Transcript:

In this video, I’m going to show you the difference between subcontracting and outsourcing and when each is appropriate for your local business. These two terms get a lot of use and many small business owners don’t see the difference. We’ll explore this together right after this. When it comes to Business Growth, local small businesses have two primary options, subcontracting or outsourcing.

While both have their benefits, there are distinct differences between the two that business owners should be aware of before making a decision.

In this video blog, we’ll explore those differences and help you decide which option is best for your business. To start let’s define each term.

Subcontracting is when a local business contracts with another local business to complete a specific task or project, usually outside of the scope of expertise of the business.

Outsourcing, on the other hand, is when a local business contracts with another business local or not to take over certain tasks in the business.

These two terms get a bit fuzzy because they are often used out of context. For our purposes, we will use these definitions to make the distinctions between subcontracting and outsourcing clear. Now that we have a working definition for each term, let’s explore some of the key differences between them.

The first key difference is in the type of work that is contracted out. When local businesses, subcontract, it is usually for a specific project with a defined scope and timeline. Outsourcing, however, is often used for ongoing tasks or those that are more general in nature.

The second key difference is in who local businesses contract with to complete the work. When subcontracting local businesses typically contract with other local businesses that they have a relationship with, or that come highly recommended. This allows for better communication and collaboration since there is usually a personal connection between the two parties. Outsourcing, on the other hand, is local businesses contracting with businesses that are both local and not that they may have no previous relationship.

The third key difference has to do with cost. When local businesses, subcontract, they are usually able to negotiate a lower rate since they are working with another local business. Outsourcing often comes with a higher cost since businesses are contracting with an outside company that may charge more for their services.

Now that we’ve explored some of the key differences between subcontracting and outsourcing, let’s look at when each option is appropriate for your local business.

Subcontracting is typically best for short-term projects or those with a defined scope and timeline. It is also a good option when local businesses need to contract with another local business that they have a relationship with, or that come highly recommended.

Outsourcing is often best for ongoing tasks or those that are more general in nature. It is also a good option when local businesses need to contract with a business that they don’t have a relationship with and that may be located outside of the area.

I hope this video has helped you understand the difference between subcontracting and outsourcing and when each option is appropriate for your local business.

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