Startups: To Outsource or Not To Outsource Explained in 5 Steps

There are many that would argue that outsourcing during the early part of your startup is probably better. On the other hand, many would also argue that keeping it in-house and doing it all by yourself is better for you. Which one is it? Which one is better for you?

In this critical time, with tight budget and a tough financial market to raise money, this question to whether to outsource or do it in house has become more crucial than ever before. Startups with no internal staff on various core functions are struggling with this question on a daily basis to get their business off the ground.

From my experience, the answer varies from startup to startup. It varies because you need to ask yourself the question, “What are you good at doing and how much time you have for your startup?” If you answer this question honestly, you will have the answer to whether you should outsource some non-core functions or if you should manage it all within by wearing multiple hats.

You should follow this simple 5 step guide to help you answer the question. I have seen this work in the past. Throughout all of this, especially if you are going at this alone, find a mentor to guide you.

thinking_womanYour Numbers  and Time:

Figure out how much time you have and how much money you can actually bring to the table for this startup. You need to be honest with yourself in making this assessment. This step determines the available startup capital for your startup. If you get this wrong, you will probably make the wrong decisions in the steps to follow.

Problem You Are Trying to Solve:

What is it that you are actually trying to solve with your startup? Figure out what sort of skill sets are required to complete the development work and what is required to market this product or service. Make a chart and figure out how much of this you are realistically capable of doing on your own and how much of this you will need some sort of help with – either in-house or external. You can wear multiple hats but you only have 24 hours in a day and 7 days in a week, just like everyone else. Hence, when your startup heats up, you won’t have the time to manage all functions by yourself.

Financial Analysis:

This is the most crucial step. You should always spend more time here and try to run through every component of your project and compare the cost between in-house and outsource. In order to do this, take your project and divide it into individual tasks and resources required to complete each task. Then examine the time required to complete each task. Do some research using employment websites and see what you will pay for in-house staff. You will also have to add the cost of providing office space for the employees. In order to find out the cost of outsourcing, call up a few outsourcing firms and get an idea of the kind of cost and time it would require to complete your project.

Numbers speak for themselves and many times, you should be able to decide by this step whether outsourcing is for you or not.

Make or Break a Project – Find the Right Talent:

Many startups are not the experts in managing staff or directly dealing with another outsourcing firm. Hence when the pressure mounts to get additional help, they tend to make the wrong decisions. Even if they make the right decision to outsource or to hire staff, they end up hiring the wrong employee or outsource the work to a firm that does not deliver. You can make or break a project with your choice. Timing is crucial for any startups so make sure you do your homework to either hire the right employee for your office or find the right firm to outsource. Don’t cheap out on either one. You need to go back to the above points and see how much you can afford, then find a decent firm that can deliver for you on time or hire a professional that can help you with your startup.

Decide if Mixing Outsourcing with In-House will Work for You:

Many will find this model work for them because there are core functions that you may not want to outsource. Such core functions could be financial related or security related. Once you follow the above steps, you will be able to identify the core functions and you will also be able to identify how much money you got to play with. These two pieces of information will help you figure out what you should keep for in-house and what you should outsource.

From my experience, mixing both works well most of the time. As a founder of a new business, you tend to wear multiple hats. Hence you able to do many functions but at the same time, you will need help with tasks that are beyond your skill sets. For those tasks, I usually look for a firm that I can outsource the work to. Once you start dealing with a firm or a few, you will begin to create a relationship with some of them. You should work on this relationship because if you find the right firm, you can use them over and over again because you know they will deliver on time and on budget.

I hope this simple step by step guide to decide whether to outsource or to do it yourself works for you. If you’ve experienced this in the past, share it with our readers by leaving a comment.

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