Small Business Outsourcing Trends in the UK

Small Business Outsourcing Trends in the UK

Have you ever considered outsourcing for your small business? You might think it’s only an option for large corporations with million-pound budgets. But the truth is that small businesses can benefit too.

Thanks to the ‘as-a-service’ model, outsourcing has never been easier or more affordable. Even if you’re a one-person operation working from your hall cupboard. Unsurprisingly, more and more businesses of all shapes and sizes are doing it.

Here’s a look at some of the benefits of outsourcing and a rundown of the tasks you might want to consider handing off to someone else.

What are the benefits of outsourcing?

Outsourcing has five major benefits:

  • It lowers the amount of risk exposure to your business
  • It saves you money
  • Getting new projects off the ground is easier and quicker
  • It helps you run your business more efficiently
  • It puts you on an equal footing with bigger players

Let’s discuss these benefits in more detail.

Small business outsourcing as risk management

When you outsource a task, you’re handing it off to someone with specialist knowledge and experience. They do this for a living. And they’re probably better qualified to handle it than you are. So, they’re less likely to make mistakes that could get you into trouble.

Tax is a case in point. HMRC’s rules can be complex and open to interpretation. And, if you don’t get it exactly right, you could get hit with heavy fines. Outsourcing your small business finances to a good accountant lowers the chances of this happening.

Small business outsourcing to save money

Outsourcing can work out much cheaper than doing things in-house, for two reasons. First, it can turn fixed long-term costs into variable ones. Second, it can eliminate upfront and maintenance costs.

Let’s say you’re in the electronics repair business. Most of the time, you can manage the workload by yourself. However, there are certain months when you have more work than you can handle.

You could hire an employee to pick up the slack. But then you’d have to pay them a fixed salary each month. Plus, you’d have to pay employers’ National Insurance, make pension contributions and buy employers’ liability insurance. And you wouldn’t be able to fire them unless you had legal grounds to do so.

man working at a greenhouse taking notes on a clipboard

By contrast, if you outsource the extra workload to an independent contractor, you pay for help only when you need it. And they’re responsible for paying their own taxes, National Insurance contributions, pension contributions and other costs.

The savings can be even greater when you outsource specialised functions. For instance, you can buy 1 terabyte of cloud storage on Google Drive for £7.99 a month. That’s a fraction of what it would cost to set up and maintain your own private cloud storage facility.

The easy way of launching new projects

Thinking of branching out? Or expanding your operations? If you decide to go it alone, there’s a lot you’ll have to do.

You’d need to spend time researching and planning. You’d need to get training (or train your staff). And you may need to invest in new equipment. This could all take several months or even more.

Not so if you outsource the project. If you choose wisely, the firm will have the necessary know-how and infrastructure already in place. Which means you can hit the ground running and launch the project sooner.

Outsourcing to improve efficiency

As a small business owner, you wear many hats. On one hand, you have to deliver your product or service. But you also have to find new clients, handle paperwork, do your books, troubleshoot your laptop if it’s on the blink and all sorts of other tasks.

This means it can often feel like you’re spread too thin. What’s more, some tasks will take a while to do properly, either because you don’t have the expertise or — let’s face it — because you plain don’t enjoy doing them (who likes going through a year’s worth of bank statements line by line, right?).

Outsourcing some of your workload frees you up so you can focus on what’s important to you. And, because the people you outsource to are specialists, they can probably do the task better and complete it in less time.

Levelling the playing field

Outsourcing allows you to offer your customers the same level of service as the big players, without breaking the bank. This means larger companies no longer have the advantage because of their size.

Let’s say you sell jewellery online. Your larger competitors all offer same-day delivery and round-the-clock customer support.

As a small business, it would be impossible for you to offer the same level of service in-house. For starters, you’d need to spend thousands of pounds on new hires, office space, equipment and other overheads. But even if money were no object, your profits likely aren’t large enough to justify the investment.

Well, services such as Amazon’s fulfilment program allow you to offer your customers this level of service, without having to take on the financial burden. You pay a flat fee per package plus a storage charge, and you’re right there neck and neck with the Goliaths of your industry.

Woman buying plants at the greenhouse

What should small businesses outsource?

So you’re sold on outsourcing. But which tasks should you outsource? Well, every small business is different, so it depends. That said, some of the most common tasks small businesses outsource include:

  • Accounting
  • Payroll
  • Marketing
  • IT
  • Customer services

Outsourcing your small business accounting

As a small business, you must comply with several HMRC legal requirements. And while you could do some of the work yourself — such as filing your self-assessment tax return — you may need an accountant’s help with other tasks.

Case in point, if you do business as a limited liability company, you have to prepare full company accounts every year. And these require certification by an accountant. Seeing as, in the UK, an accountant’s average full-time salary is £62,042, outsourcing sometimes works out much cheaper than having one on staff.

Outsourcing your small business payroll

Thinking of hiring employees? Handling payroll is probably one of the most time-consuming and (dare we say it?) soul-destroying tasks you’ll have to take on.

Not only do you have to understand the ins and outs of HMRC’s PAYE (Pay As You Earn) system, you also have to keep up-to-date employee records. By law, you must run payroll on HMRC-approved software, issue payslips, and make monthly submissions to HMRC.

Of course, it goes without saying that you risk hefty fines for non-compliance, including penalties for late submissions. Why put yourself through this, when you can hire a payroll management firm to handle it for a small monthly fee?

Outsourcing your small business marketing

More and more businesses are outsourcing at least some of their marketing tasks. According to the Content Marketing Institute, for instance, 42 percent of businesses in the UK outsource content creation.

Having an outside expert in your corner can be invaluable, not least because it can help you get the most out of every penny you spend on marketing. Hubbion founder Anand Srinivasan explains:

“Marketing agencies that spend several thousands of pounds spread over multiple campaigns are often able to catch on to trends and patterns much more effectively than any one business with a spend of a few hundred pounds.

“Consequently, the ROI [return on investment] from such campaigns can more than make up for the cost of outsourcing.”

Latin American couple buying plants at the greenhouse and salesman carrying them in a wheelbarrow

Outsourcing small business IT

43 percent of cyber attacks target small businesses. Yet, only 14 percent consider themselves well-prepared for them.

Whether you’re a software engineer or a baker, chances are your business depends on tech. So, seeing as 60 percent of small businesses fail within six months of a cyber attack, hiring an IT service provider to keep you safe online should be one of your top priorities.

But better online security isn’t the only benefit. An IT support service provider can also monitor your tech and fix any issues before they turn into serious problems. Plus they can help you implement new technologies — such as AI and blockchain — which can give you an edge on your competition.

Outsourcing customer services

As a small business, your success depends on the quality of your customer service.

Don’t believe us? According to a recent study, eight in ten consumers are willing to pay more for a great customer experience.

With this in mind, outsourcing your customer services should be a no-brainer. And here’s why:

  • A third party provider will have the manpower to handle spikes in demand. Which means your customers won’t have to bear half an hour or more of ear-bleeding hold music before they can speak to someone.
  • Better access. Why stick to business hours when a call centre could offer your customers round-the-clock support?
  • Surprise and delight your customers by going the extra mile with no extra effort. Amazon’s fulfilment program, for instance, offers customer support in the local language — great if you do business overseas.

Looking ahead: the future of outsourcing

It used to be that outsourcing was only about cost-cutting. But that’s no longer the case. Businesses increasingly see the value in freeing up their resources and gaining access to skills they don’t have in-house.

In the UK, the outsourcing industry grew by 20 percent during 2017. And, more to the point, 35 percent of UK businesses who already outsource plan to do more in future.

So why not join them and find out where outsourcing could take your business?

Andre Spiteri

André Spiteri is an expert fintech copywriter with a passion for making personal finance simple and accessible to everyone. Formerly a financial lawyer, he now helps fintech businesses establish their authority online and make more sales through the power of words. Head over to MaverickWords.com to learn more.

MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.

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