Should you be outsourcing parts of your start-up?
Friday, December 10, 2010/
Outsourcing some of the workload is no longer just the preserve of large multinationals. Even fledgling start-ups can benefit from outsourcing aspects of their business to a third party.
Not everyone starting out in business can afford to hire an army of staff, which is why outsourcing can be so appealing.
Many are cautious outsourcing, but it can work well with virtually any aspect of your business, such as packaging, distribution, copywriting, social media management, data entry, general administration, public relations and event management.
And thanks to technology, hunting for the perfect person to outsource to can be as easy as the click of a mouse.
Sydney’s Kristy Smith is the founder of Virtual Elves and an outsourcing specialist.
She says even start-ups can afford to outsource, with her virtual assistants costing $40 an hour.
“Trying to do everything yourself will only compromise work quality. If you have other important things to do and your hands are full, you should bring in some help,” Smith says.
How to decide
Businesses considering outsourcing should consider if they have the skills to handle the job in-house, the associated costs of doing the job themselves, and if they actually enjoy doing the work, Smith says.
“Taking on a responsibility that you resent will only drain your energy. Save tasks that you like for yourself and outsource the rest,” she says.
Outsourcing has enabled Sydney architect Shane Simonian to grow his business without having to hire permanent staff, saving money and hassles.
He admits he was reluctant to let any work leave the office in the beginning.
“We were control freaks, which was a big hurdle for us. Then we realised being that way was actually taking time away from our business. We chose to outsource jobs that aren’t particularly critical, like 3D shadow diagrams and 3D visualisations. It’s been brilliant.”
Outsourcing has also worked well for home appliance rental business Mr Rental. General manager Alan Payne says it isn’t the best use of resources to try and do everything in-house.
“In business, you know the things you know, but the worry comes about the things that you don’t know you don’t know. You could be operating in blissful ignorance until someone brings these things to your attention.”
Where to draw the line
Payne advises businesses to identify the key areas of control that should be retained in-house to protect brand image or intellectual property.
“Our philosophy is that we need to have control over core competencies across the key areas of our business. But we need to ensure we bring to the table the best skills and knowledge, in the most efficient way, which is why outsourcing works so well for us,” Payne says.
However, with some careful planning and lots of communication, you can outsource more than just non-core aspects of your business.
Martin Buggy launched brand Bondi Chai Latte into Australia five years ago, after tasting the hot drink overseas. Right from the start, he outsourced everything from the creation, manufacture, warehousing, distribution and packaging of the product, which is now sold to more than 4,000 cafes across the country.
“If we had kept everything in-house, we would have had to hire 15 to 20 staff to run our business efficiently,” he says. “But we didn’t have the cash to hire that many people; and we didn’t need the angst.”
Finding top talent
The next step is tracking down the best person for the job.
Sophie Andrews, founder of Sydney boutique bookkeeping agency The Accounts Studio says thanks to the internet, the world is her oyster.
She used website elance.com to track down someone in the UK willing to build a website for her for $1,000. Quotes here in Australia were between $12,000 and $14,000. Freelancer.com is another popular site, which is run by an Australian.
But Andrews warns people to be cautious when outsourcing overseas, and suggests requesting a free sample of their work.
“Make sure if you’re dealing with someone overseas that they have good English,” she says. “Also, give them a very clear brief and let them know what your expectations are. You’ve got to be really specific about the expected outcomes when you’re outsourcing.”
“And you’ve got to check the progress of how they’re going along the way, particularly when you’re just starting out with them.”
Beware of the pitfalls
Melbourne businessman Paul Wilson has built his digital agency, White Labelled, based on an outsourcing model. He outsources to people all over the world, which hasn’t always been smooth sailing.
“There have been the typical nightmares, like lack of communication, lack of understanding and a lack of quality. It’s been trial and error to find people I can trust to work with. Sometimes you’ve just got to get on a plane and meet them face-to-face to make it work.”
Buggy also admits he’s made mistakes along the way when outsourcing. “I’ve learned some hard lessons. In hindsight, I wouldn’t have given people the benefit of the doubt, and I would have cut my losses earlier.”
Jo Macdermott, founder of Next Marketing outsources to a virtual assistant. She avoids the pitfalls by giving clear guidelines. She also writes a manual for each aspect of her business “so everyone is on the same page”.
“Outsourcing is something that you need to manage quite closely and set specific deadlines. It’s about finding someone you trust, which can take some time.”
For Mr Rental, outsourcing partnerships are regularly evaluated at team meetings to ensure the relationships remain the best thing for the business. “Remember that the mix of in-house and outsource can change to suit your circumstances. There is no one correct model,” Payne says.
Tips for successful outsourcing:
- Make sure you give a clear, concise brief.
- Consider using experts from overseas via internet sites to save costs, but proceed with caution and ask for work samples before committing.
- Be in regular communication so you get regular updates.
- Don’t pay for an outsourced service up-front.
- Start out small and build up gradually.