The single biggest challenge any startup entrepreneur faces is not being born an octopus. As a human, entrepreneurs have just two hands, and even fewer brains. Yet, startup entrepreneurs really have to do everything at once.
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They have to set up financing.
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They have to get trademarks and patents in place.
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They have to research their market.
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They have to put a team in place.
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They have to establish partnerships.
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They have to set up an office.
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They have to handle inventory and supply lines and contracts.
And there is so much more. Any one of these tasks is daunting, but to do them all at once is mind-boggling.
Worse still, they have to accelerate from zero while still working to put some of these things in place.
It’s not surprising that many startups hit the ground running with a very small team. Outsourcing is one way to bring on a full suite of talent with minimal distraction.
And that really is the chief attraction to outsourcing. Whether your business makes a new type of hair curler or provides in-home chef services, you need all your attention focused on that core business.
Yes, you need accounting. Yes you need legal. Yes, you need writing and cleaning and human resources and marketing and so many other skills. But hiring staff and setting up policies for each of these skill sets takes time and attention span, which you won’t have.
Even major corporations with in-house teams outsource.
Pros and cons of outsourcing As with any decision, there are pros and cons to outsourcing, so how does one decide what to outsource and what not to? Here are a few questions to ask.
Is this a core competency? This question is less important as time passes, but at the startup stage, it is critical. You want to focus as much attention as possible on delivering your product or service. If it’s not a core competency, you’ll probably want to outsource.
Do we have in-house talent that can do this? Another way to look at it is whether people on your team could handle it. For instance, you might have a team member who can design or write or take photos. If your needs are small, it might be cheaper and even less of a distraction to just do it in-house. This likely won’t apply with legal or accounting.
Even if you have the skills in-house, are those skills good enough? For tasks such as photography and writing, it might depend on how you plan to use those skills. If it’s for internal consumption, in-house skills might be good enough. If, on the other hand, it’s for marketing, you might want to hire a ghostwriter or hire a photographer to get professional level quality.
Do we really need to do this right now? That’s another question to ask. Outsourcing is less of a distraction than hiring and training, but it still is a distraction. The question is whether that distraction is necessary or not.
Will outsourcing save me money or cost more? Outsourcing can save as much as 70% on staffing costs. But the answer to this question depends on how much you will have to outsource and who you can outsource to.
If you have enough work for a full-time employee, it might actually be cheaper to just hire. For a startup running on fumes, that might be an advantage, as well as the loyalty and team spirit the employee would build (presumably leading to better quality work).
The other aspect is whether you can hire overseas and save on labor costs. This would be impossible for legal work and a very poor decision for writing. And it might not be possible for video or photography works that needs to be on site. But for programming or accounting, outsourcing oversees could save a lot of money.
Is the task not getting done? If the answer is “yes”, outsource. Even if you bring an employee on board down the road, outsource to get started.
Do staff really have the time? This takes us almost full circle to core competencies. Yes, anyone on your team could answer the phone, do research, set appointments and even clean the office. But do you want them to be distracted and could you get someone else to do these tasks for less compensation?
Choose what to outsource carefully
Outsourcing is not an automatic decision, and there is no right answer. Sometimes it makes sense to outsource, and sometimes it doesn’t. These seven considerations should help any startup founder make an informed decision for each new function the company needs.