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Business Process Outsourcing Strategies for Small Business

These ideas are a subset expansion of the blog post, US Small Business: Cash Flow Strategies for 2011, originally posted 4/14/2011, to elaborate on BPO strategies

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Now isn’t this a fine pickle we find ourselves in?  I mean for US Small Businesses, who want to believe oh so badly in an economic recovery, but hear and see conflicting accounts of what is happening in the world.  In the midst of uncertainty, my dad always told me to look to myself and control what I can and don’t worry about the rest.  Easy for him to say, yet sound advice.  What we as small business owners can control is our cash, and that means having a cash flow and cost reduction strategy to service customers and not take on the water of unnecessary expenses.

Economic Outlook

Kiplinger reported in March that we should expect to see 8% growth in small business this year, up from 5.6% in 2010.  Equipment investment is expected to increase by 12%, with construction equipment busting the curve but still pulling a 2% growth factor.  Gross Domestic Product, GDP, should grow by about 3% according to Kiplinger, tempered by energy concerns and unrest in the Middle East.  This is fantastic news, even with job creation not moving the needle on unemployment.

Yesterday the Wall Street Journal provided their take on the current fiscal mess in D.C.—the ridiculous debt, the budget battles, and what to expect now.  To be kind, WSJ wasn’t exactly happy with the “Bad rich people, bad!” monologue in President Obama’s latest attack on business owners and wealth creators, believing that jacking their taxes is a recipe to further erode the US economy.

So who are you going to listen to?  Let’s get back to basics.

Managing Uncertainties

Perhaps the best way to manage uncertainties is to take stock of what we know and plan for the worst case, while still figuring out ways to grow our small businesses.  So what do we know?

1) Energy prices are likely not going down anytime soon, for gas at the pump and for the electric and natural gas you use at your business.  Wind farms and solar panels, while being nice, environmentally friendly means of generating, say, single digit percentages of our country’s energy usage over the next five years, please the Alaskan Caribou but won’t do much for dropping the cost of electricity in the US.  We’d better get a handle on how we manage that.

2) The current Health Care war makes the cost of hiring new employees to deal with growth sketchy at best, and most of us have to concern ourselves with trying to console and hold onto the employees we have, be that our intent.

3) In any recessionary environment, customers will continue to play off suppliers against one another to get lower prices.  This is not a death knell but something you must deal with.  What is your strategy to drop your prices AND make more profit in the process?  That is the question to continue asking yourself.

Human Resource Strategy for Small Business: Outsourcing

These are labor strategies, folks.  How do we get the work done to serve current customers, perhaps a steadily increasing number of customers, without bringing into play these wild uncertainties over hiring full-timers?  I’ve got two words for you—Creative Outsourcing.

Don’t hire, outsource activities that are either temporary in nature, interim and transitional duties, or things that need to get done but the customer does not pay for, classic non-value-added duties like secretarial, maintenance, purchasing and payroll.  Please understand the difference between non-value-added and non-essential.  These tasks may be essential to your operation, but your customers won’t explicitly pay your for them.  In manufacturing, if it doesn’t change the form or function of the product, the task falls into this category.

“But Karl, this won’t help the US economy!”  Horse puckey I say.  Any economic activity you create helps the country.  You simply don’t have to live under the false paradigm that defines that as increasing your payroll during a very punitive time to do so.  The US workforce is fragile, yes, but is also creative, robust and tough as hell.  Most small businesses are created in response to crisis or the downfall of other means of employment.  The work will still get done, it will simply change form.

This is actually a great cost reduction strategy, as firms exist everywhere to do things that might not be your strength as a business.  Virtual Assistants from overseas can be hired at a fraction of what you pay in the US on places like Guru.com, Elance and ODesk.  As tasks go up the skill level ladder, communication barriers make the overseas usage a bit trickier, but just the fact that you are paying only when needed for services and not finding make work for that guy who doesn’t justify a full-time position, the savings using US outsourcing are significant as well.  Even higher end work like Engineering, Project Management, Sales Management and Negotiating deals can be sourced virtually, letting you focus on what you’re really good at.

Virtual Project Management is a perfect example.  When volume of work increases, all the “nice to have” projects—translation, operational improvement projects—get put on ice as all hands on board go to getting the work done.  World class businesses find a way to maintain work flow and scale it with sales order volume, AND still get needed lean or other improvement processes installed.   These projects need to ultimately be adopted by the labor force of the company, but the up-front planning and initial activity management is usually too intensive for current full-time staff to perform, yet doesn’t justify the expense or headaches of hiring full-time personnel.  Dictionary definition of interim activity and perfect for outsourcing to specialists.

The Scalable Workforce

Suppose your workflow is intermittent or temporary, yet it is above in spikes what current labor can handle?  One solution is upgrading your equipment to faster, better models that produce more.  Sometimes office or production processes don’t lend themselves to that.  Now is the time to put your Outsourcing Strategy on steroids and supplement your core work processes as well as non-core activities.

For office work we’re talking temps, contract or project employees, and it’s easier now than ever.  Traditional temporary help agencies exist everywhere, and real cost cutting occurs finding individual local contract employees in places like Craig’s List.  If the work can be done off-site, these employees can work virtually and the aforementioned overseas sourcing houses can be used.  As my friend Alan Blume, author of Your Virtual Success tells us, clearly outline the scope, start and end of contract work to control the expectations and performance of virtual employees, including gaining a detailed understanding of their history of off-site work and the environment that they will be working in on behalf of your company.

What is Your Current Business Outlook?

We don’t know what’s going to happen with the US economy; all we do know is that it will likely be tumultuous.  Creative outsourcing is a key way to flex and scale your workforce for core activities and still focus on the interim or temporary projects that will help you grow your company.  Cash savings can be dramatic and provide you as a business owner with the comfort of knowing you can meet customer demand for a lower delivery cost and choose to become more price competitive, improve your margins, or both.

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