BusinessTN

Far too often, growth for a small business is hampered by limited resources. There may not be enough local experts to hire or not enough money to afford them. But you don't have to go it alone. Outsourcing for small businesses can save time and money, of which the small business owner often has precious little to spare. But where can you go, and who can you trust to share the burden?

Andy Tabar runs a fledgling IT company, Bizooki, out of Nashville. Starting out with simple Web design, he's grown into developing software, but not without some help from afar. Tabar outsources programming to India, where the burgeoning IT industry has created plenty of companies eager to take on Bizooki's projects. Tabar was reluctant at first to trust strangers with important work. "I'd always heard horror stories about it," Tabar says, "but the trick is having a good relationship with the people you're outsourcing to." Tabar also suggests starting small with minor projects that can't be catastrophically ruined if you made the wrong choice. If the relationship works out, you can move on to bigger operations. Outsourcing frees up time and energy for Tabar, letting him focus on other aspects of his business rather than getting bogged down into micromanaging a project. "It helps having people working for you even while you're sleeping, so that I can wake up every morning and things are ready to go," Tabar says. With room to grow in other directions, outsourcing lets a growing business like Bizooki open up new jobs in other departments, and Tabar plans to grow his local employee base next year.

Outsourcing isn't just for the newcomer. Mark IV Enterprises, a Nashville construction company is on its twenty-third year of operation, and president/founder Tonya Jones still outsources her payroll. Professional employer organizations (PEOs) handle the administrative aspects of paying employees and administering benefits, all the while making sure taxes are in order. The client company supervises employees and retains the power to fire and hire as it sees fit, while the PEO advises. According to Jones, outsourcing payroll helps keep her safe from HR problems. "I can't wear all those hats and dodge all those bullets on my own," she says, "and it's good to have someone looking out for me." The benefits packages PEOs offer also give small businesses a much-needed leg up in competing for employees. When she first started her business, Jones was unable to offer the competitive insurance and pension plans that have become so important in recruiting today. Working with a PEO, however, gave her the needed resources to stand on the shoulders of giants and offer employees a better deal. Unfortunately, the relationship with a PEO is not always perfect. "Technically, our company is their employee," Jones explains, "but while laws protect individual employees, there isn't any protection for a whole company." This is just another reason why it's critical to have a good working relationship with anyone to whom you outsource.

Wynne James at law firm Waller Lansden encourages companies to carefully choose their partners and clearly lay out expectations. If something goes wrong, "you can't think like a lawyer," James says. "You have to think like this is a family member, in a way." Litigation should be a last resort, according to James, and one avoided by such steps as starting with a clear contract and establishing a mode of easy communication. The latter can prove a challenge when outsourcing overseas. In such cases, even the basic steps such as agreeing on payment, measures of quality assurance and a method of conflict resolution become even more crucial.

Larry Rossini, director of the Tennessee Small Business Center in Knoxville, warns that contracts should be entered into with a probationary term, so that your company is not stuck with a relationship it can't easily escape. Test the waters with any company to which you outsource. Check their references and even ask for a credit report. It's no use counting on a long-term partnership with a company that might not be around next year.

It's difficult to disengage from a company, and finding another that knows your business will take time. You can protect your intellectual property legally, but the most effective way to protect yourself is by splitting projects up and outsourcing piecemeal. Companies overseas are often loath to use the American court system, James explains, and prefer working out issues without litigation. If you're outsourcing overseas, agree on the laws you'll treat as applicable in the contract, whether they be U.S. or the laws of the country you're outsourcing to. James suggests U.S. laws, which are more likely to protect you, and advises that you seek help from a lawyer in drafting a major contract.

This may all seem daunting for the owner of a startup business, but the savings can make it worthwhile. Mike Burns, executive vice president of global sales and marketing at Ozburn-Hessey Logistics, says that most companies can expect to see savings of 8%-10% when outsourcing. If the savings—whether they come in the form of profits gained, time freed or liabilities lessened—do not seem likely, then don't bother with outsourcing. But if savings are likely, outsourcing can allow a small business owner to draw on expertise and talent that would be unavailable otherwise.