Is outsourcing the right fit for your business? Here’s how you can help decide

If you own or operate a small business, “you become chief of IT, HR, compliance, and financials—you are the C-suite,” says Kara Hoogensen, senior vice president of Benefits and Protection at Principal^®.

All of that can be empowering and energizing—until it isn’t. In fact, three out of four entrepreneurs worry about their mental health. The stress of operating a business—and serving in all those C-suite roles—can be part of the problem.

If you or your employees are doing too much, outsourcing one or several business-critical functions can help. But how do you decide if you need to outsource, and what you should outsource? Here’s how to figure it out.

Evaluate everyone’s workload.

The average business owner works a lot—about twice as much as regular employees. And the boundaries between work and home often get stretched (or broken entirely).

Sometimes that’s seasonal—a busy stretch for a growing landscaping business, for example—but sometimes it’s not. “There’s a saying that’s something like, ‘Culture is how you feel about work on Sunday evening,’” says Amy Friedrich, president of Benefits and Protection at Principal. “Running a small business is always a heavy lift for owners.”

Long hours may be specific to one person or team, so the solution for you or others who are working too much may not be outsourcing, but delegation. If you’re able to delegate, you may find a surprising benefit: retaining employees. The opportunity for career growth is the second most cited reason employees resign for new jobs (pay is number one).

If you think delegating versus outsourcing is a solution, start by asking employees if they want to do or learn more. If it’s the latter, reskilling might be another solution. It can open doors for new types of work, help team members take the next steps in their careers, and help retain trusted employees (and their institutional knowledge).

But if workloads really are an insurmountable hurdle, it’s also helpful to evaluate their impact on business growth.

Consider your business’s future plans.

You have dozens and dozens of ideas for your business this year, next year, in five years, and beyond. But if you’re not able to get to any of them—much less prioritize the list—you may be missing out on ways to strengthen your business, which in turn helps it build resiliency during inevitable swings in the economy. If planning takes a back seat all the time and if delegation isn’t an option, it might be time to consider outsourcing.

Check in with your business leadership network.

Mentors, colleagues, people in various organizations or associations you are part of: They’re all sources to survey about what tipped the scales in favor of outsourcing, what efforts they decided to outsource, and why outsourcing made sense for them. Those same people may also provide valuable intel about what different services cost.

Rod Johnson, cofounder and chief values officer of BLK & Bold in Des Moines, Iowa, has leaned into a network at all stages of the business’s growth. “We are not doing this alone, and we haven't done this alone from when it was just an idea,” he says. “We have relied on industry professionals, people who are within our sphere of influence to help inform our decisions.”

Categorize potential outsourcing needs and establish a budget.

Plenty of necessary business functions—social media, marketing, bookkeeping, technology, sourcing, financial planning, tax advising, and human resources—can be outsourced. Start with a list of areas and rank them from “urgent” to “nice to have.”

As you’re doing your evaluation, also consider:

• Is the outsourcing temporary or permanent? For example, once you reach a certain number of employees, would you prefer to hire a full-time human resources manager? Set criteria for when to make the switch so you have a baseline.
• Do you have the budget for more specialized expertise? Simple administrative tasks may cost less than more specialized services such as information technology, but the impact may be more critical for the latter. That specialized outsourced expertise might come with added benefits, too. “Our financial professional and the team that they have around them help us scale as we reach certain milestones and look at planning, whether it's benefits, attracting talent, or understanding what the competitive market is,” says Johnson.

Plan for the impact of outsourcing on your day to day.

While outsourcing promises to help relieve some work pressures, it also comes with tradeoffs. You will have to onboard whoever you hire, and set terms of payment and turnaround. You’ll also have to review the work, which may mean ceding control.

But remember the benefits of outsourcing.

You probably started or joined a small or midsize business because you wanted to build something from the ground up. Outsourcing can help you get back to what you really want to do, not what you have to do.

Take Kori Covrigaru, owner of PlanOmatic in Denver, Colorado; he leans on his outsourced financial professional, but the relationship is simply an extension of his business. “[They] help educate our people so that they can get the most out of their benefits,” he says. Like other owners, Covrigaru may not have the time or the in-depth knowledge to explain to an employee what he or she needs to know about benefits or retirement—and he has other priorities. “Surrounding myself with the right team, like a financial professional, allows me to take care of doing my job, which is being a business owner,” he says.