How to Save Money with Outsourcing

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Outsourcing can be a cost effective way to manage the myriad of tasks you have as a small business owner. Here are ways to outsource effectively.

The Best Business Functions to Outsource

If your business is simply not set up to do perform a specific business function, it's often more cost-effective to pay someone else than to set up your own system or gain the essential knowledge yourself.

It depends on a lot of factors, of course. How often you'll have to complete this task; how expensive set up is; how easy (or difficult) it is to outsource this task. Here are a couple of general principles:

1. If your business is not logistically set up to accomplish X business function, which must be done on a semi-regular basis but is very costly to do yourself, then you will probably save money by outsourcing.
2. If there is no one in your business with expertise on a particular business function or need, you'll get better quality by outsourcing and most likely save money over hiring a full-time employee to meet the need.
3. If there is some business function/need which your business cannot perform quickly/easily and or professionally, you'll often save money and improve quality by outsourcing.

A few common areas which might be cost-effective to outsource include:

• writing
• graphic design
• website design
• SEO research
• research (scientific, market, etc.)
• maintenance (of buildings, grounds, equipment, website, etc.)
• manufacturing
• packaging, shipping and/or order fulfillment
• customer service (call center)
• delivery
• marketing and PR

The Best Methods of Outsourcing

If you're going to outsource well, you need to do it right. Here are ten simple rules to help you.

1. Know your own weaknesses/areas of need. Outsource those, not what you're good at doing.
2. Assign an adequate value to the task you're going to outsource, so you know how much you can invest in getting it done. Knowing the overall value in terms of dollars saved or potential dollars made gives you a good idea of the type of outsourcing budget you should have.
3. Find a reliable specialist. Don't just hire Joe Bob from down the road because this one time he designed business cards for his Uncle and everybody liked them. Get somebody who knows what they're doing. That's the whole point.
4. Create clear terms and use a contract. Don't assume things like deadlines, delivery dates, payment terms, or guarantees. Speaking of guarantees...
5. Ask for a guarantee.
6. Give specific directions. Do NOT assume your provider can read your mind.
7. Set deadlines.
8. Follow up and check in at predetermined milestones. This may not be necessary for small projects, but for most it's a good idea to have a couple of predetermined check-in points along the way. Otherwise you may end up at the end of the project with something that looks totally different than what you want.
9. Give feedback. Do so at each meeting you have, any check-in points. Make your feedback helpful and specific so the person or firm you hire can do something with your critique. General statements like, "it just doesn't feel right," or "this isn't what I pictured," really don't help.
10. Pay promptly. If you have found a provider you can trust, you want to be on their priority list. You'll lose that place if you mess around with payment. Trust me on this: as a person who does outsourced work regularly, I will take a job worth less if I know the client will pay promptly versus taking a job that might pay more but will require me to chase a client for full payment.

The Best Techniques for Saving Money on Outsourcing

Now, if you've figured out what you should outsource, and you're able to follow through with the right method of outsourcing, you can use these techniques to save even more money on outsourcing.

1. Outsource what is actually valuable to you. If your business does 90% of your marketing online, directing people back to a website, you can and should have a professionally built website. Invest the money and get that done. But when it comes to business cards, DIY.
2. Set up a scheduled payment plan. This can keep you from having to dole out a huge chunk of cash all at once. Ask for extended terms, make a deposit, pay a portion at completion, and the remainder 15 or 30 days after, if your provider will agree.
3. Negotiate. Really. Just ask for a better deal or an additional product.
4. Ask for a sample.
5. Ask for volume discounts.
6. Set up an ongoing contract. Many freelancers will give you better rates if they know they can count on continuing business. It saves them some time marketing and establishing new clients, and it saves you the time and effort of finding reliable specialists.
7. Guarantee an X amount of work. If you've not able to establish a contract, perhaps you can at least guarantee some dollar amount of work to your provider and get a discount.
8. Offer to trade. Bartering has been around a long time for good reason.
9. Build relationships.
10. Ask for referral discounts or credits.
11. Above all, be fair and direct in how you outsource. If you find people who are trustworthy, do excellent work, and deliver on time, you'll save more money in the long-term by using them for your outsourcing, even if you have to pay a little more initially. Quality work deserves fair pay, and as you build relationships and establish ongoing work, you'll be able to get high-quality work, and you'll be saving time, effort, and money at the same time.

That's not just smart outsourcing. That’s smart business.