If you’re wondering how to create and implement your own effective outsourcing strategies, you’re in the right place.
Outsourcing isn’t something exclusive to large businesses. Sure, larger companies can reap the benefits of outsourcing on a larger scale. However, outsourcing can be a valuable asset to even startups and small businesses.
Below, we’ll go deeper into how to develop your outsourcing plan.
What is Outsourcing?
This is the process of sourcing an individual or company outside your own to perform a task or take over a business function.
Types of Outsourcing Strategies
Offshoring outsourcing is hiring an international company or independent contractor to do work for you. Among the strategies of outsourcing, this is probably the most recognizable and most common.
Nearshoring outsourcing is similar to offshoring. The difference is that nearshoring is hiring a third-party from a country close to your base of operations to take over a duty.
Onshore outsourcing, as you may have guessed, involves hiring a third party within your own country. This can be a company or freelancer within your own state or region or even within your own city.
Advantages of Outsourcing
1. Cost Savings
Its cost-effectiveness is what leads many companies to begin constructing their outsourcing strategies.
Here are three ways you save money through outsourcing:
- No employee benefits and overheads
- Lower comparative rates from countries with lower costs of living
- Cost of tools, software, education, and equipment
2. Increased Efficiency
An outside team allows you and other team members to focus on other tasks. Often, the outsourced tasks are those that take a lot of time. Either that or they aren’t the most effective use of your skills.
As a business owner, you should be focused on growing your business. You shouldn’t leave core business on the shelf for necessary yet lower priority processes.
Also, developing your own in-house solutions can take a lot of resources. Ultimately, it would take a while before getting to a point where you can get fast results. This is where an outsourced team can be a worthwhile investment. Having worked with many companies, they have streamlined their operations. This allows you to do what you’re best at while they do the same.
3. Access to Specialized Expertise
With years of experience and expert driven processes, you can’t really go wrong. A third-party might have experience working with similar businesses as yours. This means they likely have the expertise to know what will work best for you and your company. As mentioned, they can do things efficiently without sacrificing a lot of quality. They typically have their own tried-and-true processes. They’ve tested and know which course of action will yield the best results. Knowing how to handle errors and find solutions to problems quickly is also an advantage.
Steps for Developing an Effective Outsourcing Strategy
1. Define Goals and Objectives
Before you even start canvassing for potential outsourcing opportunities, you should have a plan. As the old adage goes, “Failing to plan is planning to fail.” It may be a cliché, but some clichés can be the best advice.
So, what would an outsourcing plan look like?
The Big Goals
Well, for starters, you want to know what the endgame is. Identify what you hope to achieve by outsourcing. Often, this process involves pinpointing problem areas and evaluating your pain points. This “painpointing” allows you to first justify the need for outsourcing. Not only that, but it also provides a benchmark to monitor progress.
If your goals are your main destination, then you can view objectives as milestones or checkpoints. It’s valuable to break down goals into smaller obtainables. For one, it makes the goals seem like less of a major undertaking. Another thing is it gives you a more concrete picture of the journey towards the finish line.
2. Identify the Right Partner and Negotiate Terms
Now is the time to begin your research journey. There are several ways you can find outsourcing partners. You can try freelance websites, agencies, social media, business networking sites, and recommendations from business friends.
What should you look for when picking the right outsourcing partner?
Reputation – How can you know that a person or business has the skills to back up their claims? One word – reviews. Reviews give you a glimpse into what your experience might be like looking for a partner.
Experience – How many years have they been in business? How many companies have they worked with? Are they similar in size to your business? Have they worked with businesses in your industry?
Pricing – Flexible pricing plans mean you can scale together with them. You want someone who can cater to your needs without charging you a fee for services you won’t use.
After you’ve chosen the correct partner, it’s time to.discuss the terms of the agreement. This involves questions such as: How long is the project for? How much are the rates? What are the payment terms? What are the exact roles and responsibilities of the job?
3. Establish Clear Communication Protocols and Procedures
Communication is key. It’s another cliché that holds water. This can already be a struggle with teams who physically interact with each other on the daily. Imagine how much more difficult it can get with virtual partners.
That’s why it’s important to have protocols in place for virtual meetings and remote teams. Setting up the proper comms channels early on is essential for you to succeed in your outsourcing strategies.
You need to determine what platforms to use, how often to meet, and at what times. This is especially important if you are working in dramatically different time zones.
Consider coming up with a communication SOPs (standard operating procedure) as well. These SOPs provide step-by-step instructions on who to communicate to, where to communicate, and how often. For some, this might seem excessive. To others, this can save a lot of hassle down the road.
4. Monitor Progress and Performance Regularly
The checkpoints we talked about earlier can help with progress reports. We can use checkpoints as the basis for “check-ins” with your outsourced team.
When you hit a milestone or due date, these are great opportunities to touch base with your team. You can discuss the status of the project. Are things running on schedule? Were there any hiccups along the way? How is the outsourced team doing? Are there areas that the outsourced team thinks you can improve?
These are good questions to be asking. Remember, just because they are an outsourced team, doesn’t mean you shouldn’t be concerned for them. Whether in-house or outsourced, maintaining good relations is never a bad idea or a waste of time.
Best Practices for Outsourcing
1. Set Realistic Expectations
A lot of business relationships fall apart when you do not clearly define roles and responsibilities.. These provide a framework for your partnership.
- Listing the tasks needed accomplished
- The level of skill and experience required
- Education requirements
- Specialized knowledge needed for tools and software
Clearly communicating the job description is so crucial. This sets up expectations for your partnership moving forward.
Outsourcing companies can make all the promises they want. It is still your due diligence to research people and teams who you believe fit your needs the best.
All your strategies for outsourcing will benefit greatly from you taking initiative and responsibility early on.
2. Establish Performance Metrics
This process includes creating and setting up KPIs or Key Performance Indicators. These are measurable targets to aim for during your operations.
These can be customer satisfaction, gross and net margins, customer lifetime value, and much more.
The KPIs you set up ultimately depend on your goals and objectives.
3. Maintain Transparency
First, you need to know your needs. Second, you need to be open and honest about your needs. If you don’t communicate these effectively to your outsourcing partner, they won’t be able to help you.
This includes letting them in on any mistakes you’ve made. Some people have this notion that by revealing the flaws in their business, they compromise themselves. You compromise yourself by not addressing a flawed process or system that you have in place.
If you don’t know what your needs exactly are, that’s not something to be ashamed of! Some outsourcing solutions provide guidance if you need it. You simply need to communicate clearly with them.
Frequently Asked Questions
What type of work is commonly outsourced?
According to Blackbear’s top outsourced services, the list includes:
- Social Media
- Data Security
- Customer Service
We also have a list of 101 tasks you can outsource to a virtual assistant.
What are the disadvantages of outsourcing?
- Lack of control
- Data security risks
- Time zone challenges
- Cultural challenges
How do I reduce the risks of outsourcing?
- Set clear goals and expectations.
- Do extensive research.
- Hire from a reputable marketplace/ hire a reputable agency.
- Establish clear communication channels as early as possible.
What Is Outsource School?
Outsource School helps you to unlock the potential of virtual assistants and accelerate your business growth.
Since being founded in 2020, Outsource School has helped 1,000+ business owners hire 2,000+ virtual assistants for their companies.
Free resources you might like:
- Outsource School Case Study: How We Scaled to 45+ VAs and 8 Figures in Revenue
- Free VA Calculator | See How Many VAs You Can Afford
- Free Training on 5 Keys to Working With VAs
- Learn Outsourcing 101 | Guides, Downloads, and Checklists
Our goal with this post is not only to help you get started but be successful. Outsourcing strategies can come in many shapes and sizes. This is one that we’ve seen work most often, and we hope it works out for you too!