During these times of great uncertainty and the persistence of unstable global economic conditions, outsourcing remains the best solution for your business. As a process, it will help you streamline costs and maintain a degree of profitability even if business activity is slow.
But not all outsourcing partners can get the job done. It’s not just because there are unqualified service providers out there. You must also do your part to ensure the success of the outsourcing arrangement.
Here are 8 tips for finding the best outsourcing solution for your business:
- Research on Outsourcing
Some businesses make the mistake of jumping on the outsourcing bandwagon without doing research. They believe its benefits are automatic and immediate.
Unfortunately, they realize that like all processes, outsourcing takes time. It faces challenges and not all service providers are effective. Research opens your mind to all the possibilities. It helps you anticipate the challenges that lie ahead and develop an understanding of what to expect during the process.
In addition to online research, interview businesses that have outsourced and learn from their experiences. The more you know, the better you will be prepared to move forward with outsourcing.
- Review Your Business Model
Now that you have a firm idea on what outsourcing is, you can apply your new-found knowledge to your business. The next step is to review your business model and identify what services you want to outsource.
There are 2 ways that you can go about this:
- Identify your core from the non- core functions. Core functions are the activities that are directly related to the main enterprise.
For example, if you run an e-Commerce website your core functions would include finding wholesalers, attending to orders, keeping track of deliveries and managing inventory.
Non-core functions are those that do not fall under your core competencies or are not related to the main enterprise. These could be administrative tasks or specialized such as customer support, digital marketing or accounting.
- If you want to take the more conservative route, simply outsource the administrative tasks like e-mail filtering, calendar management, appointment setting, phone handling or back office tasks like accounting and IT. The risks will be lower and you will get a feel for outsourcing.
Create a list of the services you plan to outsource and include specific details on the scope of work involved in carrying out these tasks.
- Draft a Business Plan
Before meeting with any potential service provider, you should have a constant point of reference or blueprint of your outsourcing venture. This is similar to the Business Plan that is prepared when you are starting a new enterprise.
Granted that you probably have no experience in outsourcing and the Business Plan could have flaws and misconceptions despite doing all the research.
These flaws can be remedied as you move forward and meet with the potential outsourcing partners. You get a better idea of the intricacies involved in outsourcing and are able to introduce revisions accordingly.
The Business Plan should include a market study which covers facts and figures on the industry, its history, recent developments and relevant statistics. It should also present a financial study which outlines the baseline numbers for reviewing the pricing points given by the service providers.
Outsourcing does reduce cost but you should not be swayed by an agency that offers the lowest rates.
For example, if the agency quotes a rate of $4 per hour, would you accept this knowing the average wage rate in the region is $2.50? How much would they allocate for Internet, rent, contingencies and power while still recording a profit? Something has to give under those tight margins.
- Create an Outsourcing Team
If the Business Plan supports the outsourcing venture, then the next step is to assemble an outsourcing team. It should be composed of people with the skills and experience various areas of outsourcing. These should include the following:
- Human Resources – Oversee recruitment process; provide manpower guidelines.
- IT – Review and evaluate technological profile of the service provider.
- Training and Development – Prepares the manuals, syllabus and coordinates with the training schedules of all personnel.
Whenever you meet with potential outsourcing partners, the team should be with you.
- Create an Outsourcing Framework
The framework is a rough depiction on operational work flows from all the key areas of your business. The purpose is to come up with a draft of a framework that can become the foundation of a holistic operational system.
You can indicate the tools and processes you want in place such as programs and types of equipment. But keep in mind these can and will change as you collaborate more closely with your outsourcing partner.
Eventually the framework will be integrated with the appropriate tools, work flows and processes to become the outsourcing operational system.
- Set the Qualifications of the Service Provider
Now you’re ready to launch the search! With your team, draw up your ideal qualifications for the Service Provider. The list should include the following:
- Level of Experience
- List of Clients
- Online Presence
- Results of Due Diligence Work
- Case Studies
- Core Competencies
- Expertise in Various Systems
In the same manner, create a list of potential red flags:
- Lack of Website
- Non- Mobile Responsive Website
- Lack of Online Presence
- Aversion to Audio Video Meetings
- Aversion to Presenting Clients
- Aversion to Providing Case Studies
Having a list of qualifications and setting the conditions will help reduce the risk of contracting spurious service providers.
- Acquire a Shortlist of Potential Service Providers
There are many sources you can use to find the best outsourcing partner for your business. These sources include the following:
- Online Job Platforms
- Social Media
- Regulating Agencies
- Focus Groups
Use your qualifying list to identify potential candidates and as a reference guide when you have to post on requirements on social media and other online channels.
Subject all applicants to due diligence work right away and eliminate those who have potential red flags.
Acquire a list of at least 5 pre-qualified prospects then implement the following conditions:
- Submit pertinent documents to authenticate prospect’s capability to conduct or transact in business. This includes:
- SEC or Trade Department papers
- Financial Statements for the last 3 to 5 years
- Any certificate of good standing from a government accredited agency if available.
- Submit portfolio of work.
- Provide references to attest to quality of work and business trustworthiness.
Those who comply will be invited to an audio- video interview. You should expect a prospective agency to forward a Request for Information or RFI as its basis for formulating its formal business proposal.
- Finalize the Contracts
Once you’ve gone through the entire qualifying process, list the prospects according to preference. Negotiate with the first agency on your list.
- Finalize the pricing. Many arrangements never push through because they could not reconcile the pricing points. Always keep in mind that a negotiation should be seen from a protagonist perspective.
You should not expect to get 100% of what you want. Negotiation is give and take. The outsourcing partner is within their right to protect their profit objective.
After all, no one works for free unless it’s for charity. In fact, you should view it as a potential red flag if a service provider is too eager to reduce prices.
- Forward copies of the contract for review. As the client, you should provide the contract. The main stipulations should come from your end but the outsourcing partner must be allowed to negotiate these points. Contracts for outsourcing include the following:
- Memorandum of Agreement – Provisions that define the relationship between both parties including conditions of payment and the exit strategies.
- Service Level Agreement – Provides all guidelines in rendering service.
- Confidentiality Agreement – Establishes the conditions which result a serious breach in contract and defines the situations that could be seen as compromising security and integrity of data.
It should not take more than 5 days to finalize negotiations for the contract. Make sure the signatories of the contract include copies of 2 valid government- issued ID’s.
Once the contracts have been signed and returned, have these notarized. Submit hard copies to the outsourcing partner.
If it seems like a lot of time and effort goes into finding the best outsourcing solution, it is. But it will be time and effort well spent if you want your outsourcing venture to yield profitable results.
Felix helps small business owners hire virtual assistants and outsource tasks. He enjoys writing about marketing and outsourcing.