting function, including bookkeeping, tax management and invoicing

Compare the benefits and costs of completing a project in-house versus with the help of consultants. Do a best- and worse-case scenario for each approach to help identify the risks. Assuming you gave a clear, bottom-line benefit for outsourcing, priced to section.