Startups Cannot Live Without Outsourcing



Outsourcing is a strategy that startups cannot live without. When you start as a one-man show and have to do all things by yourself, you find out soon enough that some things you cannot do as well as others.

Despite its known drawbacks, outsourcing is a smart strategy that an entrepreneur can use well beyond its benefits of keeping overhead costs and operational expenses to a minimum.

Here are some signposts to guide you to a better outsourcing experience:

  1. Outsource work that is not your core competency, or main service offering for which you want to build your expertise. If you want to build yourself up as an innovative shoe designer, then do not outsource the designing task itself. However, you can collaborate with a production house to execute your designs for you.
  2. Use experts or specialists to gain insight into new technology, a new field or a new industry. With the example of the shoe designer, you can partner with a team who can translate your designs into 3-D drawings for a more compelling product presentation. Learning the technology yourself takes a longer time and would require you to invest in expensive software that may not be what you will need in the end.
  3. You can gain inspiration from new people and teams who can provide fresh perspective into a problem that your team has been mulling over. This can help you or your team get out of a rut.
  4. Outsource to expand market or supplier base. Partnering with other teams can link you to a new segment of the market or to a wider network of service providers. This can strengthen your service or product offering. You might also find exemplary talent that can join your core operation in the future.
  5. When outsourcing, go in with the intent to decentralize operations and lower costs, but without hampering quality or productivity. This is tricky as any new team you partner with will have to go through a steep learning curve not only with your product specification or service requirements but also with communications and company culture.  Lessen the negative impact by simplifying processes and expectations.

In all of the above, balance, the right timing and intuitive pacing are key and essential to gaining the best from the experience.

Reprinted by permission.

Image credit: CC by Richard Blank

About the author: David Drake

David Drake is the founder and chairman of LDJ Capital, a private equity firm based in New York City USA, and of The Soho Loft, an event-driven financial media company. He is a  founder and former executive board member of the US Crowdfund Intermediary Regulatory Advocates (CFIRA) and the US Crowdfunding Professional Association (CfPA).  Fluent in 6 languages and born in Sweden, he is a strong advocate of innovative investing such as the US JOBS Act (Jumpstart Our Business Startups Act), lobbying for it in both the USA and at the EU Commission. He was a U.S. Commerce Department delegate at the Transatlantic Economic Council forum in Brussels and Rome on July 2012 where he met with european ministers and national legislators.  David presents regularly as an expert on financial innovation and impact investing at 150+ annual and international events.  He writes regularly for a number of online publications including Forbes.com, peHUB.com and Equities.com.  David Drake also hosted the HBS Club of NY, Trail Blazers and Best Buddies Carnegie Hall Charity events for many years.

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