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For many financial planners, outsourcing is the secret to their success. For others, it’s the worst mistake they ever made. The difference comes down to the best practices for making the arrangement work.
For decades, companies big and small have used outsourcing to cut costs and increase productivity without sacrificing results.
Two years ago, I decided to join the party.
My firm, SurePath Wealth, needed a CPA to help with our clients’ tax preparation. We only needed 23 returns prepared at the time, all of them low to medium complexity – not enough to keep a full-time staff CPA busy. It was a straightforward task with no shortage of tax professionals who could do the job.
It was the perfect job to outsource.
I thought I had done everything by the book. I picked a remote professional with all the right credentials. He seemed like a reasonable person. Every two weeks, he would send me a status report with progress made on the returns. I took my hands off the wheel and focused on other areas of the business.
You can tell where this story is going.
As we hit the month of March, I started to get alarmed messages from my clients. It turned out that they never heard from the tax professional. As I dug in, I discovered that he wasn’t returning their messages, answering their questions or working on their returns. Instead, he was vacationing in Central Asia, cashing our checks and never touching a single tax form.
Thankfully, I was able to quickly replace him and make sure our clients filed their tax returns on time. Still, the contractor I hired ended up costing me around $30,000. An expensive lesson to learn, and one I don’t care to ever repeat.
Six essential steps to take when outsourcing
The good news is that you can take steps to avoid disasters like this. Here are six essential steps to confidently outsource work to reliable contractors. Spoiler alert: I failed to follow #5!
1. Get clear on scope
You probably already have a good idea of what tasks you’d love to outsource.
That’s a good start.
However, a great start is getting crystal-clear about the scope of what outsourcing those tasks will entail.
This means identifying where the “connection points” are to your internal team and perhaps even your clients. Where will the contractor pick the task up from the internal team? Where will he or she hand it back? What can be done to make those transitions seamless? Ask every employee who may be working with one of your contractors to brainstorm any potential problems they could foresee.
Then, get busy laying the groundwork before you begin the outsourcing process.
2. Only outsource tasks that have documented workflows
Every process within your firm should have a documented workflow that explains its ultimate goal and the steps required to achieve it.
Still, if your firm is like most, there are a few processes that lack this formal documentation. Oftentimes, workflows are simply explained via word-of-mouth from a veteran employee to the new hire.
To be fair, there may be instances where that’s enough. Outsourcing will never be one of them, though.
Provide your contractor with detailed instructions for every single task you’ll be outsourcing to them. Show these directions to every employee who normally handles these tasks and ask for feedback. After you hire a contractor, go through these instructions with them and encourage questions.
Taking this kind of care with your instructions will ensure that your clients never even notice a transition took place.
Side note: This approach only works for processes and tasks that are currently handled internally. If you are looking to outsource a new project (such as undertaking an SEO audit and website improvements for the first time), you may not know exactly what it entails. If that’s the case, you will still have to identify connection points (Step 1, above) – and then lean heavily on vetting the potential contractor. Read on for more details!
3. Vet potential contractors extensively
Thanks to the Internet, it’s easier than ever before to find contractors and research their credentials.
It’s also easy to assume you’ve got the right person without fully vetting them first. Far too many financial advisors have found out the hard way that contractors can look amazing online – but leave a lot to be desired when it comes to doing the actual work.
Ideally, you should only consider people who come recommended from a trusted source.
Of course, that’s not always possible. In that case, you can rely on public ratings and reviews.
In some situations, you may also give preference to local candidates. That approach does limit your overall pool of candidates, but meeting someone in person makes your vetting more effective. That proximity is helpful if you ever want them to attend meetings or other events in the office.
No matter whether you choose a local or a remote contractor, always call their references and review their work. Caveat: It is possible for an unscrupulous contractor to stack the reference deck with friends or to present someone else’s work as their own. Which brings us to the next point…
4. Start small
Even if you’re able to meet a contractor in person and you’re positive they’re perfect for the job, you should still start small.
This can be surprisingly hard to do.
As soon as you are convinced you’ve found the perfect candidate, it’s difficult to ignore the myriad ways they could improve your financial advisory firm. Caught up in the excitement, it’s all too easy to entrust them with critical responsibilities that will directly impact your clients.
Unfortunately, if they fall short of your expectations, you might not know it until your clients start calling to complain.
Avoid this nightmare by holding yourself back. On a big project, look for a small piece they can get started on as a test drive. Don’t give them any responsibilities that could cause a serious problem if they prove to be unreliable. And don’t step over any red flags, no matter how small. Increasing the scope of the project will only amplify them.
5. Don’t abdicate, delegate
One of the reasons outsourcing gets a bad name is because so many business owners don’t do it right. They want to hire someone who will do all the work perfectly – without ever requiring any supervision.
That’s just not how outsourcing works.
While outsourcing can save you time and free you up to focus on other areas of your business, contractors will always require oversight. Whether they answer directly to you or one of your subordinates, make sure someone is regularly checking their work.
6. Prepare for their termination (just in case)
If you follow this advice, odds are that you’ll be satisfied with the contractor you hire.
But create an exit strategy. Hopefully you won’t need it, but it’s much easier to cut ties with a contractor when you have an exit plan in place.
Your checklist should include:
- How to retract any access rights to internal systems;
- Procedures for who will take over the duties until a replacement is hired; and
- A plan for reviewing the last hiring process for opportunities to improve.
While I’m all for optimism, this kind of strategy is essential for peace of mind.
Outsourcing holds unlimited potential for your financial advisory firm
At first, outsourcing may seem like an intimidating prospect. If nothing else, you probably have other priorities to juggle. Documenting workflows and thinking through project scope are probably last on your list.
Nonetheless, few investments will reward you as much as mastering your ability to successfully outsource work. If you plan ahead and stay patient with the process, you’ll discover that there are hundreds of qualified contractors who can step in, handle an assignment and free up your time.
Start the process. Get clear about which tasks you’d like to outsource first. Then, create detailed workflows where necessary – and begin the search for contractors who will become force-multipliers for your firm.
Patrick Brewer, CPA, CFA is the founder and a partner at SurePath Wealth, co-founder of Brewer Consulting, and host of “The Model FA” podcast. Connect with Patrick on Facebook or LinkedIn.
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