How to Start an Outsourcing Company

Instructions

Decide which services to specialize in. Manufacturing is by far the most outsourced service, because it is a labor-intensive activity that can be performed cheaply by low-wage workers. Developing countries often do not possess sufficient resources to produce capital-intensive services such as engineering design in an economically efficient manner. India's computer industry is an exception to this rule.

Establish a corporation in your home country and make sure that it is adequately capitalized. Establishing a Limited Liability Company (LLC) is less desirable, because some foreign countries are not familiar with the LLC business form.

Set a up a representative office in the foreign country or countries where you wish to outsource services. In most countries (including China), a representative office is rather easy to establish and is considered a branch office rather than a subsidiary of the home company. Although representative offices are generally prohibited in engaging in direct profit-making activities, they are allowed to locate local contacts, introduce contacts to the home office, and even negotiate contracts as long as these contracts are signed in the company's home country. Minimum capital contributions are often required.

Make contacts with local manufacturers or other service providers, and get estimates of their production costs. This should provide you with the basis for negotiating the price of outsourced services.

Use manufacturing directories (see Resources section) and other sources of information to locate companies in your home country that could benefit from the services outsourcing companies can provide your company specializes in. Provide them with cost estimates and offer to commence negotiations with Foreign Service providers. Concentrate on companies that do business primarily in areas where outsourcing has not yet taken hold - the US Midwest, for example.

Broker deals between companies in your home country and service providers in the countries where you maintain representative offices. Your company's income can be stated as a flat fee or a percentage of the value of the deals that it brokers.