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The Pitfalls of NOT Outsourcing to the Right Provider

April 20, 2017 Claire Ponsaran
The Pitfalls of NOT Outsourcing to the Right Provider

In today’s tough economic climate, small and medium-sized businesses simply can’t afford to ignore the benefits that offshore outsourcing brings to the table. Businesses like yours may not have much room or resources to spare for product development or expansion. Outsourcing is a cost-efficient solution to problems with talent acquisition and retention, with resource and facilities management, and with research and development.

Not sure that outsourcing is the right option for you? Consider the following scenarios. These could happen to you if you’re NOT outsourcing to the right provider.

#1 You’ll be missing out on the benefits of strategically sourcing from offshore providers.

Outsourcing is not just about saving money. It’s about comparative advantage. When one country excels in providing quality services while another country excels in producing quality products, it’s only logical for these two countries to trade and benefit from each other’s strengths. Country B can seek workers from Country A to help in providing business process support. As a result, workers in Country A will have the money to buy goods from Country B, which then exports their products to Country A. In this scenario, everybody wins.

Businesses save money as a result of outsourcing, but that’s not their main reason partnering with a service provider. SMBs choose to outsource to the Philippines because Filipino staff can be trusted to produce quality work and deliver it on time. The fact that it costs foreign businesses only half of what they usually pay to workers in their country is an added bonus.

#2 Tight margins could lead to further losses that you might not be able to recover from swiftly.

Your business can’t grow if you don’t improve your profit margins. And, you can’t hire more people even though you wanted to. In the service and manufacturing sectors, profit margins usually decrease as sales increase.

Investopedia estimates that:

Businesses in these sectors may see a 40% margin until they hit around $300,000 in annual sales. That’s about the time where companies would have to start hiring more people.

Each employee in a small business drives the margins lower. One study found that 90% of all service and manufacturing businesses with more than $700,000 in gross sales are operating at under-10% margins, when 15% to 20% are likely ideal.

You lose the opportunity to expand your business when you’re running on tight margins. When your industry is very competitive, you’ll need help in growing your business. Outsourcing gives you leeway to add resources without increasing your expenses or your debt for that matter. A business loan is a good idea, but you can avoid incurring debt by outsourcing.

#3 You’ll always be on the lookout for good quality workers to help you.

You may be struggling to convince your customers to keep buying from you when you barely have enough people to manage your inventory and fulfill orders. Or, you may have unhappy consumers because you and your small staff barely have the time to promptly answer their calls and emails. Unsatisfied customers could leave you any time. And, this could hurt your bottom line.

Rather than lose out to your competitors, consider outsourcing as a way to add staff without adding to your payroll. You don’t have to worry about the expenses that go with hiring new workers. You don’t even have to set up new workstations for them. Outsourcing providers usually take care of the equipment, utilities and office space that you may not be financially ready to acquire if you sourced them from your country.

#4 You’re not increasing your market size, thereby losing the opportunity to expand your customer base.

You may narrow down your target market to just one geographical location or you can take advantage of globalization and expand your reach. Outsourcing allows you to introduce your brand to new markets. You can take care of your fledgling customer base in these regions through customer-facing staff who knew the culture and language of your new clientèle.

By the same token, you’ll need customer-facing staff who are fluent in your language and who grew up in a culture that’s progressive like yours. You’ll be looking for staff who are more empathetic and creative in solving your customers’ problems. But, you’ll be happier if you could find staff who were not habitual rule-breakers or disrespectful towards your customers and their coworkers.

These attitude problems are often rooted in your staff’s upbringing. This is exactly why outsourcing to the Philippines increases your chances of hiring staff members who have the qualities you’re looking for, plus the educational attainment, the level of skills, and the years of experience that bring more value to your company.

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