The first step in outsourcing is identifying what to outsource.

But figuring out what business functions might qualify can be overwhelming. What might seem like something that is a great candidate to outsource might end up being more trouble than it’s worth.

To help you cut through the confusion, I’ve put together this lesson to show you a simple process that I use in my own businesses as a way to figure out what I should keep in-house and what I should consider outsourcing.

How to Determine What to Outsource [Step-By-Step]

1. Start with Strategic Assessment

In order to effectively determine what to outsource, it’s important to take a structured approach.

First, start by distinguishing between core and non-core activities.

Core activities are those that are crucial to maintaining your competitive edge in the market; they are integral to your business’s unique value proposition and should generally be kept in-house.

In contrast, non-core activities, though they support your overall business operations, do not directly contribute to your competitive advantage.

These are often the most suitable candidates for outsourcing because they can be efficiently managed by external experts without compromising the core strengths of your business.

Next, identify tasks that require specialized skills not currently present within your team.

Outsourcing these particular tasks allows you to tap into specialized expertise on an as-needed basis, which can enhance the quality of work while avoiding the costs and commitments associated with expanding your in-house team permanently.

This approach not only brings in external expertise but also allows your business to stay flexible and agile in its operations.

Finally, conduct a cost analysis to compare the financial implications of performing tasks in-house versus outsourcing them.

This analysis should consider direct costs such as salaries and equipment, as well as indirect costs like training and ongoing professional development.

Outsourcing can often be more cost-effective, especially when external providers benefit from economies of scale and have optimized their processes to deliver services at lower costs with high efficiency.

This can result in significant savings and operational advantages for your company, allowing you to allocate resources more effectively and focus on core business areas.

2. What Can Be Outsourced?

I previously covered examples of outsourcing in a previous lesson (I suggest reading that if you have the time) but I’ll briefly summarize them once more here:

  • Data Entry: Outsourcing to countries like India to reduce costs and improve efficiency.
  • Virtual Assistant: Handling repetitive administrative tasks to enhance productivity.
  • Information Technology (IT): Including software development, website hosting, and data storage.
  • Customer Service and Call Centers: Outsourcing phone, email, and chat services for round-the-clock support.
  • Content Creation and Marketing: For enhancing online presence through high-quality content and digital marketing strategies.
  • Manufacturing: Outsourcing manufacturing processes to reduce production costs.
  • Human Resources (HR): Including payroll processing, benefits administration, recruiting, training, and compliance management.
  • Financial Services: Outsourcing tasks like accounting, bookkeeping, tax preparation, and auditing.
  • Legal Services: Access to legal support services such as document review, legal research, and drafting.
  • Research and Development (R&D): Outsourcing to tap into advanced technologies and expertise for innovation.

These are just some ideas of what to outsource, but they should get you thinking.

There are many more things you can outsource, but these are the main areas where businesses typically see the biggest impact.

Final Thoughts

Identifying what to outsource is a critical first step in leveraging the benefits of outsourcing for your business.

By following a structured approach to assess your operations and carefully selecting tasks for outsourcing, you can enhance your operational efficiency, access specialized skills, and focus more on your core competencies.

Remember, the goal of outsourcing is not just to save costs but to strategically position your business for growth and success.

Next Steps:

  • Reflect on your business operations and identify potential areas for outsourcing.
  • Consider developing a small project as a test run for your chosen outsourcing partner.
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