The 3 Functions You Should Consider Outsourcing
Every business needs to perform their own cost-benefit analysis to determine whether to outsource, especially when dealing with large-scale operations.
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As entrepreneurs, we all know that one of the hardest parts of starting and running a business is maintaining the capital to sustain it.
Accounting 101 tells us that "cash is king," and our own dwindling bank accounts remind us daily that it takes money to make money. Whether you're bootstrapping, working on a loan or having to report to investors, managing finances and keeping operational costs low is always top of mind.
When it comes to making decisions about how to get things accomplished, how do we decide whether to roll up our sleeves and do it ourselves or outsource the job to a specialist? When needs arise in my own business, the decision-making process centers around whether the cost of outsourcing is less than or greater than the cost on the business to handle the job internally. Of course there are many components to this cost: our time spent doing the job, the skills required for the job and the materials or resources needed.
Ultimately, every business needs to perform their own cost-benefit analysis to determine whether to outsource, especially when dealing with large-scale operations. There are, however, several common business situations where we have found that outsourcing is often the right answer:
Company culture, vision and mission come directly from the core founders, but when building a brand, your team may not have the artistic and creative skills to flesh out the details. Developing the core brand is a great instance when outsourcing makes sense because a freelancer can provide you with your brand package (i.e. logos and fonts) that you can use moving forward.
It's useful for someone on your team to know basic design elements and have editing software so that you can take that package and use it for marketing materials moving forward. This limits the amount that you need to rely on your outsourced designer, which can often be time-consuming and costly.
As a startup sock company, it's crucial to keep the logistics process internal to manage costs and increase control. But at a certain point, we won't have enough room in the basement to house inventory and too much of our time will be eaten up by manual labor. This is time we should be spending growing the business. When our volume exceeds our space and labor capacity, we will have to either outsource and drop-ship our products or secure a warehouse and hire people. With strong contracts, outsourcing will likely be the best option because it keeps our overhead low and our risk at a minimum. It allows us to scale up while still operating as a lean machine.
At a small startup, it's rare to have a team member that can fill every role. You might have a tech girl, a finance guy and a salesman, but you can't always expect to also have a lawyer and an accountant. And these are business areas you don't want to skimp on. When it comes to writing up legal documents and paying taxes work with a professional.
Fortunately there are many resources and organizations available to help entrepreneurs and small businesses. But whether it means asking a friend's dad for some pro bono work or paying a part-time accountant, outsource these tasks to an experienced and trusted professional.
In general, it's best to follow the rule to keep as many processes in house until your business can support paying someone else to complete them. When it comes to skill-based tasks, utilize outsourcing, but do your best to stay within a strict budget.