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How to Know What to Outsource Venture capitalist, author and professor Peter S. Cohan answer readers' top questions about entrepreneurship.

By Peter S. Cohan Edited by Dan Bova

Q: As a cash-strapped entrepreneur, what basic business tasks are best to outsource and what should I be sure to do in-house?

- Candice Leblanc
Toronto, Canada

A: In general, you should outsource everything that is not vital to your startup's survival. Of course, outsourcing is not a simple decision since you need to compare the cost and quality of the person or firm doing the work.

So no matter if it's payroll, bookkeeping, or accounting, you have to explore whether there is a way to do these activities yourself at a very low cost with high quality or whether there is a lower cost, high quality way to get these jobs done by an outsider.

Related: How to Outsource the Work You Hate Doing

Without knowing anything about your business, I would guess that you might be able to find low-priced software that would let you do payroll and simple bookkeeping yourself with high quality and a lower cost than hiring someone outside. You might even be able to get software that helps you put together your own tax returns for the business.

But if these tools end up consuming too much of your time, then the more vital activities will get short-shrift and your business could suffer. So when you consider the costs of doing these activities in-house, make sure you estimate how many hours you will spend on them if you do them yourself and assign yourself an hourly billing rate so you can figure out the true cost of doing the work in-house vs. outsourcing it.

Related: To Outsource or Not to Outsource

How do you recommend startups outsource most effectively? Let us know in the comments section below.

Peter S. Cohan

President of Peter S. Cohan & Associates

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He is the author of Hungry Start-up Strategy (Berrett-Koehler, 2012) and a full-time visiting lecturer in strategy at Babson College in Wellesley, Mass.

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