You're at a crossroads with your business. So far you've been able to handle the work coming in on your own, but lately you've been getting more than you can keep up with. There isn't enough of you to go around, but at the same time you don't know if you can afford to hire another employee.

Outsourcing could be your answer.

"Outsourcing can mean different things to different people," explains Mark Towhey, president of the human resources group TOWHEY Consulting. "Basically it's paying an outside source for something you might otherwise be able to do yourself."

When to outsource
Your first inclination may be to hire someone, even if just on a part time basis. However, this may not be the best solution. If you decide to outsource you get the benefits of experience without having to spend the time training that individual, or offering them other benefits that you may not be able to afford.

"Often we see small businesses growing to the point where they lack one of four things to get something done. They either don't have the time, they don't have the skills, they don't have the experience, or they don't have the knowledge," says Towhey.

Towhey explains that business owners probably could get the knowledge they need if they had the time. However, this is time that could be better spent growing the business. Finding someone who already has the knowledge could seem like an unnecessary expense, but the expertise can pay off and create more business in the future.

What to outsource
The first place that many small business owners begin to outsource is their bookkeeping. This aspect of the business can start to become very time consuming and complex very quickly. As you increase your sales and profits and hire on new employees the accounting side will continue to grow.

Another reason why bookkeeping and accounting is a common area to outsource is that it doesn't have an impact on the day to day workings of your business. In other words, how you pay someone doesn't add any value to your customers, as long as the employee is paid.

"If it's a function that your customers don't see, and you're not competing in it or directly value it then it might be something that can be outsourced," says Towhey.

You may want to consider trying an automated payroll system. You can get these capabilities with software such as Simply Accounting or QuickBooks, or through companies that have designed their own specialized programs for this purpose. However, you have to be comfortable using these programs for them to be a real benefit.

"Deciding on what type of service to use depends on your comfort level," Towhey says. "If you're on the computer all the time and it's easy for you, that's great and this may be the best solution for you. If that's not something you normally do, and it takes you 15 minutes to fill out the forms and send them, where it only took 10 minutes to write the cheques you may want to reconsider."

Access to experts
Outsourcing can also be a good way to get expertise that you require. Marketing is a good example of this. Marketing experts, or consultants, have a proven track record for creating work that gets results you may not be able to get yourself.

"Outsourcers come in different sizes and shapes," explains Towhey. "There are consultants such as ourselves, there are professionals such as accountants and lawyers, and then there's tactical service providers like payroll companies, or cleaners."

If you find that you're relying on these experts more and more then you may have reached a point where it makes more sense to hire a new employee. Keep in mind that while you may have turned to outsourcing to save time and get experience, you are also looking to make the most economic decision. Consultant fees can start to add up quickly.

What to avoid
Where you want to avoid outsourcing or contract work is when the job is essential to what your business does and what you are known for. For example, if you were a baker known for the pies and cookies that you make on the premises you wouldn't want to have these goods brought in from another supplier where their quality could suffer.

Towhey points out that you can find this key work outsourced in some well-known big businesses. However, customers go there because they recognize the brand name, an advantage that you may not have yet.

Get it in writing
It is always a good idea to have a written agreement of the work contract. This way you both understand what's expected. You get what you paid for, and the contractor or consultant knows what to deliver. While Towhey feels that a contract or written agreement should be drafted, he acknowledges that this isn't always the case and a lot of people will use a consultant based on verbal agreements.

"I would say that it makes sense from everyone's perspective to have pretty clear milestones that are pegged to the payment. Typically, choices include billing the contractor every two weeks based on the amount of hours that have gone into it. Another way is to have specific performance objectives and you pay for each stage of work completed. That way the both sides are trying to manage risk, the business owner doesn't pay until the work is done and the contractor isn't doing work they won't be paid for."

Written agreements are also a good idea when there is some sort of intellectual property involved. If you hire someone to create a company logo for you, you don't want to start seeing that logo show up everywhere. From the designer's perspective they may want the right to use this work in their portfolio or on their own website. Both parties need to talk about who actually owns the work and how and when it can be used.