Outsourcing for Great Profits

I've mentioned outsourcing many times throughout the kit, and it can be such an enormously powerful way to grow your business that I felt it deserved a chapter all to itself. After all, the power of leveraging is used extensively in many industries, and its successful implementation in your web business can multiply your efforts with ease.

Find the right people, set up the right system, and away you go. It sounds simple, but the reality can be quite different. I've outsourced for years and had some fantastic experiences and some truly awful ones.

In this chapter, we'll define outsourcing. We'll consider its advantages and disadvantages. We'll look at where you can find contractors to help your business. I'll offer some tips on how to assess their suitability, and then talk about the best sort of brief you need to give them. I'll teach you how to avoid the mistakes I've made. Then we move on to start the process of working together. As you might know or imagine, sometimes things just don't work out in life, and you will not be able to move forward with a particular contractor. I'll provide you with the must-do protective step to avoid the fallout from a failed working relationship.

We'll then see how to manage projects once you've developed relationships with a number of contractors. My biggest piece of advice here is to select one of the project management software solutions I recommend and start using that. Your project management life is a lot easier with the right tools, and you'll find it an extremely effective means of ensuring the very best in terms of collaborative communication and work.

Then we finish off with some strategies and pricing strategies to make sure you stay well in the black with scope for strong growth. Download this chapter now, so you'll have it handy to guide you as you embark upon your journey through the big, wide world of outsourcing.

Outsourcing isn't for Everybody
I'll start off this new chapter by stating the obvious: outsourcing isn't for everybody. Some people just don't like outsourcing, for a variety of reasons; they like to do the work themselves, find the management of contract staff too difficult, or have been put off by one or two bad experiences.

Then there are others who swear by outsourcing and view it as the path to significant profit and growth. I'm one of those guys, but there are a few hurdles to overcome on the road to success.

No one makes a fortune working for themselves -- it's always about leveraging what you have or what you offer in the most effective way.

Defining Outsourcing

So let's take a look at outsourcing by first defining what we mean when we use the term. By outsourcing, I mean paying someone else from outside of your business to complete a task or project. It is usually done to:

• access skills and services not available internally
• increase the amount of work completed by your business, which translates to more income
• cut costs -- think of Indian call centers, utilized by all sorts of large companies, as the classic example of cutting costs via outsourcing

The person or firm you outsource to can be a friend who does the work, or someone you find through a contract service in your town, or someone further afield that you find after posting your project on one of the many sites (such as Elance, SitePoint, and Scriptlance) that cater for just what we're talking about here.

Counting the Advantages of Outsourcing

The way to outsource for big profits is by leveraging.

That is, instead of you slaving away and completing one site for $5,000 and making $2,000 profit per week, you can complete three $5,000 sites and make $6,000 profit per week. Then, with your new systems in place, you generate more and more business -- happy clients help you along by referring more prospects to you. Now imagine completing five sites per week: all of a sudden you've soared from $2,000 to $10,000 per week in profit. The secret to this -- the secret to outsourcing for big profits -- is leverage.

Leveraging is what makes millionaires. You know the impact of effective systems on increasing the effectiveness of your business. Systems that enable you to contact 100 prospects a week instead of ten. Systems that enable you to meet 20 prospects instead of five. Systems that enable you to complete 10 projects per week instead of one.

By way of example, let's say you charge your firm's time out at $100 per hour. It's only you in the business and you work eight hours a day, five days a week. That's $4,000 per week. But if you contract another person and charge them out at $100 per week and only pay them $50, then you have $8,000 per week coming in and $2,000 going out: you've just increased your income to $6,000. Then you gain a few more contractors at $50 per hour: now you have four people at $50 per hour being charged out at $100 per hour.

That's four contractors at $100 x 8 hours x 5 days = $16,000 in. Your pay to them is $8,000 per week. Now you're up to $8,000 profit per week; add to that your $4,000, and you have $12,000 per week.

Now this is basic stuff, but it's the key to big profits. With ten quality contractors, you can get ten times the work done of one. With your minimizing the risk through good management, you reap the profits of ten jobs being completed. In theory, you'll make ten times as much! So let's take a more in-depth look at the advantages of outsourcing:

Access wider skills and services.
The ability to access skills and services not available internally is a huge advantage. A simple enough example is that, whether you're a designer or programmer or usability expert or search engine optimizer, you simply can't possess and offer every single skill your client needs.

Let's say you're a web designer. You make great-looking web sites that your clients love. You're also aware that the copy on the web page is very important and can increase sales of the site's product very substantially. Your happy client asks you what they should do about getting effective copy on the web site to help increase the conversion rate. You're faced with the following options:

• doing it yourself
• employing a copywriter
• referring the client to someone else
• outsourcing the project

You know you're not such a great writer, and you don't want to provide a poor-quality job for your client. It's only a one-off copywriting job, so the demand isn't there for you to employ a full-time copywriter. You don't know anyone to refer the client to, and you don't want to lose control of the client.

So that leaves you with the outsourcing option. By using the resources I'll mention shortly, within a few short hours you'll have a range of quality copywriters either pitching for the writing job, or you'll have your brief meeting with a couple of experienced copywriters you've used previously. The next day, you'll have some solid quotes from quality writers and will be able to quote your client for copywriting services. The client is thrilled.

Not only do you make more money from the healthy management margin you added, but you also:

• build the relationship with the client by meeting their needs
• develop the relationship with the copywriter -- next time you need a writer, they'll be there
• keep control of the client
• expand the service offerings of your business for the future

Improve the quality of what your business provides.
As a web developer, you need to be trying to provide the absolute best solution for your client. Let's say you have developed a great site for your client: it looks great, loads quickly, has great copy that converts, and generally works well. Problem is, the site only gets ten visitors a day. Those ten visitors per day all love the site, and 30% buy the product.

Some visitors find the site through the search engine strategies you have implemented, but you're just learning and you know the quality of what you're providing your client could really benefit from a search engine optimization expert. So you find a search engine expert, let them loose on the site and within a few short months you're well ranked for your major keyword term and instead of attracting ten visitors a day, the site receives 500 visitors a day. Your conversion rate holds at 30%, the site now makes 150 sales per day, is a huge success, and you're now well recognized as the person who provides a top-quality site.

Increase the amount of work completed by your business.
Increasing the amount of work your business can take on means more money coming in. In a nutshell, this is the main benefit of outsourcing.

Many hands make light work -- and many hands also means more work can be done. With increased hours of work or projects being performed, obviously your income will grow. Instead of you slaving away to complete one site a week for $5,000 and making $2,000 profit per week, you can complete three $5,000 sites and make $6,000 profit per week.

Cut costs dramatically, allowing greater profit.
Let's say you employ a web designer at a salary of $50,000 per year. There are the associated costs on top of that $50,000 -- health, insurance, holidays, sick pay, and all the rest. Then they need a computer, and software, and an ergonomic chair, and a staff room with a coffee machine in it. You get the picture -- the costs go on and on, long after you pay their salary. Employing a full-time worker is expensive.

However, if you only draw upon those skills at the time you need them, you can cut your costs. The competition amongst web designers for contract work means you can cut those costs sometimes by a very, very significant margin.

Counting the Disadvantages of Outsourcing

Of course, as great as the benefits of outsourcing are, there are some disadvantages -- otherwise everybody would be doing it.

Here are the major disadvantages I've found over the years:

legal issues
You'll often incur legal fees in drawing up a contract; also, it's extremely difficult to get legal satisfaction should your contractor be in another country. Laws differ from country to country (and state to state), so you need to make yourself aware of the relevant laws in the area in which you are operating in addition to the laws that affect the contractor you are engaging. Be aware of the difficulties involved in commencing legal action against another person or company in a foreign country.

Another constant legal concern we battle against with our web designs is copyright infringement. We occasionally use web design contest sites (like SitePoint's Contests) and have had issues where the designer has assured us the graphics used in a design were free of any copyright restrictions. It is very difficult in many instances to verify copyright ownership, and we rely to a large degree on the honesty of the designer. On more than one occasion we've discovered that an image has been used without the permission of the copyright owner and we've been liable for additional costs. With the benefit of this expensive experience, we now insist that the designer undertake to guarantee that images used are copyright free, and to be liable for payment of any images found to be otherwise now or in the future.

confidentiality and trust issues
It is often necessary for contractors to be provided with a whole range of confidential information regarding the client and the client's business. The question is: can you trust them with that information? Sure, you'll protect yourself legally as best you can, but sometimes you simply can't cover all the bases of a sneaky and dishonest contractor.

Is the contractor trustworthy? I've had my own contractors go to my own clients behind my back and attempt to undercut my project quotes, as we saw in the case of Jacqui in Chapter 4, Taking the Plunge. Conversely, I've had contractors deal with large-scale ecommerce sites with no problem at all.

Along with whatever legal protection you can implement via confidentiality agreements and the like, it's critical to undertake a comprehensive risk analysis of each person whose services you will engage. As the web developer engaged to provide the service to your client, you are responsible for all aspects, and that includes the actions of any contractors you engage.

A contractor isn't always the right person for the job.

control and quality assurance issues
With international time zones, other work the contractor might have on, and language issues, you always lose a little control with contractors. You can lessen this with the right management, but it's not the same as having a paid employee sitting at the desk beside you.

After all, you don't have the same level of relationship with a contractor as you do with your own staff. Their goals and your goals will be different -- and because of that you lose a fair bit of control over quality and project completion time frames.