What Is Nearshoring And Why Is It A Popular Option For Businesses?

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When running a small business, you’re naturally going to be spinning a lot of plates. And there will be times that you just can’t do everything yourself. 

There’s no shame in that. We can’t be masters in everything. If you’re running an electrical supplies business, you can’t be expected to also be an expert in accounting. 

When those situations happen, there’s an easy solution: get someone else to do it. By outsourcing work to someone else, you save time and effort trying to complete it yourself and ensure that only quality work is being produced. Using an accountant to look after your accounts will be far more efficient than just ‘having a go’ yourself. 

When it comes to outsourcing, there’s a particular type that’s growing in popularity: nearshoring. In this guide, we’re going to tell you everything you need to know about what is nearshoring and why it might be a good option for your business. 

What is nearshoring?

First and foremost, let’s tell you exactly what is nearshoring.

The meaning of nearshoring is to outsource services to another company from a nearby geographic location. 

For instance, if you need a new brochure design for your UK-based company and use a company from France to complete this for you, you are nearshoring this work. 

Nearshoring is used by a lot of businesses worldwide, including big corporations such as Whatsapp, which nearshored most of their development workload to Eastern Europe. 

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What are the benefits of nearshoring? 

Nearshoring can bring a number of advantages to your business when used right. These include: 

1. It saves you time and resources 

If you don’t have to complete a piece of work by yourself, you’re saving time and resources that can be better used elsewhere. 

For example, let’s say your business needs to submit your annual returns to HMCR. Now, you could spend hours reviewing your accounts, working out what information you need, filling out the forms, then double-checking to make sure that you’ve done everything right… 

Or, you could get an accountant to do it in half the time, with more insights and knowledge to make sure that it’s right. Then all that time you’ve saved can be spent working on your business. 

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2. It’s cost-efficient 

If you cannot facilitate a particular service or level of work right now, one option you might consider is to hire a team or a specialist to work within your company. 

However, nearshoring work is far more cost-efficient than hiring. Although hiring would give you long-term gains, the cost that you’ll pay on wages, resources, equipment, or internal training to upskill members of your team greatly outweighs the cost to outsource to a 3rd party. 

Sometimes nearshoring can be the most cost-efficient solution to parts of your business.

3. You’ll be working in similar timezones 

Because nearshoring is all about working with people in similar geographical locations, your time zones shouldn’t be more than an hour apart. 

This means that unlike working with someone in Australia, or India, you’ll be able to call and talk to them as you would any other client based in your country. There’s no getting up early or taking 3 am phone calls to talk to each other, helping to regular your working day. 

This also helps with communication, so you can always get in touch at a moment’s notice and know they will be around to help. 

4. Communication will be easier 

By nearshoring to similar geographical locations, the chances are that you will have similar values, culture, and language with the country. This will make communication easier, ensuring that you and your contractor understand each other. 

With better communication, the easier it will be to brief and regulate the quality that you get back from the work. This will, in turn, save your business time and further costs going forward. Everyone wins. 

5. You can grow your business 

The main reason to nearshore in the first place is that it takes a piece of work away from your business. Without having to complete it yourself, you free up time and resources to focus on your own business. We’ve covered this point before, but it’s worth expanding on what else this offers for your business. 

As well as short-term gains, nearshoring also provides long-term advantages, such as opening up your business to new markets. 

This could happen in one of two ways. The first is that you open yourself up to a geographical market by creating more contacts in the location that you have nearshored to. The second is by offering a new service by using nearshoring to fulfil the request, earning new customers and thus growing your business. 

6. You get the best talent 

If you only search for contractors or companies within your specific region, you lower the amount of talent that’s on offer. By widening the net, you open your business up to more talent and potentially better matches for your business. 

It’s like realising you can fish in a lake when you’ve spent hours trying to catch a carp in a back garden pond. 

Expand your search, increase your chances, and secure the best for your business with nearshoring. 

The disadvantages of nearshoring

Language barriers are one of the biggest disadvantages of nearshoring your business.

Okay, we’ve talked about the advantages that nearshoring can offer. But in the spirit of being fair and giving your business a thorough understanding of nearshoring, we need to talk about the cons. 

  • It might be difficult to find the right talent for your project, or their costs may exceed the budget you’ve set. 
  • There could be a language barrier in nearshoring. For example, although the UK and France are close, if you don’t share a common language you won’t be able to communicate and take advantage of the nearshoring benefits. 
  • Potential new rules and legislation to navigate. Depending on what service you’re nearshoring, there might be different rules and legislation in the country that you’re nearshoring from that impact how the service is carried out. 

Generally speaking though, these are the risks that could be associated with any type of outsourcing, not just nearshoring. For your business, you need to look at the wider picture and see if the pros outweigh the cons.

How does nearshoring differ from outsourcing? 

Outsourcing is where a business will hire a contractor, freelancer, or company to offer a service or complete a piece of work. It’s normally used when the business doesn’t have the in-house skill or time to complete the project and provides them with a cost-effective solution to the problem. 

Nearshoring isn’t different from outsourcing, it’s a type of it. Nearshoring is when you outsource a service to a company or contractor in a nearby geographical region. 

Outsourcing is the broad act of contracting someone else to provide a service for your business and can be facilitated in a number of different ways. Nearshoring is just one of those ways.

What are the other different types of outsourcing 

As we outlined above, nearshoring is just one type of outsourcing that a business can use. It’s not the only option on the table though. 

As well as nearshoring, businesses can make use of two other types: onshoring or offshoring. 

Onshoring vs nearshoring 

Onshoring is the act of outsourcing to another city in your country, therefore keeping the work on the same shore. (Onshore, get it?). 

For example, if you’re a company based in London, you might find slightly cheaper rates outsourcing to a contractor in the north, rather than using another London-based company. If you’re both in the UK, you also eliminate language and time zone barriers, improving communication. You are also under the same obligations and legal limitations, meaning you don’t have to double-check requirements for your nearshored location. 

However, when compared to nearshoring, onshoring can have a higher cost and a limited talent pool, depending on the service that you’re looking for. If budgets are tight for your company, you may want to consider nearshoring rather than onshoring. 

Offshoring vs nearshoring 

Offshoring is one of the other kinds of outsourcing and it means that you are taking your business or parts of it to a further location than nearshoring.

Offshoring is the act of outsourcing to another country that is not geographically close to your country. So if you’re based in the UK, this could include outsourcing work to America, China, or India. 

When offshoring, you might find a lower cost than nearshoring. However, you’ll be faced with a lot more hurdles and potential problems, such as:

  • Different timezones, making it hard to find a common work time where you can communicate with each other.
  • Different languages, cultures and values, making it difficult to find a common ground and agree on the quality of work that you are receiving.
  • Legal and tax issues, as the offshored country, will have different laws and regulations that you need to take into account.

When you’re facing hurdles like this, sometimes it’s just easier to pay a slightly higher cost for better communication and quality on offer by nearshoring. 

What is nearshoring and is it the right call for your business?

Nearshoring is a great way to outsource work overseas while keeping the same values, language, and values as your business. If you’re considering different types of outsourcing, then it’s worth considering the general rules when it comes to the output and cost that you’ll encounter. 

  • Onshoring: The highest cost and fewest problems;
  • Nearshoring: A lower cost and small potential problems; 
  • Offshoring: The lowest cost and lots of potential problems. 

For a lot of UK businesses, nearshoring allows for a better quality of work for a more flexible budget. 

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Business4Beginners has been advising new businesses owners since 2013. The founder, Paul Bryant, has created, grown and sold several successful businesses and remains the editor and fact-checker of all content published on the site.
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