In the early days of running a startup, trying to keep everything up and functioning can be an incredible challenge. Whether you’re running your business entirely on your own or working with partners and employees, those early days are a constant balancing act between getting all the work done and keeping your budget where it needs to be.
One strategy that can benefit your business in those early days and years is outsourcing. Outsourcing is the simple process of hiring a freelancer or vendor to do something for your company instead of trying to do it in house.
1. Focus on what you do well.
No one is good at everything. There are so many facets of a business – marketing, sales, accounting, IT, and more – that one person can’t competently handle everything. Partners may help fill certain gaps, but it becomes impractical for a small business to have a fully staffed IT department, or even a dedicated IT person.
At this point, it makes sense to hire a cloud-based IT company, or work with a local company to maintain virus protection and information backup, for example. Similarly, a company may be able to keep some sort of online presence available, but a dedicated marketing company can offer an amount of expertise that a general purpose employee can’t.
2. Set spending amounts.
Surviving the early months with a startup, especially when you’re bootstrapping it, depends on an accurate budget. When you’re managing all these departments on your own, the cost can be flexible and difficult to plan for; it can also be difficult to see where exactly your dollars are going, and what benefit they’re bringing you.
When you pay a set fee to a vendor, however, you can factor that exact amount into your budget, month after month. This helps you plan your operating budget appropriately. Lots of costs – inventory, employee cost, and more – will fluctuate month after month. Knowing how much of your budget is inflexible helps you better manage those changing costs.
3. Lower operating costs.
Whether you work with agencies that give you a set monthly budget amount or you work with freelancers on an ad hoc basis, contracting work out will decrease your overall operating costs. Freelancers are almost always paid per project, but not all freelancers have to the ability to accept credit cards as a method of payment or bill you on a monthly basis. This means smaller invoices raised and processed in the accounts payable department.
However, you can figure out how much you can afford to pay for your website design, social media campaign, or blog maintenance. Then you can find a freelancer who can agree to your price. With employees, you’re agreeing to pay them for a certain number of hours whether there’s work to do or not. You need to pay benefits, taxes, and more. With freelancers, you’re free of all of these obligations.
4. Better scaling.
One of the big problems for small startups is knowing when to scale up. If you’re looking at bringing on more employees or heavily investing in other operating costs, the scaling can be more intimidating. After all, onboarding is one of the most expensive human resources costs most businesses have.
Asking a freelancer for more work, increasing your order with an agency, or stepping up to the next plan in your freemium cloud based software are all easier to manage – and to scale back if the investment isn’t delivering – than hiring several new employees to whom you will be obligated if things don’t go your way.
Scaling through outsourcing gives you opportunities to explore your options without committing to long term investments that might ultimately be unsustainable for your business. It gives you better responsiveness, letting you hit the ground running rather than spending time training new employees on your company mission and methods.
5. Levels playing field.
For what might be the first time in the history of business, small companies and big companies are able to compete in many ways. Small companies can have large reach on social media, customize their message for small, niche markets, and compete for customers through loyalty programs and exceptional customer service.
But contracting work out through freelancers and agencies offers another way for companies to compete on a leveled playing field. Small and large businesses can access the same experts for their web design, marketing, and more. Since so many professionals work full time at one company while freelancing on the side, small businesses may be able to access exactly the same experts that work at another company (though rarely at a direct competitor).
This expert access gives companies the opportunity to create great products with incredible reach into niche markets, which is something that larger companies simply can’t do. To support a big company, the audience must be quite large; a smaller company can cater more specifically to a narrow market while remaining very successful.
6. More efficiency.
Most freelancers and outsourcing agencies are very aware of the balance of their time and their payment, especially when they’re being paid per project. Many freelancers actually prefer to be paid per project rather than using billable hours because they are more efficient than a by-hours project will often account for, and they end up being underpaid.
But because of their awareness of this relationship, they are efficient at their jobs and accustomed to delivering high quality products very quickly. They can often deliver before the set deadline so that they can get on to the next project in their list.
Be aware, however, that this can backfire; if you underpay a freelancer too much, you are likely to get work that is quickly and sloppily done. This is because they literally cannot afford to spend more time on your project than you have paid for. Educate yourself on the going market rate for certain services, and know what you’re paying for – and what you’re not.
In the early days of a startup, companies can increase their chances of not just surviving, but thriving, with the benefits offered by outsourcing. Accounting, marketing, web design, and other tasks can easily be outsourced to the benefit of the startup company.