Contracting Out – 10 Reasons Your Company Should Contract Out Services

Strategy Plan One

April 20, 2012 

contracting outContracting Out

Businesses encounter pressured operational scenarios requiring resource decisions.  In some cases, businesses do not have the quality and quantity of people to accomplish an operational task or goal.

 

Decisions need to be made by leaders on how to resource a particular circumstance, by either building up and accomplishing the goal with internal sources, or to acquire outside assistance to get the job done.

Contracting out is one solution to alleviating many operational pressures.  External contracting solutions can assist both in the short-term and long-term, depending on the scope and duration of work required, and operational needs.

There are several benefits to contracting out services…here are some of those advantages:

  1. Contracting Out to Get the Work Done

As a leader managing projects, you can observe where things need to be accomplished according to your schedule.  The volume of work during a specified time frame may not be accomplished with existing staff levels.  Acquiring outside help in the form of contractors would help alleviate short term pressures until long term plans can be developed and implemented.

  1. contracting outContracting to Acquire Expertise

Acquiring contracted professionals would help where your existing staff compliment does not have the capacity to complete professional tasks.  An example would be to bring on a marketing contractor or IT professional or company where your business does not have this built-in capacity.  Many companies, corporations and Federal Government agencies have moved to contracting out specialized functional areas.may not have the required skill set or intelligence of an industry or function.  Bringing on external expertise would help build capacity in your organization. 

  1. Save Money with Contracting Out

Contracting can be a cost-effective way to defining costs and to not entertain the internal costs to hiring and developing staff for the short-term or long-term.  Staffing processes, developmental processes, salary and wages in some cases would cost substantially more than short-term defined contracts.  Staffing also requires obligations (legal and otherwise) to employees that extend beyond a defined period for a project.  It is more often difficult, with costly process to staff up a short-term professional position for a defined deliverable, than to acquire an external company ready to go on a project.   The element of risk is also higher with employed resources than contracted staff, as employees can leave for other opportunities, quit or disagree with deliverables midstream on a project.

  1. Focus on Core Business Activities

With contracted services for one element of operations, you as a manager or business owner can focus on other core business activities, such as business development, business planning or partnership building, or any other key function instead of managing an activity.  Also short-term contracts may give you the ability to “catch-up” in staffing for the long-term, strategic HR plan.

  1. Results Achieved with Contracting Out

The contracts should be set up to be results-based or performance-based.  The contractor has an obligation to meet a certain target, goal or result.  As part of the terms and conditions of a legal contract agreement, the contractor has been acquired to meet those terms and conditions.  The schedule of payments could be based on hitting the milestone objectives, with a hold-back payment until the full job has been completed in a satisfactory manner (i.e.: the contractor has met the goals, objectives or deliverables in an acceptable manner).

  1. Definition and Certainty

Everything in a contract can be defined, from scope of work, results, objectives, deliverables, time frame, contingencies and cost.  As an entrepreneur you can manage projects more efficiently with defined contracts.  You will know when you hit your objectives, and achieve them within a certain prescribed duration and budget.  Your financial budgeting exercises will become more defined and the estimates for the annual budgets for activities will become more precise with defined contracts.

  1. No In-House HR issues with Contracting Out

The responsibility, for HR issues related to contracted employees working on a contract project, lies with that outside company.  The external company must deal with appropriate staff levels and issues to ensure their company meets the terms and conditions of the contracting agreement.   Some contracts will require their employees to work in-house or collaboratively with your own staff, and so those employees look and feel like your own employees without the responsibility.  The outside company is fully responsible for their salary and wages, benefits, working conditions, working arrangement, their budgets and their conduct in any work environment.

  1. Request for Proposal (RFP) Processes applicable to other business functions

Setting up an RFP is a valuable process, and elements of this process can be replicated for other internal business functions.  For instance setting up objectives, goals, deliverables in a RFP could be replicated in the functions of setting up work plans for staff members.  The accountability measures in an RFP can be copies across and into the accountability accords of employees and managers.

  1.  Contracting Out – More Control

In setting up contracts you have more control over a project, in that you will be assured that the scope of work can be accomplished by a party that has a legal obligation that you approved.  Through a solid Request for Proposal (RFP) process you will have chosen the right company to get the job done.

  1.   Contracting Provides Business Partnerships

Contracting with companies that align with your objectives and mandate will open the door to building partnerships, not only with the external contracted company, but with other linkages this external company has.  The contractor may want to align your business with more subject expert companies or professionals.  Synergies and collaboration can occur between businesses in the same industry and lines of products and services.

As an entrepreneur in your planning stages, develop and weigh your resource options for meeting your goals, which may include staff resources, contracting out services, or a combination of both.  Always recognize the value of your internal staff, and where there is a need, contract external professionals and companies to get the job done.

 

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Business Energy Consumption Statistics [Infographic]

Strategy Plan One

April 4, 2012 

Courtesy of Ecova.com, here is an infographic illustrating energy consumption statistics from the commercial and industry sectors.  Through analyzing 700 of the largest companies in the US, Ecova has highlighted some of the business energy trends from 2009-2011.

With rising energy costs, businesses should be reviewing way to reduce energy consumption to lower overall cost of business expenditures.  These energy reduction strategies can help businesses be more competitive and financial sound, as energy is considered to be one of the largest expenditures in business operations.

Some key business energy consumption data points:

  • 8% decrease in electrical energy consumption intensity by business for the 2009 to 2011 period
  • 30% of company energy consumption is considered waste
  • $202 Billion – the cost of energy across the US commercial and industrial sectors
  • Energy cost is the 3rd largest company expense, just behind labor and material costs

Energy efficiency

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Prepare for Federal Budget Cuts and Changes

Strategy Plan One

February 26, 2012 

Federal Budget CutsFederal Budget Cuts

We have all heard the pre-emptive messages in the media about the upcoming Federal budget cuts, and it doesn’t look pretty.  In addition to the reactions in the world economy and Federal budget cuts, the US Federal election will bring in new economic & business policy change and initiatives.

So how does an entrepreneur prepare for change?  As an initial step, assess the current situation of your business, and any current, relevant policies or initiatives that have an effect on your business.  Under current rules, regulations and initiatives there may be still be an opportunity to take advantage before massive Federal budget cuts or changes comes in.

Potential Economic or Budget Initiatives

Gather as much intelligence you can around upcoming economic or budget initiatives and changes that will have an impact on your business.  You will need to analyze any potential changes and incorporate scenario planning into your core business planning activities.   Be ready to implement your action plan in response with any Federal changes to regulations or tax policies.  Don’t get caught off guard by not completing your own due diligence.

Federal Budget CutsImplementation Plan

Your business should have an implementation plan of action.  Along with strong business planning, be a strong project manager and be ready to implement your plan step-by-step in a timely manner.  If the change will be significant, management of your implementation plan of responses will be extremely important.  The smoother your implementation phase, the less significant impacts your business will experience.

Financial Actions to Federal Budget Cuts

If you know a change will have a significant impact on your financial viability, prepare in advance by bringing in your own budget restraint measures before legislation is in effect.  The budgetary adjustments in advance will lessen the financial pain.

Adjust your sales and marketing plans to generate new revenue streams and tap into new markets prior to big economic changes.  Additional retained earnings may act as a buffer in alleviating the financial challenges.

As the world and local economies continues to experience challenges, activate financial and business changes in advance to be better positioned as an adjusted, economically sustainable business in the new environment.

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Trade Show Event – Great Exposure for an Entrepreneur

Strategy Plan One

February 22, 2012 

Trade show event

You have almost completed your business plan, but you are still developing the marketing activities component.  One great avenue to include in your planning and to get exposure to your products and services is at a trade show event.

 

 

Trade Show Events

 

Trade show events give you the ability to showcase products and services to masses of potential customers, with colourful, interactive displays manned by representatives promoting the business.  Since the marketing product industry is so competitive, banner and pop-up displays are cost-effective and can be user-friendly in the set-up and take-down.  If designed right, your display can last for years and be used over and over again at trade show events.

 

If you have chosen the right trade show and right target participants, you may be able to convert a high rate of participants at a trade show event into buying customers.  You must consider that participants are there for a reason, and the fact that most pay to attend is a great sign that they are interested in the commercial aspects of the event.  Ensure you have the ability to track leads and to follow up on those leads.

 

Key factors you should be aware of when considering trade show events:

 

Trade show event- Ensure you target the appropriate venues and trade shows that will result in the highest volume of interested participants

- Be prepared – design the layout of your trade show space and pick the appropriate spot in the trade show event

- Design your trade show booth and display, interactive with models, samples, videos, and take home products

- Make sure you staff you booth appropriately and that at least 1 person is there at all times; an unmanned booth is a waste of money at an expensive trade show, and opportunities for new customers will be lost

- Interact with customers stopping by the booth but also with the pedestrians who are walking the aisles by invite them in with offers

- Make sure you have freebies and give-aways with branded logos and contact information for the potential customers; there needs to be a way for potential customers to contact you

- Track revenue and expenditures from trade show activities, and analyze the return on investment

 

Your marketing budget for a trade show event must include:

 

- Cost of trade show attendance and appropriate booth space

- Any advertising that will promote your attendance at the event

- Banners and printed materials

- Give-aways, samples and contest expenditures

- Human resource staffing costs

- Costs of transportation

- Any additional insurance costs

- The post event costs associated with customer and lead follow up

 

Consider trade show events as one of those key marketing, outreach activities for your business.  With added attention to your trade show participation, your booth will be the showcase of the trade show event, and will result in additional customers and revenue generation you deserve.

 

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Super Bowl Advertising – Are Big Advertising Budgets Worth it?

Strategy Plan One

February 6, 2012 

The opinions on the value of advertising during Super Bowl are quite divided by the corporate world and consumers / viewers.  Most viewers that do like Super Bowl ads are appreciating the entertainment value of these ads.  On the other side, a consumer may see little value in some of these ads, as those ads may do very little to tell a story or promote a product or service.  Big advertising budgets obviously have pros and cons, with Super Bowl advertising at the top of the charts.

In this age of protests and occupy this and that, did any corporations get that message?  At $3.5 Million per crack, did anyone think it may be worthwhile promoting or supporting their side causes, instead of entertaining viewers?  I know that sounds boring and maybe not fits, but I can’t help to think of how many watching (the 99 %?) would focus on whether the corporate world was trying to do the right thing.  Of the “other 99%” that did watch, I am not sure they would agree with corporations spending this money on entertainment, when $3.5 Million could employ 70-100 mid-level, full-time positions.  The corporations may come back at us with the fact that $3.5 Million in advertising resulted in an additional $7.0 Million in revenue and 140-200 jobs created.  As you can see, positions are solidified on both sides.

At the end of the half time show, the crowd cheered to the “World Peace” message lit up on the field; I am sure the emotional response from most of the rest of the world viewers was the same.  And that’s the point – emotional connection with the viewers.  I am not sure that a vampire bush party did it, although with reference to the above, was entertaining (different type of connection with viewers).

A lot of things could be done on a $3.5 Million budget.  Most entrepreneurs and small businesses are not in this same league the corporate world is in.  I am sure that there will be some brand awareness or increased sales from these ads, but this only forms part of the multi-million budgets these corporations have.

On positive notes, many positions were created in the production of commercials, and with an estimated $11 Billion spent on food and retail around Super Bowl, many more.  I am sure the good people of Indianapolis benefited greatly with the ~$150 Million in direct spending in their community.  Fiat (LA Times) has reported that their ads during Super Bowl have resulted in a 138% increase in traffic to their website; logic would state this would lead to improved sales, improved company, and more employment.   All benefits from big budget advertising.

When advertising and dedicating resources, perception and optics should be key factors in your marketing budgets and should shape your own business’ or corporation’s messages to the consumer.  In tough economic times it is difficult to do anything else but to message around helping people, helping the consumer, and maybe not just to entertain.

Strategy Plan One

© 2012 Strategy Plan One

Business information, resources and tips for the entrepreneur

Another 5 ways to Reduce Expenses in your Business

Strategy Plan One

February 1, 2012 

Like the previous blog, this is intended to provide some ideas for cost saving measures in business.  Too many times we have seen companies not adjust with environmental or economic conditions.  Every option should be analyzed as one cut here, could be devastating to another unit over there.  Some of these measures could be temporary until the climate improves, while other measures may be necessary for long-term survival.  As always, weigh your options carefully.  Here are some additional considerations for budget reductions:

Information Technology (IT) Reductions

As you may know, every person, every cubicle and office may not need devices.  Sharing peripheral devices, such as printers, is the way to go, linking in all computers around the office to a common device.  Many organizations and businesses have moved to laptops and docking stations, instead of buying desktops and laptops for each employee.  Ensure you company has developed standard procedures for IT acquisitions, replacement, repair, and decision making.  Request for Proposal processes will allow your organization to benefit from low cost providers.

Carefully weigh your options when it comes to printers, as some of the commercial models can cost you hundreds of dollars a month.

Travel Costs

In times of financial difficulties, travel may be discretionary.  You will need to assess the pros and cons of travel to have meetings with clients, partners or staff in your business against lower cost video or audio conference calls.  Can you temporarily afford to move to having conference calls instead of travel?  The answer in some cases may be yes.  We have known clients that have saved $5,000 in travel costs per quarter per traveler.

Marketing and Advertising

In tight economic times, consumer spending will be down, along with consumer exposure to advertising (ie: buying less, entertainment outings may be decreased).  Be smart about your advertising placements.  This doesn’t mean the complete elimination of your marketing budget, but to use the marketing dollars wisely.  If you have done accurate reporting on marketing activities you should have a track record of the best Return on Investments (ie: increased revenues and profit through the costs of each marketing activity).

Wherever possible, you may want to partner with another company and conduct some joint marketing and advertising.  You may gain access to partner resources to assist in your efforts, such as access to another company’s marketing manager, or to piggy back on existing marketing and advertising avenues.

Client Perks and Benefits

If you have been rewarding clients, this may have to be temporarily discontinued until a more favourable environment.  Whether you consider this to be a necessary marketing expenditure to keep a client, or as one of the add-ons in your goods & services package, you may need to eliminate all or part of the benefits and perks, or it could have a significant impact on your bottom line.  Are the slim resources for perks and benefits to the client or for you to survive?  Like all measures, analyze these options with caution, as a lost customer through financial restraint measures is lost revenue.

Employee Perks and Benefits

The larger your staff size, the more costly the perks and benefits can be.  It would be a good idea to keep essential benefits intact such as medical, dental and retirement savings plan program benefits, but perks such as free memberships or discounts on items the company must pay for could be eliminated.

If you are in the realm of cutting costs, implement with caution and always monitor the impacts and results frequently.  Revise if necessary if the impacts are too severe.  Through your diligent measures, your financial picture will become healthier, and your business will be in a better position to be more profitable when the economic climate become more favourable.

Strategy Plan One

© Strategy Plan One 2012

Business information, resources and tips for the entrepreneur