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Outsourcing 101: When does outsourcing make sense?

Woman looks at the computer screen of the woman beside her

“Outsourcing” is a term used to refer to the practice of hiring an outside party to perform services that otherwise could, or would, have been completed in-house. Many companies and individuals who run businesses use outsourcing as a way to get necessary tasks completed without having to hire additional staff or overwork current staff.

It can be tough to know when a job can be completed in-house and when outsourcing is the better option. Outsourcing is often a valuable tool, but it’s not always necessary or advised. 

Before you go through the process of hiring someone, you’ll want to ensure that the decision to outsource makes sense. Not every task or project requires it, and hiring an outside party unnecessarily can cost you time and money that would otherwise be better spent elsewhere. If you’re considering hiring out to someone else to absorb some of your business tasks or services, there is a right way and a wrong way to go about it. Outsourcing, like any type of hiring, is best executed when the process is well-thought-out. 

Let’s take a look at how to successfully outsource once you’ve decided that doing so is right for you.

Getting Started

Woman looks at the computer screen of the woman beside her

Honestly assess your workload and responsibilities 

The first step is to take an honest look at your workload and responsibilities. Spending money to unnecessarily hire a consultant is never a good idea. Outsourcing is a great option when it’s needed, but can be a major money drain when it isn’t. Here are a few scenarios that are likely to indicate that outsourcing is a good choice.

    1. Your task list has grown significantly. If you notice that your daily, weekly, or monthly task list has grown (or is growing) to a level where completing these tasks internally is becoming challenging, outsourcing is likely a practical idea. 
  • You can’t seem to get ahead or can’t focus on your strengths. Do you find yourself constantly working but not seeing any progress? Or, maybe, your task list is full of projects that are important but don’t take advantage of your strengths? Outsourcing is a great option if you feel stuck or if the tasks you’re focusing on aren’t where your energy is best utilized. 
  • Your business is suffering from inaction. Inaction often shows up as your business failing to produce new, innovative ideas for company growth, increased ROI, and other objectives. Hiring out is often useful for bringing fresh outlooks and mindsets to otherwise creatively stagnant companies.  

Determine the type of consultant you need

Once you’re aware of your need to outsource, your next step is to identify what type of work needs to be done and by whom. Can you hire a junior consultant with mostly entry-level knowledge or do you need a seasoned and savvy industry veteran?

Take a candid look at your responsibilities and list out the top three areas where you need the most help. For example, your list may include Excel VBA, data storage, and customer service. With your problem areas narrowed down, add “consulting” to the end of the term (e.g., VBA consulting or data storage consulting) and do a quick internet search to hone in on a consultant type. You might find that your problem area can be handled by any consultant in the industry or, alternatively, that it is specific and requires expert knowledge. The level of expertise required will depend on how difficult your tasks are, but most consultants will be at least moderately experienced in their area of choice. 

If you aren’t sure what needs to be done but you know who to hire, you can find a consultant, have them assess your needs, and take it from there. Do this for each problem area that you believe requires external assistance to help you determine the type of consultant you should focus on.

Determine whether your consultant’s location is a factor

Some outsourced tasks can be done from anywhere in the world while others require you to hire someone regional or local. Once you know who you need to hire, you can determine whether their location will affect the successful completion of the project. If there are any in-person tasks needed, a consultant that has to travel for more than a few hours isn’t ideal. Plus, in-person consultants that have to travel often charge extra and require that travel expenses be included in their contracts.

However, if your consultant can work remotely and communicate via message board, email, or video conferencing, you have more freedom in where you hire and whom. Hiring remotely often means that the consultant is in your region or country, but not local. If you choose to hire overseas, which can be more cost-effective, you’ll have to be comfortable with your consultant operating from another country. Each choice, ultimately, has its pros and cons.

Hiring locally or regionally means you’ll be drawing from a relatively small pool of options, depending on your industry. But, if you hire overseas, while you’ll have many more options to choose from, considerations like language barriers and time zones can impact the efficiency of the project.

Also, you’ll need to determine where you prefer to hire your consultant from. There are online platforms, such as Fiverr and Upwork, where freelancers can easily be found, but with credentials that are not always verifiable. Or, if you have the budget, you can opt for a known firm or agency with well-vetted consultants – though this will likely cost you more money. Alternatively, you can hire an independent contractor from neither a platform nor a firm, but this also carries a certain level of risk.  

Estimate how often you need this help

The number of hours you need your consultant for will greatly affect how much your outsourcing will cost you. The hourly requirements and the length of the project will be the most important factors in calculating your final costs. 

How many hours do you estimate your needed tasks will take? Is it possible to reduce this estimation by utilizing internal resources in any way? While you want to ensure that you pay your consultant well, it is not practical for you to pay for inessential hours of work or dead time. 

If you’re unsure of how long your project will take, you can reach out to a reputable consultant for a “good faith” quote. Not all consultants are willing to provide quotations without a project scope (which we’ll touch on later), but some are. However, you’ll likely be quoted a higher rate if you are unable to provide enough details about your project’s needs. 

Analyze the costs and determine your daily/weekly/monthly budget

Taking into consideration the experience level of the consultant that you desire and the hours of work that you need, estimate your expenses. You can do a quick internet search to assess an average hourly rate to help you get as close to a reasonable figure as possible. The best way to do this is to calculate a daily rate and then multiply the rate to fit your expected weekly or monthly requirement. If your consultant is likely to charge per project and not per hour or month, calculate how many projects you’ll need (at the estimated rate) to determine your total expenses. 

If your budget doesn’t align with this expense, assess how you can adjust your numbers to better meet your budget. If you have significantly more flexibility in your budget, consider calculating your hourly needs based on a more experienced consultant’s rate. You can also add hours to your estimate to see what you’d pay if the project ran longer than expected. If your expense is more than you budgeted for, estimate the cost for a lower-level consultant or cut your time requirement by a few hours, days, or weeks.

project scope - project deliverables

Write a project scope that covers what you need now and in the future

Once you’ve found a prospective consultant, whether independently, through an agency, or using a platform, your next step is to prepare for hiring. Creating a project scope will help your future consultant better understand your needs by concisely breaking down your expectations. This project scope can be as detailed as you’d like but should give anyone reading it a clear outline of what project success looks like to you. A project scope, also called a scope of work, can be sent out to prospective consultants as a basis for their quotation. If your document is created well, you can reduce unnecessary back and forth between yourself and the consultant and will likely receive a more comprehensive quotation. 

Check out my previous blog post on how to write a good project scope for some tips and tricks to creating a solid, usable document. 

Draw up a contract and hire an attorney (if needed)

Before you allow a consultant to begin working on your project, you should draw up and sign a contract. This contract should cover the project scope and detail your responsibilities as a client, as well as the responsibilities of the contractor. Any deadlines, deliverables, and expectations (including payment schedules and invoice protocol) should be included in this contract. 

Every single deliverable should be clearly listed in the contract – don’t leave any information vague or easy to misinterpret. If possible, and if needed, have an in-house or external attorney read over the contract for any missing or incorrect information. This contract is 100% necessary to protect your business (and yourself) from legal issues that can occur when a working relationship is not contractually bound. 

Set reasonable expectations

Some projects require little communication between parties while others require consistent, sometimes daily, correspondence. If you have expectations for how often your consultant should communicate, and when, these should be made clear early on. Not everyone has the same communication style and you may find yourself speaking to your consultant less often or more often than you’d like.

Settle first on how often you’d like to communicate – once a day, once a week, bi-monthly, etc. Once you’ve done this, determine which forms of communication are best. Do you prefer email and message systems like Slack and Asana or phone or video calls? Or, maybe, you’d like to combine both written and visual/voice communication throughout the project. Try to ensure that your expectations are reasonable. If possible, work with your consultant to find days and times that work best for you both — when it comes to communication, the ability to compromise is an important skill.

Time to get to work!

project scope - project milestones


Although the road to finding the right contractor can be challenging, it can be an incredibly rewarding process. Once you’ve found someone to expertly execute your outsourcing needs, the next step is to, simply, let them do their job.

As their client, it’s essential that you remain responsive to any questions or concerns they may have to better help them complete their tasks. As much as possible, keep your lines of communication open and prioritize responding clearly and effectively to help the project continue running smoothly. Do your best to make yourself available to the contractor if and when needed.

And, finally, create an exit plan that details actions in the event that you or the contractor are no longer able to fulfill the contractual agreement. Your contract should have a clear exit clause for both parties, but you should plan out how you’ll move forward if the contract is terminated early. Will you hire a new contractor or finish the project in-house? If needed, will you budget to start the project again from scratch? If the project is time-sensitive, what is your solution if the deliverables are delayed for any amount of time? Creating an exit plan can help you more confidently outsource your needs by preparing you for potential challenges and unforeseen situations. 


project scope - line items

Outsourcing is often key to ensuring that you and your company remain efficient. And, since outsourcing is generally more cost-effective than hiring new employees or investing in training programs for current staff, it can significantly decrease your overhead expenses. The decision to hire out can be a tough one, but, for many, it’s a choice that quickly proves itself to be invaluable to the success and growth of a business.

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