The last few years have been tough for business.
COVID, high inflation and interest rates, increased energy prices, the lasting effects of Brexit and increased economic uncertainty have put many companies in an increasingly precarious situation.
Throwback to October 30th last year, when Rachel Reeves delivered the first Labour budget in 14 years, and companies started to panic.
Many predicted that 2025 was going to be even tougher for them come April, when they’d have to pay out more on increased National Insurance contributions as well as the minimum wage rise.
It’s too early to predict the exact impact, but rising consumer costs, job losses and recruitment freezes are all being mooted by business experts.
Here we talk to Michael Kitt, owner of London-based outsourcing specialists Kimon Services, about how bringing in outsourced business support can help companies weather the storm and could mean the difference between survival and falling over the precipice.
Your business specialises in back-office outsourcing support; you will champion the benefits that outsourcing could bring. Is that why you’ve done this interview?
No, not at all. I think that outsourcing overseas can sometimes be looked down upon or not seen as a viable option, and I want to challenge that way of thinking. In turbulent economic times, outsourcing could mean the difference between a business failing and succeeding.
But of course, I’d be in the wrong business if I didn’t believe in the benefits of outsourcing.
Why Outsource Back Office Functions?
In very simplistic terms, it saves time and money when you have the right partner working with you.
Because of what’s been outlined in the introduction to this article, UK businesses are under increasing pressure to find creative ways to survive. Sometimes, there has to be a compromise to ensure that a business can continue. Outsourcing can be that compromise.
For example, almost all companies outsource accounting, and they accept that if the accountant gets it wrong, the fine stays with the company. People don’t even give this a second thought, so why not outsource less mission-critical processes? Our customers outsource entry-level work and redirect their UK-based staff to more profit-generating activities. Some even reduce the number of in-house staff they employ altogether.
If you are creative with your outsourcing and only work with outsourcing partners you can trust to deliver quality work, you can get better and more consistent output for less money. That’s because you don’t have the added overheads or restrictions that employing in-house can bring.
How badly do you think rising energy costs, national insurance, and minimum wage increases will affect businesses and the economy?
For those who can’t be flexible with their cost structure, it will be devastating.
In hospitality & leisure, casual staff are already being laid off, but that’s just the start. It won’t be long before redundancies are made, prices increase, staff work on reduced hours, or venues open for fewer days.
I am all for a fair day’s work for a fair day’s pay, but my question is just how are businesses going to afford it?
I’ve looked at the figures and it will cost a company about £2,500 per year per minimum wage employee… that is £12,500 for five employees… straight from their bottom line. That can only be
sustained for so long without having profound implications for a business.
I predict that we will see unemployment rise to more than five million before the next election if something doesn’t change.
Could outsourcing help companies maintain profitability and help them avoid redundancies?
Yes absolutely. Moving staff around and refocusing them can help reduce redundancies. One of our most successful customers had a sales team of three costing them £15,000 per month, and this team were completely tied up doing admin and not selling. By moving the admin part to us, it completely freed up their sales team to focus on what was important, generating margin that was approximately eight times our cost.
Financially, what kind of cost savings can businesses expect to save if they outsource?
I think it would be helpful here to give some ballpark figures.
An employee working for the minimum wage will probably cost the business £27,000 a year if you include Employer NI and pension contributions. If you outsourced that, the cost would be £10,200.
That’s an instant saving of £16,800 per year, per minimum wage employee.
Outsourcing five people’s work would save a business £84,000 a year. That cash could be reinvested into their existing staff or increasing their marketing and sales activity to grow their way out of the problems.
Won’t outsourcing just lead to job losses?
I would be lying if I didn’t say yes in some circumstances, but that is not what we are seeing. In our own experience, we are seeing the companies we work with redirecting existing staff into more profit-generating activities and getting us to pick up the entry-level admin they were doing that was taking up their time.
Is there a limit on what business functions can be outsourced?
In all honesty, yes. I don’t believe that senior management should be outsourced. Companies need a senior leadership team that is controlled and motivated by the company. For instance, it would be very difficult to offer share options to outsourced senior managers to keep them tied to the business.
I also believe that if project-based work is outsourced, then it must be done through a process where you are in control of the workers’ time so that projects can be completed to your timeframe and not the outsourced resources’ priorities.
Can it help businesses operate more efficiently?
Yes. One of the things that our customers tell us is that working with us forces them to define their internal processes more stringently. That helps us understand how to work with them more collaboratively, ensuring a more seamless process.
What’s your view on how it affects in-house employees’ productivity?
That is something that is interesting to watch. We do sometimes see pushback and challenging behaviour from those where we are taking on part of their role as they fear their job is under threat.
We find that senior managers embrace it with open arms and push more and more work our way because they can see how productive working with us is.
It is an interesting dynamic. I think sometimes in-house workers may do the bare minimum to get their pay check and go home, which is fine, but outsourcing can expose that when you look at the output from our team.
How does it help businesses become more flexible?
Our business model is based on flexibility for our customers.
As we are an external contractor, our customers are not bound by UK employee rights. They pay us to get the job done, and it is our problem to make sure that happens. We manage staff holidays, sick leaves and benefits in a way that the work doesn’t stop, so our customers can rely on consistent output. We also operate on a rolling 60-day contract, so it’s super simple to scale the resource a customer needs up or down depending on their business needs.
For example, recently we had a customer who lost one of their big clients, which in turn meant they would have less customer support work for a few months. A simple email to us, and we took three people off the job and reduced their bill accordingly. Companies don’t have that luxury with an in-house team.
Are there any risks of outsourcing?
The biggest risk is probably the loss of internal knowledge. To counteract that, we take ownership of documenting all the customer processes that we do and will happily hand them over if a customer ever leaves us.
What about data protection and ensuring compliance with payroll, tax rules and any changing employment laws?
It is undoubtedly important to make sure any outsourcing partner is competent. I can only speak from a Kimon perspective, but we ensure we are watertight in all compliance areas.
In your opinion, what are the risks of not outsourcing in today’s challenging economic climate?
The biggest risk is waking up one day and realising your business is not competitive. The companies that embrace change and ensure their business survives in the bad times are way more likely to have a solid foundation of growth when the world finally recovers, and it will recover. It always does.
Do you have any tips for businesses thinking about outsourcing?
Other than “Use Kimon,” what is important is making sure the key decision makers within their business are on board to drive it through and make the process work. Our greatest successes are when the CEO wants it and is assertive enough to ensure the senior managers are on board too.
Finally, if you could sum up what outsourcing could do for a business, what would you say?
Outsourcing isn’t just a short-term business strategy; it’s a gateway to possibility and could be the difference between surviving the current economic challenges and not.
When done right, outsourcing can transform a business from what it is into what its leaders dream it can be. It can help free companies from capacity constraints and allow the greatest minds within the business to focus on innovation rather than implementation. Kimon turns fixed costs into variable ones, which is SO important when there is economic uncertainty.
The companies that thrive in the coming decades won’t be those who try to do everything, but those who do a few things really well while working with a global network of partnerships to handle the rest. They’ll be lighter, more adaptable, and more focused on their true purpose.
I believe that the heart of what we do isn’t about our customers giving something up; it’s about them gaining the financial and time freedom to become what they were always meant to be.
To find out more about outsourcing and how Kimon Services can help you, go to: https://kimonservices.com email: info@kimonservices.com or call 0118 991 9545.
