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Key Factors to Consider When Outsourcing

Last Updated: September 08, 2023

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Key Takeaways:

  • Outsourcing can be a cost-effective strategy for businesses to increase productivity and profits by delegating tasks they don't want to handle themselves.
  • Finding the right professional will require using various recruitment venues, creating a clear Service Agreement, and making an action plan.
  • With careful planning, outsourcing can be a valuable way to concentrate on core business functions and stimulate growth.

When you’re running a business on a tight budget, you want a cost-effective strategy that increases productivity AND profits.
Done properly, outsourcing is a solution for a wide variety of tasks that a company doesn’t want to handle itself.
Still not convinced it’s the right strategy for you? Consider these nine key components of successful outsourcing.

Find the right professional

What’s the secret to attracting qualified workers? Write a thorough description of your ideal candidate and include it in your job posting.
The task or project you need help with will require a certain level of skill and experience. You might also prefer a contractor with specific traits, such as a positive attitude or the ability to work under time constraints.
Don’t forget to think about location: would a local or remote worker be better equipped to handle the job? If location isn’t a deciding factor, you’ll still need to weigh the pros and cons. Local service providers may be easier to hold accountable when enforcing the terms of a contract. On the other hand, remote workers might come at a lower cost.

Take advantage of recruitment venues

You may find that your ideal candidate is more likely to connect with you on one platform or another. So, don’t be afraid to explore different recruiting venues, including:

Create a Service Agreement

A written contract is crucial for establishing the terms of your business relationship.
Verbal agreements are unreliable. By creating a Service Agreement, you clearly state your expectations for all stages of work. This includes what’s needed to complete a project and the obligations of each party in the contract.
Although a business may hire both contractors and employees, these relationships come with different obligations and responsibilities. For instance, an employee:
  • Usually works exclusively for their employer
  • Works under the employer’s direction
  • Gets paid days off in their contract
On the other hand, a contractor may work for several different clients and has more autonomy over working hours, equipment, and methods. As such, a Service Agreement is essential for setting expectations.

If possible, set a deadline

Setting an exact deadline keeps the contractor coordinated with the rest of your team so that you can achieve your goals efficiently. If you want to discourage delays, add a contract term that withholds payment or otherwise penalizes the contractor. For example, you can pay the contractor incrementally at project milestones, or opt for a smaller (or no) deposit.

Set clear payment terms

To save money, you may want to refine the payment terms of your Service Agreement. Many service providers are willing to negotiate prices and accept various forms of payment. Research the average rate for the service and consider the value of the work you need to be done.

You can also write payment terms that help ensure the contractor completes the required tasks before they get paid. Some possibilities would be to pay a small upfront fee, 50% midway, or pay the full amount upon project completion.

Clarify intellectual property

If you’re outsourcing creative services, it’s crucial to specify the ownership of any intellectual property (IP) created under the contract to avoid potential conflict. This allows the rightful owner to capitalize on their work and prevent its unfair use by competitors. In some cases, the owner may also want to register the IP for further copyright, trademark, or patent protection.
It’s also important to remember that some IPs may be proprietary information—which brings us to our next tip...

Discuss privacy and security measures

Your service provider may need access to sensitive information to get their job done. In this case, you’d likely benefit from putting a confidentiality clause in your Service Agreement. Or, if you want a more thorough document, you could put a Confidentiality Agreement in place. This document may be helpful when a Service Agreement is already set up, but the contractor’s responsibilities change (giving them access to business information and increasing their fee).
Establishing rules on confidentiality helps ensure that the contractor doesn’t misuse your company’s information.

Create an action plan

Clearly defined responsibilities and end results are essential for completing a successful project. It’s important to have measurable goals and benchmarks. Without them, you’ll have a tough time proving the value of the hired help.

If you’re going to outsource work, you want to give the hired help a clear plan to follow. The earlier you make this plan, the more likely you are to avoid miscommunication with your contractor or freelancer. In turn, this helps you get the biggest return on investment (ROI) when outsourcing services.

Outsourcing to improve return on investment (ROI)

How you evaluate the ROI of outsourcing services depends on your company’s goals. For instance, you may have tangible goals that are easy to measure (e.g., putting out a certain number of products). On the other hand, outsourced help may free up valuable time for your employees (which may be trickier to quantify).
Regardless, you’ll have an easier time measuring your success if you begin with a thought-out action plan and a well-drafted Service Agreement.
In many cases, outsourcing is an effective way for companies to concentrate on their core business functions and ensure that other important tasks get done. Conduct the process properly by following these tips and you’re sure to stimulate your company’s growth and success. Good luck!