I Got What You Need: Outsourcing a Biz Need Increases Biz Productivity

by Annie

in systematic

Bag of oranges being exchanged for a dollar bill

Yeah, RIGHT, that costs a dollar.

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I am about to do something I never thought I’d do:

Admit that law school was helpful.

Don’t get excited – it’s a relatively minor thing. Here it is …

It was in law school that I learned about the concept of a “needs” contract.

What the What, Now?

Yeah, so, a “needs” contract is simply an agreement whereby one person (or business) provides all the widgets some other person (or business) needs to fulfill some purpose.

(Sidenote: it’s so funny thinking about the trite law school contracts examples that we were routinely given which mentioned “widgets” – it used to be a word that represented any kind of goods. Now, of course, they’re the little boxes of code on your website. I digress …)

So, if I’m an orange juice maker, I obviously need a steady supply of oranges. (Unless I’m one of those evil chemical-lovin’ manufacturers.)

But how do I know with any precision how many oranges I’m gonna need? Maybe the orange juice market will boom this summer, when Kim Kardashian gushes about how much good OJ does for her skin and hair. Maybe the orange juice market will bust this summer, when Kim Kardashian gushes about …. well, you get the picture.

Point is: I can’t tell you, Ms. Orange Grove Impresario, how many oranges my business will need at each and every delivery, so we can’t put that in the contract. But if we don’t specify the number of oranges you’re contractually obligated to deliver to me, we’re just headed for a lawsuit here, and ultimate business ruin!

Oh noes! What can we do?

Fear not, brave entrepreneur, for we can take advantage of the needs contract! Our awesome lawyer simply whips up a standard goods-for-cash contract, in which you’re obligated to provide, and I’m obligated to pay you for, all the oranges I need.

Spot the Problem Yet?

There’s a potential hitch in this giddy-up, though.

Specifically, how can the orange grower protect herself from the wild fluctuations of the OJ maker’s needs?

One month, you’re shipping out tons of the delicious juicy fruits, and the next you’re down to nothing … how can you possibly plan your biz finances and cash flow projections?

Yep. That’s a problem, all right. That’s why the “needs” contract is a bit riskier than a contract that spells out specific numbers or quantities and deserves some additional thought before consent is given.

(I promise, that right there? Is the end of the law school crap.)

OK, you’re thinking, but what in the name of Donald Sutherland does this have to do with marketing my business productively?

Excellent question. Read on, mon frere … 

Why Outsourcing Your Needs Is Smart Business

So, this past month has been cah-razy for me. Business? She’s a-booming. Not so much a problem, this, but there’s also been a growing, nagging realization picking at the outer edges of my consciousness. Finally it came into sharp relief a few weeks ago.

The issue was that all my clients wanted graphics to go with several of my Stage Presence Marketing services. That’s not a problem — I can do graphics.

The problem: I don’t wanna do graphics.

The problem: I’m not that good at them. I mean, they’re serviceable and all — I did my header at the SPM site, as well as the cover image and app images at the SPM Facebook page, and I’ve gotten several compliments on them.

But it doesn’t come naturally to me, the way writing, tech work, and productivity coaching do.

And it takes me a lot of time to get these graphics done.

That’s time I could be spending marketing, or getting client work done, or writing more content for this site (yeah, yeah, I hear ya, Someone) or SPM’s various channels.

Soooo … what’s the productivity-lovin’ pajama queen of the couch warriors to do?

She is to outsource those graphics needs to someone who does ’em well, loves to do ’em, does ’em fast …

Enter evan austin.

evan was already doing some of my graphics work for clients. Matter of fact, he was always my first call when I was just swamped or when a graphics need exceeded my meager skills.

Formalizing the whole agreement, and making it a part of my business systems (that’s the real key here) was the logical next step.

Outsourcing As a Small Biz System & Service Enhancer

See, here’s the thing: my clients need graphics.

(Duh.)

And I, as the logical service provider, have a choice:

  1. Either I get better at graphics and do it myself …
  2. Or I get someone else who’s already better at graphics to do it instead.

Really, that’s it – those are my options. (I guess I could leave my clients hanging, but that’s not the better biz solution. I’m missing out on a viable income source and I’m not serving those clients’ needs very well.)

The solution for me was easy. I have neither the time nor the desire to become a graphics guru. So if I want to provide this logical accompanying service to my clients with a need for it, then it’s gotta come from someone else. And there, too, I have only two options:

  1.  Either I hire someone to do it for me in-house (albeit in the digital, virtual sense) …
  2. Or I outsource this to someone who already does it under his/her own brand identity.

And once I articulated the choice for myself in those terms, the solution jumped off the page at me: evan.

Again: Duh.

Outsourcing for a well-defined, specific need is a smart way to build a small biz system that enhances both your market position and your productivity. It helps you gain more clients in your niche, because you broaden your offerings to become the “one-stop shop” for a particular client type. And obviously it helps you become a more productive business owner, because it takes all the tasks associated with providing that service off your plate — and ideally puts it on the plate of someone who’s a lot faster at it than you are.

That serves everybody: 

  • You get the benefit of the added service and the additional clients it entices, as well as buying back the time you’d have otherwise spent on it.
  • Your source gets the benefit of additional work and income, plus the exposure to a completely different subsection of the market.
  • And most importantly, the client wins big-time, through the added value and quicker turnaround.

Minding the Outsourcing Details

Now, I promised to leave the law school crap way back up there. But there are some tricky aspects to establishing an outsourcing agreement, and I wouldn’t be doing my job if I didn’t at least mention them.

The first thing to do is identify the services/goods being provided. “Graphics” (as in my example) isn’t sufficient. So I asked evan to work up a list of specific kinds of graphics he’d be willing to provide.

From evan’s perspective, he also needed to do some serious thought on this point. Maybe he likes doing headers but logos, not so much. Pinpointing what each side needs and is willing to provide is key.

Next, we needed to establish our pricing structure for the provided services. We elected to go on a cost basis. In other words, whatever evan charged me, that’s what I’d charge the client. I don’t make a profit on his effort.

I think that’s the fair way to play it, but there may be situations in which it only makes sense to mark up outsourced goods or services. Just think very carefully about this point, as it can have unintended consequences down the line.

Another potential trap for the unwary is how you will each market the association — if you choose to market it at all. evan and I are still working out the details on this point, and there are a lot of options to choose from.

Personally, I’m a fan of making it a selling point — I’m leaning towards this solution in my agreement with evan. It has the advantage of being the transparent choice, and it clearly communicates the value to the client. But you could also elect to simply describe the services/goods as just “one more thing we do for you.”

And of course, you’re going to want to spell out the particulars, such as …

  • turnaround times
  • work formats
  • how work will be delivered
  • who deals with the client
  • when payment is due
  • how invoicing will be handled
  • what happens when prices are adjusted

Bottom Line: Outsourcing Needs Is a Win-Win-Win

Mind the details, and pick the right partner, and outsourcing can be the best gift you can give to yourself, your business, and your clients.

For more spectacular perspectives on outsourcing, take a look at the Word Carnival page for this month’s “Outsourcing” topic, which has links to ALL our participating Carnie blogs!

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{ 20 comments… read them below or add one }

Sandi Amorim April 24, 2012 at 9:00 pm

Wow, you’ve covered all the bases here! I’ve often just thought of the ol’ “Is it a fit?” question because that’s what feels good and aligns with my values. But then, if the specifics aren’t clear and laid out, as you so clearly suggested, all kinds of issues have come up which then make me NOT want to outsource the next time! And so the vicious cycle is born.

I like your way much better 🙂
Sandi Amorim recently posted..Your Soul Song is Waiting

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Annie April 25, 2012 at 12:18 am

Thanks, Sandi! I think there will be a great coverage of this topic from all the Carnies this month, judging from the behind-the-scenes notes that have been flying around. The devil’s in the details, as they say, right? And you’re right – the wrong fit from the start will doom you, for sure.

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Nick Armstrong April 24, 2012 at 11:34 pm

Annie, as always a fantastic article.

I’d never thought about utilizing a “needs” contract before, because in a Consulting biz their needs can quickly override your available time. So I always utilized the Consulting Package as a Product model, allowing me to service multiple clients at once.

Worse, if your agreed hourly rate isn’t up to par, you literally work yourself to death.

Seems like there’s room for an upper bounded needs contract – I can service up to this much before I exhaust my supply. Or a tiered rate system. Up to 30 hrs = $100/hr, 31-50 = $125 and 51+ = $150

I’ve never experimented with that kind of pricing model before but I can see now it could work!

Thanks for the great insight!
Nick Armstrong recently posted..The Danger of Doing Everything Yourself

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Annie April 25, 2012 at 12:20 am

Ooh, good point. Yes, that’s a common approach in the corporate contracts world – kind of a hybrid, with an upper cap, as well, so the provider’s schedule isn’t over-taxed. Lots of room for ingenuity here!

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Someone April 25, 2012 at 4:12 am

Nice. I got a shoutout :D.

Anyway, great post, lots of nice info and tips as always.

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Annie April 25, 2012 at 10:13 am

Yes. Yes, you did. 😀 Thanks, SO!

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Clare Price April 25, 2012 at 2:30 pm

Great article and the law school “crap” was interesting and instructive for us non-lawyers. I agree with Nick here. I have typically used a consulting package but now I’ll keep my eyes open for the needs option where it might benefit both parties. Thanks Annie for the ideas.

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Annie April 25, 2012 at 4:39 pm

Thanks, Clare – glad it was helpful and interesting! I always feel a little queasy now when I get close to law-related topics, LOL.

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Tea Silvestre April 25, 2012 at 4:23 pm

Oh-how-I-wish-I-knew-evan-way-back-when! First of all: NICELY DONE, Annie. You always give such great advice for humans. Second of all: I think you pinpointed something crucial to making this all work well: clear, concise communication between the two parties. When expectations aren’t written down (and sometimes even when they are), things can go sideways fast. Clear, honest communications keeps everybody happy — even when things get a little bumpy.
Tea Silvestre recently posted..When You Just Need to Get ‘Er Done! Employees vs. Independent Contractors

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Annie April 25, 2012 at 4:53 pm

Y’know, I find clear, honest communication (A) solves MOST problems between people in business and in life, and (B) is one of the most challenging things to actually DO, simultaneously. It’s something we all have to work on, just as much as we work on our skills and our marketing.

Thank you very much for the kind words, Tea, and for spearheading the Word Carnival every month – it’s one of my favorite days every month!

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Sharon Hurley Hall April 25, 2012 at 5:40 pm

Love the idea of a needs contract, Annie. I sort of work this way with the people I outsource to except that I haven’t totally formalized it. Definitely something to keep in mind going forward. I agree with you about transparency though – I prefer clients to know that I’m passing work on to an expert. It’s better for all of us to know what’s happening.

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Annie April 26, 2012 at 1:13 pm

Totally, Sharon – as my ex used to say, “the great thing about being honest and upfront and telling the truth is that you don’t have to remember which story you told.” LOL

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Katrina Pfannkuch April 25, 2012 at 10:54 pm

Great post! Hits all the best points about outsourcing in context of a real life situation AND gives awesome tips and things to consider for your own business — especially regarding the important things to think about on both sides.

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Annie April 25, 2012 at 11:48 pm

Thank you, oh creative one! Glad you found it useful. 🙂

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Nicole Fende April 26, 2012 at 12:27 pm

Annie I actually enjoyed the legalese part…. (not that I want to actually BE one!)

Thanks for giving us a peek inside a real life example, and I second Nick. I’ve got some more ideas to mull over on pricing. I’ve seen the capacity pricing elsewhere (think airlines), however never thought about for a consultant.
Nicole Fende recently posted..Outsourcing to Upsize Your Small Business Profits

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Annie April 26, 2012 at 1:14 pm

I would LOVE to see more ideas about pricing these arrangements, Nicole – and (ahem) I think you’re just the person to do it. 😀

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Michelle Church April 27, 2012 at 3:09 am

As always another great one…even with the lawyer crap included. Yes, the details make all the difference and I could not agree more about having others take on the tasks you don’t want to spend time on. I am struggling with should it be I “transparently” have someone else do it, add a lil extra in it for my time or if I am referring for outsourcing should there be a courtesy referral fee. I referred a potential client to a business in Canada once and about 6 months later I received a $250 check thanking me for the referral. It turned out, the person I referred did a lot of business with them, You bet, I still refer to them when it fits. I have given current clients free hours on their invoices for referrals as a way to thank them. Still thinking that one through…In the past, I paid sub-contractors less than I charged and always a sub-contract was signed.
Michelle Church recently posted..The Truth about Being Alone

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Someone April 30, 2012 at 12:04 am

Wow, they sent you a check for your referral? I always ask for a courtesy referral fee personally.

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Melanie Kissell April 30, 2012 at 7:06 pm

Fantastic post, Annie!

I’m seeing Evan Austin’s name around several corners I turn on the internet. To me, that’s a positive sign. So I’m sure you’re outsourcing your clients’ graphic needs to a really good egg. 🙂

Entrepreneurs tend to shy away from developing contracts and I’m not certain why. I think it’s always better to have the “black and white” of business transactions openly discussed and written down in a formal agreement. Ultimately, it benefits both parties. It sounds trite but I’ve always believed it’s better to be safe than sorry.

The Kardashians … Ugh. My 20-yr-old twin daughters are glued to the T.V. when the Kardashians are on. For the love of God, I don’t know why. I don’t find their lives a bit fascinating. But apparently millions of people do.

Thanks for another great Carnival post! 🙂
Melanie Kissell recently posted..Toilet Paper and Toothpicks

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Annie April 30, 2012 at 8:03 pm

I refuse to accept that the Kardashians are in any way a role model. I’m putting my foot down on this one. (Also putting my fingers in my ears and singing “LALALALA I CAN’T HEAR YOU,” apparently.)

Thanks for the kind words, Melanie! And yes, evan is a very good egg. Er – if eggs do awesome graphics, that is. (They might. I don’t know. Who KNOWS what goes on in that fridge when the light goes out, right?)

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