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On Choosing What to Outsource

It seems that nearly every part of a business’ operation can be outsourced. There are companies that provide sales, accounting, shipping, and even manufacturing to small businesses. What are the general rules for determining whether to outsource part of my business?

This may go down as my favorite question of all time because it applies to every, single small business in America today.  Yes, one of the promises fulfilled by technology in the modern era is the capability of having third-party companies perform functions for our businesses better, faster, and even cheaper than doing them ourselves. The question, then, is not whether we should outsource;  it’s what should we outsource?

You’re asking for rules, so I’ll give you five of them:

  1. Don’t outsource any activity that is unique to your business’ brand or established reputation. There are things that your business does its own way because they contribute to its success. You shouldn’t outsource what makes you special.
  2. Do outsource functions that are done the same way by most businesses in your industry.  Things like accounting, shipping, and HR administration.
  3. Without violating rule #1, outsource functions that are high cost/ low return.  In other words, if it costs a lot of money or time to do but doesn’t increase profitability even if you do it well … stop doing it yourself.
  4. Never, never, NEVER outsource customer service.
  5. Finally, hold the outsource vendor as accountable as you would an employed manager.  Although you’ll be giving up direct control of how the work is done, outsourcing doesn’t mean you cede responsibility for the results.