Should Your Startup Outsource?

Outsourcing has long been the practice of large companies looking to cut costs and streamline processes.  But many small startups have also chosen to outsource some of the key functions of their business in order to manage things more effectively.  Many young companies are running lean and mean with few employees wearing many hats.  This is par for the course in a startup, but it also places you at risk because it means you’re not giving the highest level of attention to any one part of your business plan.

Individual pieces of your overall strategy such as marketing, accounting, or sales should have dedicated professionals running them.  Yet it is expensive to hire a staff large enough to take on each portion of your business individually.

In recent years, a plethora of small firms and freelancers have established themselves, focused on providing small business solutions and specialized, outsourced management of key business areas.  Thanks to modern technology, outsourcing has become affordable and allows these professionals to work remotely, without even taking up office space in your facility.

But is outsourcing always the best option for a startup?  Keep in mind that there is no way you’re ever going to get out of working hard for your own business.  Outsourcing can help lift some of the burden, but even then you’ll have to stay on top of everything that you’ve hired someone else to do.

Additionally, in order to be competitive in any market, you must strive to stand out from the crowd.  If you’re hiring outside groups to do things for you, chances are high that they will be using tried and true methods.  While this offers you some stability, it also means that you’re not going to be blazing any new trails.  As an entrepreneur, you need to think creatively when it comes to your business strategy.  You are the only one who has that drive and the passion to get your company moving in a unique direction.  If you do outsource, it is essential that you maintain constant vigilance over the work being done for you by outside firms.

As an entrepreneur, you are the only who knows if you really need help.  It is up to you to balance the decision between the costs associated with outsourcing with your own limitations of time and ability for managing certain aspects of your startup.

If you do decide to outsource, make sure you weigh your decision on whom to hire as seriously as the decision to hire in the first place.  There are usually multiple options and you should be prepared to meet with these firms, check references, and find out their processes for working, communicating, and implementing before you sign a contract.  Once you hire an outsourcing firm, they become an integral part of your business and you will be working with them on a daily basis.  Their overall business philosophy should compliment yours.

Small Business Startup Myths

Millions of people dream of starting up their own business:  of being their own boss, making it big, and having a company that that they can point to as their life’s work.  But the realities of starting up a small business are sometimes overshadowed by myths which make it difficult to deal with the real challenges that arise in the first few years of operation.   Here are some small business startup myths that might keep you from realizing your startup vision:

Myth:  I’ll finally have time to do what I want / spend with my family / enjoy life

Reality:  Anyone who has successfully started up a small business will laugh you out of the room if they hear your say this.  The fact is, there are many benefits (personal and financial) to having your own business, but plenty of free time is not one of them.  Granted, you do have a little more flexibility with your time.  Many small business owners choose to work late at night so that they can spend time during the day with their families; but there’s still some major sacrifice…namely, sleep.  Starting up a small business requires that you work 110%, without exception.  Those fantasies of taking long vacations while your business grows itself?  Just fantasies.

Myth:  I’ll be profitable within the first year because I am hardworking / passionate / good at what I do.

Reality:   It doesn’t matter how good you are at your business, how hard you work, or how much of your heart and soul you put into it.  All businesses take time to get off the ground, and the majority of them are not profitable for at least the first couple years.  You need to be realistic about this for a couple reasons.  First of all, you can’t let yourself lose momentum or start to feel depressed just because you’re not profitable right away.  Building up expectations like this can damage your business simply by virtue of chipping away at your morale.  The other reason is that you’ll have to plan financially.  Your budget needs to reflect five years of bootstrapping during your startup.  With very few exceptions, no one hits the “big time” in six months, regardless of how talented they are.

Myth:  I already know what I want to do, so I don’t need to write a business plan.

Reality:  You do.  A business plan is going to help you think ahead, plan for all contingencies, work with a budget, keep you focused on your mission, and help you sell your company to anyone else you need/want to have involved—lenders, employees, contractors, vendors, family, friends, etc.  Writing a business plan doesn’t have to be rocket science.  A simple, small business startup plan can be around 10-15 pages long and follow a simple outline.  For an excellent resource on creating a business plan, I recommend the free ebook:

Outline for a Business Plan by Ernst & Young.  http://www.techventures.org/resources/docs/Outline_for_a_Business_Plan.pdf

Myth:  If I build it, they will come

Reality:  You still need to market and advertise your business strategically.  That means having a plan and a budget.  It also means researching the most effective methods for marketing and advertising.  There is no shortage of ways to waste money in advertising, and it can end up being a huge financial drain on a fledgling company.  Do you really think 5000 key chains with your logo on them are a wise choice in your first year of business?  Do you think the yellow pages are the best place to put an ad, when 80% of your business is done online?  No matter how good you are, there is lots of competition and you small business has to establish a presence and reputation to go along with your talent.

Small business is one of the most exciting arenas for earning a living.  There is unlimited creative potential and a chance to really make something tangible for yourself and your family.  But doing so requires more than just a vision and some chutzpah.  You need to be intelligent about how small business is framed in our marketplace, and what kinds of obstacles there are to overcome.  You also need to be aware of the tools and support that you have at your disposal.  Staying focused on these realities, and avoiding the myths that many fall prey to will only increase your chances of success and longevity in your small business.