What is Outsourcing?
Today I want to talk to you about outsourcing. The question is, "What exactly is outsourcing, and how does it work?" Right now, especially in a post COVID environment, the move to outsourcing is rapidly picking up speed. The reason for that is pretty simple and I’m going to explain what outsourcing is as we talk about this.
A company or an employer needs a particular job or task done. Perhaps they need a particular skill set, and either financially they do not want to hire a full-time staff person or even a part-time staff person in-house because they don't want to pay the overhead. Meaning they don't want to deal with things like insurance and office space and utilities and all of those kinds of things. A very efficient way to accomplish their objective is to outsource, which simply means to assign that task to someone outside of their business or organization.
Oftentimes what happens with small-business owners is they have to try and do everything, and as their business grows they get to the point that they cannot handle all of the tasks that are necessary to keep their business growing and moving forward. So one of the best solutions is to outsource those things that either are taking them away from their income-producing activities or those things that simply are not their strength or skillset.
I've been a business owner for many years, and there are things that I outsource that are not my strength and take me away from the things that I do best. For example, I outsource my bookkeeping and accounting functions. I outsource my writing. So blog creation, writing books or writing articles I will outsource those tasks. Although I know how to do search-engine optimization, I outsource that process because there are others who can do it more efficiently than I can and that's something that takes a lot of time.
Learning how to leverage other people's time is really what outsourcing is all about. It's to allow you, the business owner, to focus on those things that are most productive in moving your business forward. Or, in a larger organization, it is a way to get the task done and yet save the overhead expenses of office space, furniture, phone lines, internet connections, employee benefits, all of those types of things.
So how does outsourcing work? The way outsourcing works is an employer begins to put out into the marketplace the types of tasks that they need help with. And when I say, "Put out into the marketplace," there are clearing houses, if you will, or websites, where those who are offering to provide services, meet those who need services done for them.
And so it's in these environments where an employer or a client will post up the job details that they are needing to fill. What is the task that needs to be done? What types of hours might be involved in that? What's the end result that is being sought after in that proposal? And then they'll post that to a bulletin-board area of the website.
From that point on, what happens is freelancers or outsourcers will then begin to bid on that project. "I will do that project for X number of dollars per hour. I'll need this many hours per week or this many hours total to make that happen." And so the hiring party will then go through those proposals, find the person that seems to be the best fit, and they will work together on that project for whatever specified period of time that project is set up for.
Now, the second question that tends to come about when you deal with outsourcing is, "How does that outsourcer get paid? How is money handled?" And there's a couple of ways that that can be done. Some platforms will handle the payment process for you for a fee. Others encourage you to work out a payment arrangement between you and the person providing services to you. And so those can be arranged in multiple ways.
What generally happens is, if that freelancer, that outsourcer, is here in the United States, a 1099 gets produced at the end of the year, as long as their earnings are over $600 within the year. And they are responsible for their own tax implications. There are some additional requirements if your outsourcer is working overseas, unless you're using the outsourcing platform as your payment-processing component as well.
So a couple of things to keep in mind when you're dealing with outsourcing. The ultimate goal is to let you utilize talent that you need to grow your business, move your business forward, without having to officially hire that individual. The great thing about this type of arrangement is that it allows you to work on a project basis or a task basis. And in some cases you may work with that outsourcer on an ongoing basis.
Having been both the employer and the outsourcer, I've done both. I've had ongoing projects. I've had short-term projects and I've hired for long-term and short-term projects. So you can really structure that however you need.
The other great thing is you can build a team of outsourcers that you can draw from on a regular basis. As you have project work that needs to be done, you simply pull in which individuals you need to utilize to complete that project and get those things done as well.
Discover how outsourcing can help propel your business forward by setting up your Taskenator account today.