The Ins and Outs of Outsourcing

Businessman sitting at white table with hand drawn business concept background

By MJ Plaster

Before you leap into outsourcing, consider how it could affect established relationships with current employees and customers? It’s one thing to save money, but you don’t want to lose key employees or have customers run for the exit.

What Is Outsourcing?

The term “outsource” has two meanings:

  • To contract with a person or business to provide talent that doesn’t reside within your workforce. The talent you hire is “work for hire” or sometimes hired on retainer and must fall within IRS guidelines for contractors.
  • To offshore work to a country with cheaper labor.

Both forms of outsourcing provide a service that’s cheaper than hiring an employee when you consider employee overhead.

Outsourcing Saves Small Business

You can’t do it all.

Under Obamacare, small businesses that employ 50 or more full-time equivalent employees must provide health insurance to 95 percent or more of full-time employees and dependents up to age 26 or pay a fine (or what the Supreme Court calls a “tax”). And, Obamacare has redefined full time employment as an average of 30 or more hours per week.

The 50th employee breaks the bank. So outsourcing has never been more important to small business.

The devil is in the details. The trick is to outsource the right tasks to the right people under the right circumstances. How do you decide?

Step 1—SWOT Analysis

Before you create an outsourcing strategy, analyze your company’s Strengths, Weaknesses, Opportunities and Threats (SWOT). Download a free SWOT analysis template to guide you through the process.

Step 2—Plugging in Your SWOT Analysis

If you have vendors, then you’re already outsourcing. To determine other opportunities for outsourcing, start with the results of the SWOT analysis. Focus on weaknesses, opportunities and threats. Don’t try to fix what’s not broken by outsourcing your strengths.

  • Weaknesses – “Systems” is more than a buzzword. It’s the collection of processes to keep the business motor running smoothly. It takes organizational skill to devise these processes, and if that’s one of your weaknesses, hire a business consultant to help you devise and implement systems that work. Or, what if you could occasionally use an assistant? Virtual assistants are available for project work or on a recurring basis.
  • Opportunities – You’re probably so busy running your business that you don’t have time to mine opportunities or even to see those that fall at your feet. Marketing and public relations professionals can pluck opportunities out of thin air and turn them into revenue streams for you.
  • Threats – Do you run a nightclub? Are Friday and Saturday nights dicey nights for crowd management? Consider hiring a contract bouncer. If you’re too small to hire an information technology professional or a computer security guru, find one to put on retainer or one who is willing to be on call 24/7. They’re out there, they’re eager for work, and they’ll lock down your computer network as if it were Fort Knox.

The Charlotte Observer reports,

“Former Wells Fargo CEO Dick Kovacevich said Friday that regulations are ‘killing’ small banks and have contributed to the loss of more [than] a thousand of them since the financial crisis.”

Replace “small banks” with “small business,” and you get the picture–because regulations are killing small business. The Washington Post calls it the “ailing entrepreneur economy.” It’s not just compliance; it’s the mountain of paperwork mandated by the regulations.

Consider the artisan food processor who has to comply with many of the same provisions in the FDA’s Food Modernization and Safety Act as the corporate giants. The regulations are endless, and the fines are stiff. Multinational conglomerates have entire departments that deal with compliance, but this is not an option for small business. The only way to assure compliance is with the help of a qualified food-safety consultant. If your small business is a regulated business, it can save you a fortune (and maybe save your business) to outsource your compliance needs.

Step 3—Contracting Qualified Help

Nothing beats word-of-mouth. Start with your networks and ask for referrals to qualified sources. If you look for someone online, ask to see previous work and/or references. Many qualified professionals want to earn extra money with a side hustle. That’s your target market for project work.

Step 4—Staying on the Right Side of the Law

There are times that you want to work through an agency to avoid legal problems:

  • When you’re not paying on a project basis.
  • When you require people to work a set amount of hours at specified times.

When in doubt, work through an agency to steer clear of any IRS contractor versus employee problems.

Outsourcing on the Cheap with Fiverr: A Case Study

When you’re strapped for cash and you need creative help in a hurry, check out Fiverr.com. It’s the ultimate platform for Type A professionals who actively side hustle. I’ll show you how get the most out of Fiverr using my logo as a case study:

  1. Search for “logo.”
  2. View examples of each provider’s work along with comments from satisfied and not-so-satisfied users.
  3. Narrow your choice to two or three sellers and order multiple logos from each seller. If you want anything other than what the seller lists under the job, contact the seller before placing the order. If you have a tagline, provide that to the graphic artist when you order your logo.
  4. Place your order, and when you receive the confirmation along with a request for information, be as specific as possible about your needs. Sometimes a seller from another country suits your needs better than one closer to home. When working with a seller from another country, use plain English and write in short sentences.
  5. Review the order and ask for revisions if necessary.
  6. After you decide which logo to use, order all associated files, including print resolution (300 DPI) files, and Adobe Photoshop and Illustrator files.

I worked with two graphic artists. The first one did a nice job, but after living with the logo for a few days, I decided the style didn’t fit my image. So, it was back to the drawing board. Five logos ordered from two graphic artists produced the logo below for under $100, including one rush order, all files mentioned above and tips for a job well done.

outsource image

This is a classic use of outsourcing a one-off project—in an area where admittedly my talent could not fill a thimble. Good luck getting something like this in two days for under $100 from an ad agency.

Driving Away Loyal Customers—A Precautionary Tale

Dell Computers repeatedly disappointed customers who had paid an arm and a leg for premium tech support and next day, on-site repair. It was a nightmare dealing with their customer support when it was outsourced to every imaginable exotic port of call.

I had one of many such dealings on a Fourth of July. Two continents, four tech support reps and seven hours later, they promised to send someone the next day to repair my laptop. The last tech support rep admitted he gave in just to get rid of me. That was the final straw. For nearly a decade, I took my business elsewhere, which up to that point had amounted to over $10,000 per year.

I wasn’t alone. This trend swept the nation, and all because the company made a bad call on outsourcing. Finally, Dell caught on and insourced the customer service it never should have outsourced.

Today, I once again use Dell desktops and notebooks, but I use a third party for support and on-site repair. Once burned, twice shy. A company is judged not so much by what they provide when everything goes right—but by how they handle a situation gone wrong.

Your Outsourcing Experience

We’d love to hear your outsourcing success stories as well as your horror stories. Please share any lessons you’ve learned in the comment section below. And if you found this article helpful, you know what to do—share it.

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