How to Outsource Your Business Functions the Right Way

Ivan Widjaya·June 29, 2009

With today’s uncertain economy, bootstrapping and going frugal are the most sought after business strategy. Like it or not, business owners are pushed to count every penny (and even to count their blessing.)

Outsourcing is often coming up as a solution because it offers business owners two major benefits:

Cut costs and other resources
More resource to do what’s more important

Not all outsourcing is good – Some do result as intended, but some are actually leaving the business owners with more costs related to outsourcing (in addition to the existing overheads); Instead of cutting cost, outsourcing the wrong way cost you money, even a loss in revenue. Knowing what and when to outsource is key – You can read about this in my previous post about outsourcing dilemmas.

Here are some tips to outsource your business functions the right way:

Eliminate unnecessary business functions first, outsourcing second
Tim Ferriss suggested in his bestselling book, The 4-Hour Workweek, that before doing anything related to outsourcing, you need to eliminate unnecessary and counter-productive business functions. If not, outsourcing such business functions will actually do your business worse.
Outsource repetitive tasks
Obviously, you wouldn’t want to outsource your decision making. Some examples of repetitive tasks would be: Order fulfillment, customer service inquiries, and products assembly. That being said…
Don’t outsource important functions, unless you are sure that your outsourcing partners deliver quality.
Outsourcing your product design, content creation and other important business functions is trivial – Partnering with the wrong company will leave you end up with more costs and overheads, as you need to rework the sub-par outsourced products or services.
Study the outsourcing market
You should do some “window shopping” and look for the best value for money. Chances are, your outsourcing partners also outsource their business functions to other companies or individuals. Knowing what you receive for the money you pay can help you decide which partners are better than the others. Just remember, lower cost doesn’t always mean better – Judge well.
Know when to outsource
The basic rule of thumbs: If outsourcing directly affects your bottom line in a positive way, just do it.