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Benefits of Outsourcing at Different Growth Stages of an SMB

by Shanzeh Shunaid

Small and medium-sized businesses vary both in size and in their capacity for growth. They have different management styles and organizational structures, facilitating independent strategizing for future growth possibilities (Harvard Business Review). The benefits to be gained from outsourcing are the common factors uniting them, such as keeping costs low, meeting projections and surpassing planned goals.

With an external team handling non-core functions, SMBs are free to work on their core competency rather than other tedious and time-consuming tasks. They can prioritize duties without worrying about fast approaching deadlines, and explore new possibilities for value-added products and services. While the benefits of hiring an outsourced service provider are not in dispute, when to do so can be.

As an SMB grows, every stage of growth has its own set of demands and requirements. These are to be dealt with strategically to maximize the advantages of outsourcing for each.

The Stages of a Small and Medium-sized Business’s Growth

A small and medium-sized business progresses through the following stages of growth during its journey to maturity (Harvard Business Review). Outsourcing at each stage is a beneficial opportunity to focus on core competency, should the SMB choose to take advantage of it. Knowing when and where to use it can help owners, managers, employees, consultants and investors to make informed decisions and plans for the future.

1. Seed

The seed stage is the development phase of an SMB’s business lifecycle. Beginning the growth journey, the owner is testing out their idea for the business, researching its profitability, the industry it is hoping to serve and the trends guiding it (LinkedIn).

The SMB is developing and establishing its business structure and working on gaining market acceptance. The Seed stage is less likely to see outsourced operations unless business strategy necessitates it. If possible, it will be helpful in freeing up time, capital and labor to focus on bringing the idea and subsequent SMB to life.

2. Startup

The strategy of an SMB at the Startup stage is primarily concerned with surviving, attracting customers and delivering on the products and services they offer. The organizational structure consists of the entrepreneur or owner undertaking most responsibilities, and overseeing a small team. In this stage of growth, SMBs do not yet have standardized quality, established production or planned product transport. They are simply trying to gain customer traction, manage sales expectations and establish the product capability and market presence required to make it to the next stage (Business2Community).

At this stage, outsourcing can be a great resource given that the SMB is focused on developing their operations and building its team. It will allow the core team to focus on the initial development of products and services, building a customer base and navigating the market.

3. Growth

An SMB progressing to the Growth stage has proven itself as a workable business entity. No longer fighting for survival, they have a loyal customer base, and quality products with high demand. The organizational structure is simple with a small team and a manager, and the owner is still synonymous with the business.  The main point at this stage is navigating the relationship between increasing revenues and expenses. The SMB has to generate enough cash to break even, invest in maintenance and research and development to conquer a market niche. If they survive this stage, they will move on to the Expansion stage.

The Growth stage is the most fitting for the beginning of an outsourcing relationship. By now, the SMB has identified what essential core process further company goals, and which do not. Having broken even, they are navigating revenue streams, expenditure patterns and decisions of whether to begin investing back in the business (Business2Community). In order to continue to thrive and compete effectively, the SMB should outsource essential business processes, such as accounting, taxes and data analytics. The benefits of outsourcing these can allow sole focus on optimizing its core functions and maintaining low costs.

4. Expansion

The SMB is doing well, revenues are rising, the business is moving into new markets and researching, developing and adding products and services. A major decision for the owner at this point is whether to scale up and take advantage of this platform for growth, or remain profitable enough to support the owner’s side projects. If the former path is followed, the organizational structure can be decentralized and expanded to include new departments and hires. Systems become refined and extensive, and operational and strategic planning continue. If the latter path is taken, the business will remain stable, functioning in a comfortable ecosystem while other avenues are explored.

It is likely that the SMB has made it this far by managing its resources optimally and making the right choice between doing, delegating and outsourcing. However, if not already outsourcing business processes, it is not too late to make available more resources and capital to accelerate the focus on your core competency. The benefits of outsourcing at the Expansion stage will be a catalyst for scaling operations onwards and upwards!

5. Maturity

Having successfully survived and expanded, an SMB at this final stage of growth is a dedicated market leader. The business is expected to continue growing, at a slower pace than before, navigating new markets and more value-added offerings.

SMBs now have the option to further expand or consider an exit strategy. The benefits of business process outsourcing at this stage include increased efficiency and access to industry-leading expertise.

Every stage of the growth journey of an SMB brings with it a novel set of challenges. Strategies, business plans and operations should be adjusted according to the unique needs of each. Outsourcing is a proven and sustainable benefit to the business model at all points. Success is in correctly delegating tasks to internal teams and outsourcing firms, making a viable combination of the two is the difference between progressing to the next stage of growth or remaining stagnant.

Blog Author

Shanzeh Shunaid

Shanzeh Shunaid

Shanzeh is Director at SMB Services. A specialist in delivering sustainable solutions to those in need, she enjoys working on building startups from grass root levels. When not strategizing for core competency, Shanzeh shares her invaluable insights on the industry with our readers.