The early days of a startup are full of pressure — on time, cash flow, and revenue. It is no wonder so many consider outsourcing (collaborating with an offsite partner for a specific task) as a way to gain faster business growth. In an ideal world, it gives the startup access to expertise, reduces costs, and provides an opportunity to focus on core procedures.
However, outsourcing can bring its own challenges. From observations of successful and failed startups, we’ve compiled a list of best practices when it comes to outsourcing.
Good Practice 1
Know Exactly What You Want to Outsource
This means identifying the task and diagnosing what areas you need help with. Once you have done that, pinpointing a project start and end date is crucial. You will also need to communicate to your outsourcing partner how stages of the work will be monitored (and paid). Remember, being explicit in your requirements will bring the best results.
Good Practice 2
Firstly, Outsource the Non-Core Function
Successful leaders will advise startups that focusing on creating strategies for business growth is a core activity. However, startup CFOs often say they do not have sufficient time for this as their time is being spent on more critical work such as managing accounts and closing ledgers. Therefore, identify those non-core tasks for outsourcing, and concentrate on expansion.
Good Practice 3
Outsourcing Can Save Money
Having some functions outsourced can help save money and an example of this is Slack (the business messaging service). It outsourced it’s app for development and used the feedback to create an app that became a huge success within two weeks of launch.
Good Practice 4
Knowing Accurate Project Costs
Setting a realistic turnaround time is vital for effective financial planning. Compare previous project costs and timeframes. Ensure that third parties bidding for the role are equally accurate about their own capabilities and timelines, as changing deadlines will negatively impact on costs.
Bad Practice 1
Appropriate planning is essential when managing remote workers. Milestone goals and dates need to be clearly defined alongside the required final result. If you do this, you will have a smoother project process and a better relationship with the outsourced party.
Bad Practice 2
Technical Proficiency is Critical
Does your outsourcing partner have the right skill level, support infrastructure, and staff levels to complete your task well? It is vital to research the party you will be working with. Hiring an insufficiently experienced vendor can lead to delays, budget overruns, and potentially a failure to deliver.
Bad Practice 3
Lacking Clear Communication
The best projects are the ones with clearly defined duties, goals, and turnaround times. Both parties must have a definite understanding of what is expected of them and by when. Always communicate accurate, precise instructions for the most rewarding results.
Bad Practice 4
Outsourcing Core Functions
In a word — don’t. Outsourcing the non-essential functions of your business gives you and your staff time to focus and gain expertise on core functions to enable expansion.
Bad Practice 5
Picking the Cheapest Option
Even if you are outsourcing to reduce your costs, cheaper is not always better. It could mean a lack of supporting staff, infrastructure, or expertise. If your project is delayed for any of these reasons you may let a client down or need to re-start the job – both of which will be expensive.
Outsourcing is here to stay and can be a fantastic money-saving option for startups. Stick to best practices and avoid the bad ones for the best way to make this option work for your business.