Outsourcing is a great way to allow you to focus on what you can do to add the most value to your firm. If you’ve ever asked yourself how should I outsource, you will realise that outsourcing is more prevalent in the small business world, but:
- What is outsourcing in a small business?
- Why should I outsource part of my firm?
- How should I outsource in my firm. What should I do?
- What are the pitfalls of outsourcing parts of my firm?
How should I outsource – payment methods
Motivation is important in business; this is often about how people are paid! Think about it when outsourcing. Two common types of payment methods are:
- “Fixed Price” – The provider completes the specified tasks and gets a fixed sum, regardless of time taken. The provider takes more risk and the perception maybe that they will “cut corners”, so it can be conflict prone. This was certainly relevant when I recently had some rebuilding work done.
- “Time and Materials” – The provider charges for however long it takes. This might be asking for a concerned buyer to micro-manage the whole thing, which can lead to conflict.
It maybe more relevant to combine both or get even more creative. For example, web design might be at a fixed at a price per page but subsequent changes paid at an hourly rate. This combination could save money, and avoid conflicts by aligning the interests of the buyer and the provider.
More radical still might be to build in an element that relates to the results, it’s easy to think of that with something like telemarketing (paid per successful lead) – but how about ongoing website maintenance?
Does the project split into two with one part well defined (unlikely to change) and the other less well defined and perhaps needing change as you see results? Could you fix the price for the well defined part, while agreeing upon an hourly rate for the rest? We recently agreed to pay a graphic designer a fixed price and then an ongoing retainer.
As you get more advanced…
Several years ago I worked for a company that outsourced all of its personnel management, there was uproar. It’s now something that complex is common in larger companies. Can you outsource more than you first thought about?
- Having started with the smaller and simpler processes, take a second look at specialised services (often the most expensive in your business), ask yourself the daring questions “can I outsource them”.
- Start small and send out chunks of them to lower cost providers who can do the simpler components of the task for less.
- Expand the relationship as both sides become more confident in handling the additional complexity.
- For the projects you are outsourcing, see if some of the activities you do before and after the project can also be done by your outsourcing partner.
Click “6 tips for successful outsourcing” to learn how to do it well now that you’ve decided outsourcing is right for you.
Have you ever asked yourself how should I outsource, and what will move you on to the next step?