👼🏻 👧🏾 🥢 How to make a successful outsourcing company ♿️ 🔧 🖐🏻

This article will be useful primarily to those who are considering freelance, are already engaged in freelance or want to scale their private activities in the system business.

Managers and business owners are likely to find something useful for themselves. I will also be glad to comments and additions from experienced businessmen.

Outsourcing or outsourcing is when an organization delegates part of its work to a contractor specializing in this type of work.

The reasons for such delegation may be different - the need for such work is rare, the monthly amount of work does not require the full employment of even one employee, it requires high qualifications with a small amount of work, etc. But usually it’s just profitable to entrust the work to an external contractor at an affordable price, rather than hiring and retaining suitable specialists.

By outsourcing business, I mean systematic contracting for the provision of work execution services to various customers.

Outsourcing business includes all kinds of advisory activities, accounting, legal and logistic services, design, PR and advertising, staff recruitment and much more. But the most profitable and massive outsourcing business, it seems to me, has developed now in the field of software development.

I believe that many freelancers and start-ups ignore some very important success factors in the outsourcing business. As a result of this, they suffer greatly, cannot make good money, and often abandon the idea of doing business in outsourcing. In this article, I reveal the three most important (in my opinion) principles that help to achieve success in the outsourcing business.

Perhaps you ask - why do I think that I can give someone advice on building and developing an outsourced business?

Firstly, since 2000 I have been engaged in product development of software (software) and from time to time our company took orders to develop custom software on the subject of our products and on the basis of the technologies that we used in our products.

Secondly, I have many friends who manage outsourcing software development companies and we regularly communicate on business topics.

Thirdly, I directly participated in the creation and participate in the development of a recruitment agency, and this is also a real outsourcing.

Fourth, for four years now I have been working as a startup tracker in the accelerator of the South IT Park, and about 20% of our residents are freelancers and outsourcing companies who want to create their own products. During my work in the accelerator, more than 100 freelancers and outsourcing companies who wanted to improve their business went through the caring hands of our team and we really helped many of them.

Fifth, I had experience in providing recruitment services for outsourcing companies, and for some time I even worked in a leadership position in an outsourcing company developing custom software.

Therefore, I believe that I have some experience that allows me to talk about the successful development of outsourcing business.

So, 3 success factors in the outsourcing business, which I consider the most important:

Narrow specialization.
Good understanding of the business model and growth points.
Personnel policy resulting from a business model.

Specialization

This factor plays a big role in the success of not only outsourcing companies, but also of any business, as well as in the career of a specialist. The main task of specialization is to narrow the niche in which you are looking for customers and stand out from the general mass of competitors. The narrower your specialization, the less strong competitors you have. There will also be fewer customers, but this allows you to better know them and better interact with them.

Many believe that it is enough to specialize in the technological stack. Like we do web projects in PHP / Laravel and JS / React. This is certainly better than just “developing sites and web applications,” but it does not set you apart from the huge faceless crowd of other site builders.
It sounds something like “I'm a photographer and I'm shooting with a Canon camera”. Who wants to be just shot on Canon? Most likely, the photographer’s client wants a photo shoot of a certain specificity - a portrait, a family photo, a report of a children's holiday or corporate party, love story, etc.
It is also worth considering that many types of outsourcing business, such as custom software or design development or personnel selection, allow you to work remotely, which means that your competitors can be anywhere in the country and even the world. Therefore, you need to find something more effective than the technologies with which you know how to work.

A more reliable option is a specialization in business tasks. For example, online electronics stores (or clothing or jewelry), computer vision (using artificial intelligence to recognize images in a photo or video stream), parsing web pages, chat bots, etc. Your potential customer needs to solve the specific problem of his business and he will look for such artists who are especially good at solving such problems. As a rule, the technology you use is not so important to the customer. More important is your expertise in tasks similar to his task. Have you done anything like this before? How well do you understand the specifics of the customer’s business? Do you understand the context in which you will have to work or the customer will have to explain everything to you in detail and paint in the terms of reference? Of courseif the customer is looking for an executor for revision, development of the project, then your experience with technologies will also be important.

Sometimes specialization occurs at the stages of the project. Some companies focus on the fact that they are able to conduct primary research, do MVP or do a good job of supporting old projects. In itself, I consider this option not very successful, but in combination with specialization in specific business tasks, this can work well. I know companies that make good money on the phased implementation of startups - they help the client first create landing pages, test business hypotheses, determine the functionality of MVP, and therefore already saw and develop the product. However, they still do not undertake all the projects in a row, but specialize in certain industries and tasks.

Good understanding of the business model and growth points

If you are outsourcing, then you must clearly understand your business model. Using a contractor is appropriate when it is more profitable than hiring a team of specialists in the staff, equipping them with everything necessary and experiencing with the team all the stages of team building. It is also appropriate to use contractors when you need to do a small amount of work, in which it does not make sense to hire specialists in the staff. But even freelancers have a minimal complexity of tasks for which they are ready to take.

An outsourcing company makes a profit when the client pays for the work more than the cost of this work for the outsourcer. This is possible by attracting employees from places where the general level of remuneration is lower, where “living cheaper”, as well as through effective management of tasks and time of specialists of different qualifications.

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160 260 .., 1600 ./, , , , .

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, - -- 150 .. . 1000 ./ -, 100 .. .

Many outsourcing companies in the regions of the Russian Federation do not pay their salaries officially, save on taxes, and of course, not every employee receives 100 tr. per month. As well as the rate of 1000 rubles per hour, outsourcing companies still need to look, usually the services of outsourcing companies for software development are more expensive.

Thus, an outsourcing company must take a fee from the customer, which, on the one hand, is less than the cost of solving the problem by the customer’s full-time specialists, and on the other hand, this fee allows the outsourcing company, in turn, to hire good specialists and make a profit.

Let's say our conditional company from Rostov-on-Don pays its employees a market salary of 100 tr fully official and she found a customer willing to pay based on an hourly rate of 1,500 rubles per hour. Then, in theory, for a month a company can receive for one employee 240 tr per month and, accordingly, make a profit of 90 TR from one employee. It would seem all right, what could go wrong?

Firstly, the customer may not accept work in the amount of 8 hours for each working day. Inevitably there will be downtime and rarely when outsourcing companies manage to close 40 working hours per week. A good indicator is 30 hours a week, often less. Payment for work by the client is usually not based on the time actually spent, but on the assessment of the complexity of the tasks. Thus, the revenue will be approximately 1,500 rubles. x 120 hours = 180 TR, and profit from one employee - 30 TR

Secondly, it happens that the project of one customer has ended, and you did not find another project from another customer for this particular employee in a timely manner. An employee still needs to pay a salary, but he does not bring profit at this moment. So it’s not at all difficult to catch the cash gap.

Out of such situations, the leaders of outsourcing companies often draw the following conclusions:

It is worth paying employees less and unofficially (save on taxes).
It is worth hiring the bulk of employees of lower qualifications than usually required by the customer (and, again, paying lower salaries).
It is worth finding more orders than we can complete and strive to load all employees 100%.

The first paragraph should remain on the conscience of the leaders. About the second point I will tell in more detail later. And now about the third point.

I believe that the most important for the well-being and growth of an outsourcing company is to be able to find more customers than you can serve at the moment. On the one hand, this guarantees you one hundred percent download. And on the other hand, if you have many orders, you can either expand the staff or raise prices for your services. And I think that in the first place it’s worth trying to raise prices. This more insures you from sudden failures and unexpected downtime. If you don’t manage, if necessary, you can re-contract another company or freelancers instead of hiring employees to your staff.

, - - — . , , , .

Some companies that worked for foreign customers, in 2014-2015-2016, inflated their states in the wake of the growth of the dollar. Foreign exchange earnings grew in rubles by themselves, and programmer salary funds were in rubles and initially remained the same. Demand for programmers increased, and salaries began to rise. Those who did not want to raise salaries lost specialists at crucial moments, as a result of which they lost customers. Therefore, salaries had to be raised. Then in 2017, the dollar fell in price, stably kept at less than 60 rubles. and many outsourcing companies were not able to keep the bloated staff and in 2018-2019 made reductions, fixing losses. The mistake of these companies was that they decided to increase staff not on the basis of their ability to attract more customers,but because of the temporary increase in the hourly rate of the floating rate in rubles for their services.

First, learn to sell your services well and consistently receive more orders than you can work out, and only then increase the staff.

In sales of your services you will be helped by a distinguishable and understandable specialization in specific business tasks of clients.

HR policy

Is it possible to perform the work by specialists of lower qualifications than the customer considers necessary? It’s not just possible, but that is exactly what the vast majority of outsourcing companies do.

In almost any business, in most cases, only 10-20% of the volume of work really requires the skills of highly skilled (leading) specialists, another 30-40% of the work is quite capable of ordinary specialists and most of the work is done by young, novice specialists under the supervision and control of more experienced companions.

Then why do customers have misconceptions that they need high-level specialists?

Because if they will hire 1-2 specialists to carry out the work, then they will need those who can do the most difficult parts of the work. That is, the necessary qualification of the only specialist in the organization is determined by the most complex tasks that he will have to solve. At the same time, an outsourcing company specializing in certain tasks always has many interchangeable specialists. Therefore, in order to earn more money, an outsourcing company can afford and must fully utilize the achievement of capitalism called the “division of labor”. That is, in a team of 10 people, 1-3 leading specialists, 3-4 mid-level specialists and 3-5 young, novice specialists are quite enough. Such a team can lead several different small projects from different customers at once.

The main task of project management in an outsourcing company is to ensure optimal decomposition and distribution of tasks between specialists of different qualifications. And the main task of personnel policy is to ensure that the company has the right amount of good specialists of the right qualifications.

Consider this in more detail using custom software development as an example. Programmers of different qualifications have different goals for working in a company. It seems to me that in most cases such realities take place. Novice programmers work to gain experience. If they are comfortable, then they work 1-3 years in one company for X money (X depends on the city and region). After which they either receive a noticeable increase in salary (1.5-2 X) and middle status, or they quit and look for higher status and income in another company.

The middles are looking for interesting topics and projects to find their specialization. They need tasks and technologies. They tend to change their jobs on average once every 1-2 years, their salary level is usually 2-3 X.

Leading programmers (Signora) value social status, stability and salary at 4-5 X. Under favorable conditions, they can work in one company more than 3 years.

For regional companies, X is usually 25-30 tr. For Moscow and St. Petersburg, X is 40-50 tr.

For the stability of the business of an outsourcing company, leading experts are primarily important. Experienced professionals who are ready to educate young people should pay in the market or even above the market to reduce the risk of luring them to other companies, including your own customers. It’s not worth it to push hard to keep middle and jones at the expense of wages. If the middle wants to leave, then the money will not hold him much. And if the june wants to leave, then let him go, it will be better for everyone.

It is worth developing activity in attracting novice specialists to the company, because this is the most appropriate channel for replenishing personnel. June, on average, work in one place for a long time and you can pay them relatively little for a long time. Due to the competent separation of tasks from the June, it is possible to achieve good labor productivity and efficiency.

Thus, good June is the main source of profit for outsourcing companies. They do most of the work for X money, and the company receives 4-6 X money from the client for this work.

When selecting jones, I recommend first of all to pay attention to learning and motivation to work. In order for the company to get the maximum benefit from June, it is necessary that he study a lot and work enthusiastically. Well, if the money will not be his main motivator, at least for the first time. In June's activity, focus on the quality of the result, rather than quantity, is more important. Let them not work quickly, but the result of their work will be similar to the work of their mentors. If there are two June that do not work very fast, but produce high-quality code, then for business it is much better than one middle that works quickly, but produces not very good code (buggy, poorly documented, poorly supported).

Personnel policy is a personal matter of each leader, but I consider it most reasonable to rely on long-term relationships with experienced specialists and capable beginner specialists.

Total

Five key ideas in this article:

Find your specialization in specific customer business tasks.
Do not increase staff until you learn to consistently attract more orders than you can serve.
When you learn how to attract customers, first of all try to increase the price of your services and only then increase the staff.
Remember that the profit of an outsourcing company depends on the correct division of labor and it is brought mainly by young specialists under the control of a small number of experienced specialists.
Do not save on the salaries of experienced highly qualified specialists, you need to hire them not so much, but the stability of the company depends on them.

If you need help with a deeper analysis of your business model and search for growth points, write to me and I will try to help you.

How to make a successful outsourcing company

Specialization

Good understanding of the business model and growth points

HR policy

Total

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