How to Start an Outsourcing Company

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Growing numbers of companies are outsourcing customer support, accounting, inventory management and other services. In 2018, business process outsourcing generated $23.6 billion in the U.S. alone. If you're looking for a business that can be run from home with low startup costs, consider starting your own outsourcing company. In this role, you will act as the middlemen between service providers and organizations that need their services.

TL;DR (Too Long; Didn't Read)

The first step to starting an outsourcing company is to research the market and find a profitable niche. Determine what services you want to offer, to where you will outsource these services and whether you want to work from home or set up regional offices.

Find Profitable Outsourcing Business Opportunities

Start by researching the market and look for outsourcing business opportunities. IT security, for example, is a profitable niche; in a recent survey, 47% of respondents said that they outsourced the IT security auditing process in 2017. Furthermore, over 80% of pharmaceutical companies and 70% of financial service executives outsource some of their activities. These services help business owners to free up their time, reduce their expenses and improve customer experience.

Consider your target customers and their needs. Do you plan to work with small or medium-sized businesses or provide outsourcing services for corporations? Either way, choose a niche and learn everything you can about it. This way, you will be better prepared to provide customers with what they need and set clear, realistic requirements for the contractors you work with; for example, if you have a good understanding of digital marketing, you will know what specific skills to look for when screening social media consultants, copywriters, automation specialists and other service providers.

While it's true that you can provide various services, it's better to focus on a specific niche. This way, you'll find it easier to screen and select qualified professionals, reach your ideal customers and promote your business. Look for outsourcing business startup ideas online and try to figure out which services are the most profitable. Take the following options into account:

  • Social media marketing
  • Search engine optimization
  • IT services
  • Payroll processing
  • Accounting and bookkeeping
  • Graphic design
  • Event management
  • Customer support
  • Legal services
  • Health care services
  • Human resources
  • Manufacturing
  • Marketing and PR
  • Data entry

Make a Business Plan

Put everything on paper and draft a business plan before launching your outsourcing company. Decide on a business model, research the legal requirements and make a list of outsourcing countries. India, China and Malaysia, for example, are the go-to choices for business process outsourcing and offshore business services. Next on the list are Brazil, Indonesia and Thailand.

As an outsourcing work provider, it's your responsibility to find qualified professionals. You first need to choose a business model. One option is to set up an online platform that connects companies with skilled freelancers. Screen and interview freelancers in other countries before granting them access to your website. Consider local professionals too – there are thousands of U.S.- based web designers, event planners, virtual assistants and other skilled individuals to whom you can outsource work too.

Depending on your budget, you can also set up offices in the foreign countries to which you want to outsource work. The costs will be higher, though. That's why your business plan should cover the startup costs and ongoing expenses, financial projections, capital requirements and other related aspects. Furthermore, it should outline your short- and long-term business goals, mission statement, marketing strategies and other factors involved in starting and running an outsourcing business.

Legalize Your Outsourcing Company

Regardless of what business model you choose, you need to register your company with the state, obtain a tax ID number and get licensed. If you're planning to open physical offices in a foreign country, you may need business licenses and permits there as well. Discuss your options with an attorney before taking the plunge.

If your outsourcing company is located in the U.S., you'll need a general business license and certain permits. Again, this depends largely on how you plan to run your business. If you set up a home office, it's not necessary to apply for zoning or signage permits. Another thing to consider is the legal structure of your business, which can be a sole proprietorship, a partnership or a limited liability company, for example.

Once these steps are completed, open a bank account and get insured. Reach out to freelancers and other business professionals via online ads, social networks and online recruitment platforms. Let them know about the outsourcing business opportunities you're offering, inquire about their rates and ask them to sign a contract that states clearly how they will get paid, their obligations and whether or not they can communicate directly with your customers. Include a noncompete clause in the contract to make sure they will not enter into competition with your business and attempt to take your clients.