flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

Factors Startups Must Consider before Outsourcing Manpower and Services

Editor's Note: Take a look at our featured best practice, Five Stages of Business Growth (25-slide PowerPoint presentation). This presentation introduces a framework for entrepreneurs to use when building and navigating their business from a nascent, startup state to an enterprise with a global footprint. This framework, called the 5 Stages of Business Growth, is based on the fact that all businesses experience common [read more]

* * * *

Starting a small business is a different level of gambling. You have to consider many factors, but the most critical is how you’ll introduce your brand to your clients.

Startups engage in outsourcing when they contract third parties to do jobs, conduct operations, and provide services for the business. According to the businesses that profited from it, outsourcing can reduce labor costs by 70% for startups.

Pre-outsourcing Evaluation

Outsourcing has several advantages, but the most notable is that it allows you to build your brand before launching your campaign in earnest. This reason alone can convince startups to outsource, but they should also consider the following issues influencing their outsourcing decision.

Cost of Outsourcing

Many startups fail because of the initial overconfidence they have in their finances. Remember that there are many ways to finance a startup, especially if you’re creditworthy. There are even loans available over the phone, but repaying them requires a lot of discipline and commitment. So, try to be practical in all of the undertakings as much as possible.

Outsourcing, as previously said, reduces the company’s costs, especially in staffing. The outsourced task involves billing, but in many cases, the costs are lower than they would be if your business performed the work internally.

Additionally, in-house development costs cover increased salaries, incentives, and even hardware and software costs. With outsourcing, aside from the compensation of the remote developer or offer, if you hire an outsourcing provider, you have to pay for the software licenses if necessary.

Comparing outsourcing expenses with in-house development costs is the most dependable way to determine how much you’re spending and how much you can save from your operations.

Keeping the Business Reputation

Joblessness and reduction of competitive edge are all results of outsourcing, leaving some employees stressed out. So, to start right, communicate to any employee who may be affected by the decision.

Take note that employees who feel that someone from an outsourcing company will replace them may be furious. As a result, these individuals may lose loyalty to the company and become demotivated in their job.

If employees believe they’ve been unfairly treated, they may resign and establish their own business, thereby competing directly with their previous employer. They can also spread negative sentiments and bring such on social media, the result of which could significantly affect the company’s reputation.

Sample Outputs

Through social media,  it’s much easier to learn how clients feel about a provider. If this seems impossible, consult past and current clients for feedback on their services and any difficulties they encountered during the collaboration.

The organization’s website may also have several case studies that can be used to familiarize yourself with the finer details of the company. In addition, use existing projects or marketing concepts as samples to get an idea of what you’ll be enjoying after signing your service agreement. Finally, as a reliable indication of service quality, ask potential partners for their NPS score.

Ease in Communication

Many outsourcing errors are due to communication issues. Assuring seamless communication channels involves certain features. Make sure to test their service to see if it has the current technological innovations in communication. To avoid failure, make sure you’ve invested in solid collaboration tools.

Assuming you’re in a different time zone, check if your working hours are in sync to avoid communication gaps.

Onshore or offshore, communication is the foundation of a successful collaboration. Ideally, your provider will be able to develop communication and plan that minimizes project delays, uncertainty, and stress on the people involved.

Outsourcing Contract

There should be no room for mistakes and misunderstandings on either side of the outsourcing agreement. Aside from IP protection and non-disclosure agreements, the contract also contains other clauses like the pricing, schedule, and timeline.

An expert in contract law should draft the contract for you. Hiring a lawyer is a brilliant idea to seek explanations on the topics that have been included in the contract.

It’s essential to pay close attention to the contract and its provisions before signing it. Upon receiving the outsourcing contract, you must carefully read what is written and analyze the matters discussed there.

Hidden Costs

You have to know that offshore outsourcing is not as cost-effective as it is believed to be. Even after writing the predetermined cost through a contract, contractors might still charge for work that is not included in their agreement.

Look into any hidden costs associated with project execution and personnel training that could incur additional charges for your company.

Aside from contracting costs, there are many other hidden expenses associated with outsourcing, such as server costs and knowledge transfer costs, among others. Assess your risks and manage them successfully by choosing the right provider for the needed job.

Takeaway

Apparently, the preparations don’t end the moment you render the capital. For this reason, it’s essential to work with the best strategies and planning suitable for the business. For example, you should be able to consider external agreements with third parties through outsourcing. But, of course, you can only do this if you consider the things mentioned in this article.

Excel workbook
New Version - Massive Update !! This updated version of the previous template is almost a completely new model including new assumptions, new Setup Reports and new and updated Output Reports. Creating a financial plan is the roadmap that lays out the path for your company's future financial [read more]

Do You Want to Implement Business Best Practices?

You can download in-depth presentations on Entrepreneurship and 100s of management topics from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.

For even more best practices available on Flevy, have a look at our top 100 lists:

These best practices are of the same as those leveraged by top-tier management consulting firms, like McKinsey, BCG, Bain, and Accenture. Improve the growth and efficiency of your organization by utilizing these best practice frameworks, templates, and tools. Most were developed by seasoned executives and consultants with over 20+ years of experience.

Readers of This Article Are Interested in These Resources


56-slide PowerPoint presentation
The Lean Canvas is an adaptation by Ash Maurya of the Business Model Canvas. Four building blocks were replaced with new ones with the aim of making the canvas more startup-oriented. The adaptation emphasizes importance of clearly understanding the problem the customer faces. Beyond the canvas [read more]


 
Excel workbook
 
 
81-slide PowerPoint presentation

About Shane Avron

Shane Avron is a freelance writer, specializing in business, general management, enterprise software, and digital technologies. In addition to Flevy, Shane's articles have appeared in Huffington Post, Forbes Magazine, among other business journals.


Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]

  This 48-page whitepaper, authored by consultancy Envisioning, provides the frameworks, tools, and insights needed to manage serious Change—under the backdrop of the business lifecycle. These lifecycle stages are each marked by distinct attributes, challenges, and behaviors. [Learn more]

We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]

  We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  

The Flevy Business Blog (https://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most of our articles are authored by management consultants and industry executives with over 20 years of experience.

Flevy (https://flevy.com) is the marketplace for business best practices, such as management frameworks, presentation templates, and financial models. Our best practice documents are of the same caliber as those produced by top-tier consulting firms (like McKinsey, Bain, Accenture, BCG, and Deloitte) and used by Fortune 100 organizations. Learn more about Flevy here.
  


OUR CORE OFFERINGS
Flevy Marketplace: Top 100
· Strategy & Transformation
· Digital Transformation
· Operational Excellence
· Organization & Change
· Financial Models
· Consulting Frameworks
· PowerPoint Templates
FlevyPro (Subscription Service)
KPI Library
Streams (Functional Bundles)
Flevy Executive Learning (FEL)
PowerPoint Services

FREE Resources

About Flevy
Management Topics
Marcus (AI-Powered Consultant)
Partner Program
LinkedIn Influencer Marketing
FAQ / Terms / Privacy / Blog
Contact Us: support@flevy.com



CONNECT WITH US!
       
TOP 100 TRENDING TOPICS
Acquisition Strategy
Agile
Analytics
Artificial Intelligence
Balanced Scorecard
Best Practices
Big Data
Breakout Strategy
Business Continuity Planning
Business Plan Financial Model
Business Transformation
CMMI
COBIT
Change Management
Cloud
Communications Strategy
Company Financial Model
Competitive Advantage
Competitive Analysis
Consulting Frameworks
Continuous Improvement
Core Competencies
Corporate Culture
Cost Reduction Assessment
Customer Experience

BROWSE BY FUNCTION
Strategy, Transformation, & Innovation
Digital Transformation
Operational Excellence and LSS
Organization, Change, & HR
Management Consulting

Customer Journey
Customer Service
Cyber Security
Data Privacy
Decision Making
Digital Marketing Strategy
Digital Transformation
Digital Transformation Strategy
Due Diligence
ESG
Employee Engagement
Employee Training
Enterprise Architecture
Growth Strategy
HR Strategy
Hiring
Hoshin Kanri
ISO 27001
ITIL
Information Technology
Innovation Management
Integrated Financial Model
Kaizen
Kanban
Key Performance Indicators

ADDITIONAL RESOURCES
Business Strategy Frameworks
Case Studies
Consulting Training Guides
COVID-19 Trend Data
Digital Transformation
Financial Advising Services (FAS)

Knowledge Management
Leadership
Lean
Lean Manufacturing
Logistics
M&A (Mergers & Acquisitions)
Manufacturing
Market Research
Marketing Plan Development
Maturity Model
McKinsey PowerPoint
McKinsey Templates
Operational Excellence
Organizational Change
Organizational Design
Performance Management
Post-merger Integration
Pricing Strategy
Process Improvement
Process Maps
Procurement Strategy
Product Launch Strategy
Product Strategy
Project Management
Quality Management


Free Resources
KPI Library
Lean Management
Lean Six Sigma Training Guides
Marcus Insights
Operational Excellence

Real Estate
Remote Work
Restructuring
Risk Management
Robotic Process Automation
SWOT
SaaS
Sales
Scrum
Service Design
Six Sigma Project
Social Media Strategy
Strategic Planning
Strategic Thinking
Strategy Development
Supply Chain Analysis
Sustainability
Target Operating Model
Team Management
Total Productive Maintenance
Value Chain Analysis
Value Creation
Value Stream Mapping
Visual Workplace
Workplace Safety


Product Strategy
Small Business Owner
Startup Resources
Strategic Planning
Strategic Planning Process
Value Innovation Strategy


© 2012-2024 Copyright. Flevy LLC. All Rights Reserved.