The Key Outside Services Founders Need for Their Startup

November 3, 2020
Los Angeles Angel Investor and Venture Capital Partner- Jonathan Hung > Startup How To > The Key Outside Services Founders Need for Their Startup

Knowing the right services for your startup is fundamental for any successful founder. To properly scale and grow quickly, every company needs to add team members to get the things done that need to get done. Of course, every founder needs to balance their budget and add team members strategically, which is why most startups run lean and only have a few key employees who wear many hats. This often leads to unmanageable workloads and burnout, and can even cause mistakes. Growing companies need to also grow their workforce to keep up with demands. Still, internal hiring can often be cost-prohibitive, especially for a startup trying to sustain an upward trajectory.

So what can a startup that needs help in certain areas of a business do to relieve strain on a lean workforce without spending money that they don’t have? One option is to outsource services to firms that are dedicated to their respective areas to maintain a high quality of work without a high price tag.

Here are some of the basics about outsourcing services for startups and questions you should ask yourself before bringing in an outside consultant to help your team.

Table of Contents:

The Basics: Why Startups Should Outsource

Would My Startup Benefit From Outsourcing?

What Questions Should I Ask Before Outsourcing?

What Resources Should I Outsource for My Startup?

Conclusion

The Basics: Why You Should Hire Outside Services for Your Startup

Every startup is pushing to stay competitive in their own market, while also balancing a budget. One of the toughest things to balance is scaling a team and development efforts in a sustainable way. Opportunities don’t wait, and competition is always right around the corner. The natural reaction is to onboard top talent to get a product to market quickly and efficiently. The problem is that hiring the highest quality talent often takes a lot of time, a lot of money, and a lot of effort. Outsourcing is an excellent solution to counter that time, money, and energy loss and help a startup expedite development, drive innovation, maintain flexibility, and compete in the market.

Outsourcing helps companies of every size shore up skills gaps in their teams so they can boost efficiency and sharpen focus. Thanks to the “gig economy”, the talent options are endless—in fact, it’s estimated that more than 25% of workers engage in freelance or consulting work. Thanks to technology, outsourcing has become an extremely affordable option for startups with less capital to burn: consultants require less overhead and less overall compensation than a full-time employee. There’s even an option of working with an agency that can provide multiple services under one roof for one price. This allows founders to efficiently fill knowledge gaps within their organization so they can concentrate on growing the business.

Would We Benefit From Outsourcing Services for Startups?

Startups choosing to outsource certain responsibilities doesn’t mean that those jobs aren’t important. Some roles don’t need a full-time hire from the get-go to make a difference. Outsourcing certain roles can create great advantages for a startup if done properly. Some of the benefits include:

Reduced costs

One of the most significant benefits of outsourcing services for startups is the cost benefits. It is cheaper to hire contract expertise than employing full-time internal employees. Hiring a consultant means you don’t need to offer benefits or insurance, provide an office space or technology, or pay for relocation. It also means that you just have to pay the hours someone works versus a full salary. This means you can better control your burn rate and focus your limited budget wherever your business needs, even if it’s for a limited time.

Simpler onboarding

It’s much easier to find a worker to outsource one task or project than it is to find the absolute right long-term employee to bring onto a team. With a consultant, you don’t have to worry about managing training of the employers or provide performance reviews regularly—a project has set goals that consultants need to live up to, but don’t need the growth channels that a full-time employee would expect. Consultants are on a simple contract agreement, which simplifies the process.

Staffing flexibility

In a quickly growing startup, priorities evolve and your company may need to pivot at any moment. By outsourcing, you can be more agile because consultants allow you to scale your team up and down as needed. This allows you to focus your spending on the departments that need it at the moment, which means being able to iterate quickly and improve your process more efficiently.

Freeing up your vital team members

It’s no secret that startup teams are often stretched thin. Employees hired to do one thing may have to wear many hats just because things need to get done. When you outsource some of your key business processes, you will empower your team to be able to focus their expertise and get the job done that they are best suited to accomplish.

Access to global talent

A great benefit of outsourcing is that your startup will have access to some of the best talents in the world without the hefty price tag. Whatever area of expertise you’re looking for—from IT, to marketing, to finance—you’ll be able to access them at a rate that is less expensive than bringing someone in-house or working to skill-up a current employee. This means your work will be high quality and will be done quickly.

Level the playing field

Contracting out work to consultants or agencies gives smaller companies and startups the ability to compete on a higher playing field. Experts in their field are more accessible on the consultant side because they are more affordable, and they can help startups find niche markets to reach a bigger audience and grow successfully.

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What Questions Should I Ask Before Outsourcing A Service for My Startup?

Before deciding to outsource services for your startup, you need to gauge whether it’s the right decision for your business. When deciding whether you should outsource services for your startup, ask these questions:

Will it save me time?

How much of your team’s time is spent on administration or basic tasks? There are only so many hours in the day and plenty to do to run and grow a startup, which is why you need to understand where it is best to focus your team’s attention. An important question to answer is whether bringing in a consultant can help your team with the small tasks and whether their time would be better spent shifting their focus on the bigger picture.

Tip: Find out how much of your team’s time is spent on transactional vs. strategic work. If your team members are always in the weeds and don’t have time to think about the big picture, it may be time to outsource some work. Strategy is what will get your business to really grow, so that should be the priority for your core employees.

Will it cut down my costs?

While cost saving is a benefit to outsourcing, bringing on a consultant should be a strategic move. Outsourcing allows startups to invest money where it makes the most impact, so you need to figure out if and when the time is to bring in consultants.

Tip: If you’re looking to increase production, but also need to lower costs or keep them low—outsourcing is a logical next step. Be strategic about growing your team by slowly bringing a consultant in one project at a time.

Will it help push my business forward?

Starting a company is exciting, but it can be stressful when you’re trying to scale while also watching your burn rate. Growing quickly brings with it the challenge of knowing when to pull the trigger on adding a new employee or outsourcing. Your in-house team is great for keeping things running, but keeping teams small can be holding you back from your full growth potential

Tip: If your business is growing rapidly and your team is stretched thin, consider outsourcing. Outsourcing can be that key to propelling a startup forward faster and more effectively than a small in-house team can do on their own.

Will it bring much-needed expertise to my team?

Adding additional resources to your startup means your team should be filling the knowledge gaps that are missing. For example—if your team doesn’t have a person that excels at marketing, that would be a valuable resource to add to your startup ecosystem through outsourcing.

Tip: Take stock of what expertise your full-time team brings to the table, then figure out what pieces you’re missing. Add those resources slowly through outsourcing, and build up to adding full-time members as your company scales.

Will it make my team more efficient?

Outsourcing shouldn’t just be about filling knowledge gaps for areas your team is missing, sometimes your team may need help in areas that they do excel. Whether you need to free up your team’s valuable time or if you need to boost those resources, outsourcing can help your team get the job done. For example, if your sales team needs to boost their production during peak periods or if your software team needs to add developers to get through a product sprint quickly.

Tip: Be strategic about when and what departments you boost with additional resources by already having consultants in various industries in your orbit. Network at industry events and keep in touch with the most talented consultants you’ve worked with so you can quickly get them back up and running on future projects when you need them.

Which Services for Startups Should I Outsource?

Every startup runs its business in a unique way, which means that each team needs different resources to be most effective. Any essential process can be outsourced, so it’s important that you take stock of what processes you might need that fall outside of your core team’s expertise. Here’s a look at some of the most common business processes that growing startups might outsource to stay lean but scale effectively.

Legal

Having a lawyer in-house for your startup is a pretty big expense, and it’s not likely something a startup needs in their normal day-to-day. That’s why one of the most effective services to outsource is legal services. A law consultant can help your company save a lot of money later by helping you structure your business, lease office space, negotiate contracts, file for business licenses, and file patents or trademarks. Outsourcing legal services makes sense—startup teams don’t usually think about having an in-house lawyer as an early team member, but filing proper legal documents is an absolute must to keep the business out of trouble in the future.

A business should incorporate very early on—as soon as an idea is materialized and you’re ready to build a team, enter into contracts, or seek investor funding, you should consider incorporation and a legal consultant will be absolutely necessary for your business.

Financials

There are two types of financial consultants a startup should consider outsourcing. The first, and earliest addition should be an accountant. Bookkeeping takes up a significant amount of time and outsourcing it can free up a lot of time to shift towards more strategic efforts. Bookkeepers can manage the day-to-day books, taxes, payroll, and regulatory compliance for the business. Most startups don’t necessarily need to hire someone full time for this work until they see significant growth.

Even companies that are in a higher growth mode are now outsourcing financials. If your company has closed a round of funding, you’ll likely need more than just a bookkeeper, and it’s more than acceptable to outsource CFO services for more in-depth financial needs. A CFO can help with operational budgets, product/service pricing, reporting, audits, debt management, equity, and debt negotiations, and even forecasts and projections. As a business owner, you should be concentrating on offering the greatest product or service to your customers, which is why you should consider outsourcing your financials. One caveat: make sure to look for a financial consultant that has experience working with startups, you want someone that knows how to scale a business.

HR and Recruitment

More than half of businesses outsource their Human Resource efforts, and it’s no surprise—from recruiting, to onboarding, to personnel issues, to training, HR can take over a founder’s whole schedule. These two HR areas are best to outsource from the get-go:

  •      Onboarding: HR requires quite a bit of paperwork, especially onboarding new employees. An HR consultant can manage contracts, payroll, and benefits to keep employees and consultants on the same page.
  •      Recruiting: One of the greatest challenges for growing startups is getting the right people in place. It can be difficult to find the high-caliber talent necessary to scale a startup team. Sourcing, candidate tracking, follow-up can all take time and energy away from the mission of the startup. Outsourcing can keep the core business strategy running without taking the focus of the core team.

Marketing

Startups are always looking for opportunities for fast growth and predictable customer acquisition. Outsourcing marketing efforts to focus on gaining customers leave your core team to focus on the product or service. Here are some of the basic marketing services that can be outsourced to a consultant or agency:

  • Market Research: gathering market information and developing target audiences can be a time-consuming process, which is why outsourcing market research to a dedicated freelancer and research assistant can be an effective way to get the research data you need.
  • Branding and Web Design: Web design and branding often require technical ability, an understanding of an audience, and an eye for design. A website also requires knowledge is search engine optimization (SEO) to make sure search engines can find the brand, and they require quite a bit of attention—in the early stages of a startup, website content should be tested and optimized regularly to reach audiences. All this attention may be best left up to the professionals—outsourcing this piece of marketing can be beneficial.
  • Social Media Management: Social media is often overlooked by business leaders because its importance isn’t as vital as sales and product development, but these days it is almost impossible to grow your brand and connect with your audience without a social media presence. Many startups think these efforts can be handled by an intern, but it can be just as cost-effective to bring in a consultant to handle these efforts with more expertise and the attention they deserve.
  • Content Creation: Providing education and value to potential customers is a necessity, but hiring a dedicated in-house content creation team is not something an early-stage startup can afford. Outsourcing efforts like blogging, videos, and graphics will mean that the blog is maintained while leaving team members to concentrate on vital efforts.
  • Paid Advertising: this area of marketing is another area that is well served through outsourcing because it requires technical skills. Platforms like Google, Facebook, and LinkedIn make it easy to get started in online advertising, but the complexity quickly escalates. Marketing consultants can give attention to optimizing campaigns to keep audiences engaged.

Customer Support

Customer service is synonymous with outsourcing, but it’s important that if a startup is planning to outsource this business function it must do it right. An in-house team is a big expense, but you will likely need at least one dedicated member that knows the ins and outs of your product. As your business grows, you can scale your customer support through outsourcing without incurring a huge cost. This will make sure your customer issues are resolved and customers are happy.

Conclusion

To scale quickly, startups need to grow their team, but founders need to be strategic about how they manage that growth. Outsourcing the areas of the business where you have knowledge gaps in your team or where you have unmanageable workloads means that your company can remain lean, but leaves room to grow into the creative and productive company that every startup strives to be.

If you’re looking for more advice and guidance on how to grow your startup, reach out to experienced entrepreneurs or angel investors like Jonathan Hung.

 

jonathan hungAbout the Author

Jonathan Hung is one of the most active angel investors in Southern California, his mission is to drive value creation within each portfolio company. In support of this mission, he serves as Co-Managing Partner at – Unicorn Venture Partners.

Jonathan and his team target investments in US companies that have global market potential with a focus on long-term growth expansion to East Asian markets.

Jonathan developed his investing prowess as a Managing Member for his family office fund, J Heart Ventures, which made investments in startup companies such as Gyft, ChowNow, Miso Robotics, Clover Health, Bitmain, to name a few startups he funded.

Jonathan has various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania.

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