Need Help? How About Outsourcing?

Tuesday 21st April 2020 Dave Sharp Start Ups!

There comes the moment in every entrepreneurs life where the amount of time you have available and the amount of work you need to do just doesn't add up. There are a couple of ways of looking at this:

  • is all the work in front of you really necessary. Is it? Really?

  • you can ignore it and see what happens.

  • you can hire people to do specific parts of the workload.

  • you can use outsourcers to bring it all back under control again.

Outsourcing in its simplest form can be just about arranging certain parts of your workload to be handled by a specialist (accounts done by book keeper for example). Its an honest way to deal with a time based problem - as accounts can be extremely time consuming.

Upping the ante in the outsourcing stakes is to take part of your delivery and pass that onto an outsourcing partner. This could be the physical delivery of the product or the fulfilment of the order (combining the product and the packaging). This is where entrepreneurs can get nervous because if the outsourcer isn't focused and professional then they will let your customers down, either not delivering on time or with the incorrect products.

There are some misconceptions about what outsourcing is about.

The biggest is that it saves you money. It rarely does. The operational and management expenses of moderating an outsourced project will get rid of any financial benefit.

The best ways to look at are this:

  • It increases your capacity without increasing your fixed costs. You can get more done with roughly the same amount of money is one way of looking at it.

  • It allows you to bring in unique or specialist skills you don't have internally just for the part of the project you need them for rather than hiring and having to feed an employee full time when there is not a lot of requirement for them.

  • You can use outsourcing to bring a localised version of your product to market. Something made in the US for a US audience may not suit a Chinese audience exactly, so Chinese outsourcers can use their local expertise to modify the product to be more suited to the market.

  • Short term surges can be dealt with using outsourcers. If you find yourself unexpectedly busy at short/no notice then outsourcers can plug that requirement and make sure you don't let customers down.

There are some things that you shouldn't outsource - specifically sales. No one will every understand the products the way a creator or entrepreneur will or will have the passion and enthusiasm which is quite often the difference between a sale and no sale. I've never seen outsourcing the sales process as likely to work out.

The issue is always one of project management and quality control. You will need extremely well defined processes internally for the outsourcer to replicate to ensure delivery is on time / on scope / on budget and meets the required quality controls. Every internal issue you have will be amplified by the outsourcer who has the same issue without the same level of understanding.

If a company is going to outsource for the first time then they need to bring in expertise or a consultant to completely work out their outsourcing strategy, work out the processes completely and to moderate the outsource partner - at least through the first project. Otherwise I would suspect that neither the company or the outsourcer are in for a pleasant experience.

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