Outsourcing for startups: A complete guide

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Wouldn’t it be great if your team had the necessary bandwidth to work on bigger ideas or a chance to foster better client relationships? Wouldn’t having dedicated personnel or a team help you manage tedious or repetitive tasks more efficiently?

Outsourcing processes like software development, graphic designing, content, SEO, accounting, or digital marketing help startups improve their processes and products or services to stay ahead in the current competitive market. It offers startups the opportunity to meet the changing business and market conditions without any hassles.

According to Business Wire, the global IT sourcing market will be worth $397.6 billion by 2025. Outsourcing is a logical and practical solution that offers a host of benefits. However, this solution needs thorough evaluation and planning for its success.  

You will be surprised to know that most companies include outsourcing as a part of their long-term business objectives. According to the survey referred to in the book – The Outsourcing Revolution by Michael F. Corbett, 90% of businesses gave outsourcing the credit for their success. 

Outsourcing is the best option for growing startups as it helps them save time and money. 

Table of Contents

• Outsourcing for startups
• Benefits of outsourcing
• Top 6 challenges in outsourcing for startups
• 5 key functions that startups can outsource
• Top 8 outsourcing best practices for startups 

Outsourcing for startups

Startup owners in their early days often juggle multiple functions. They try to keep everything running by balancing the work, time, and budget, not realizing that one person or team cannot handle everything competently. There will be some skills gap that would affect the team performance and ultimately the business success. 

Often due to budget constraints, startups are not willing to invest in a full-time hire. For example, developing a website is usually not an ongoing task and hence, does not require a full-time hire. In situations like these, outsourcing is the best strategy to adopt. Startups can outsource the website development tasks to an experienced web development agency. 

The development teams today possess the expertise to design customizable websites for your startup. Alternatively, many web design platforms offer templates for dynamic websites which are just as easy to work with and are a significantly more affordable option. You can see how their platform can be used to create a service website to get a better understanding. This helps startups get their websites up and running in no time.

Outsourcing certain functions empower startups to scale up the existing work processes. It helps startups focus more on growing and scaling the business.

Benefits of outsourcing

As we said earlier, investing in outsourcing is beneficial as it helps startups save money, keep projects on track, and smartly manage time. Let us now have a look at the benefits outsourcing offers for startups.

Focus on priority tasks

Outsourcing frees in-house teams from undertaking repetitive tasks. While mundane activities are being taken care of by the outsourced team, the in-house team has time to refocus on important profit-generating activities like marketing, customer happiness, content creation, and more. The team can now realign their efforts to build brand reputation, provide high-value services, and conduct thorough research without any hassles. 

Increase the team efficiency

The outsourced team brings in years of experience and expertise that proves to be an asset for the overall business. The knowledge and understanding of the domain ensure increased productivity and efficiency. Thus, an outsourced team can help you achieve more in less time.

Save money on labor costs

Hiring a full-time in-house team to carry out certain tasks requires you to pay salaries. These salaries are usually based on their experience and the economic status of the country. You can avoid these costs via outsourcing. You pay a fixed price to the outsourced company every month while saving money on labor costs. 

Decrease costs for infrastructure

Outsourcing eliminates the need for investing in infrastructure and technology. As the work is designated to an outsourced team, it is the responsibility of the outsourced company to develop the infrastructure and invest in the technology required to carry out the assigned tasks seamlessly.

Get up and running in less time

You can get your outsourced team started with your work quickly. All you need to do is provide them with a project brief and grant access to the tasks, passwords, and other documentation. With the right infrastructure and high-speed internet, they can start working on the tasks immediately.

Access to industry experts

Outsourcing companies are breeding grounds for expert talent. With outsourcing, you will have access to experts in web development, IT, human resources, marketing, accounting, and many other teams. You will not only get quality deliverables but also, have them completed on time.

Remember a long-term alliance with an outsourcing company will help the outsourced team understand your project well. The team will know the best methods to work and deliver quality solutions to you. 

Top 6 challenges in outsourcing for startups

Although outsourcing has increased the efficiency of startups, it does come with its share of challenges. However, with the help of the right technology and well-defined work processes, startups can overcome these challenges and ensure success at outsourcing.

1. No prior experience with outsourcing

Outsourcing can be overwhelming as most startups are not familiar with the concept, best practices, and workflow when working with a new team. Conveying the vision and goals to an entirely new team can be a difficult task.

The best solution in situations like these would be to ask the outsourced team to walk you through their entire work process. This will help you define requirements properly, identify and avoid bottlenecks, and get the required tasks completed on time.

2. Contract negotiation

The next challenge that startups face when outsourcing is negotiating the contract terms with the outsourced team. Defining the scope of the work, roles, and responsibilities for a service-level agreement is not child’s play. 

Further, fine-tuning the contract to suit both teams’ requirements involves thorough planning. It is a time-consuming process. 

Setting clear project requirements is certainly the first step toward drafting an excellent contract. Conduct multiple meetings to convey clear requirements and desired expectations before drafting the contract. 

In addition to this, discuss the situations when the outsourced team fails to deliver the expected deliverables. It is always wise to sign an NDA and other regulatory documents before starting the project.

3. Cost estimation

Although outsourcing is a cost-effective solution, it could be a costly affair if not properly planned. Calculating an accurate cost for the outsourced tasks is one of the most widely spoken outsourcing challenges.

Define the exact requirements and share the same with the outsourced team. Additionally, share the budget limitations with the team to avoid any misunderstandings. An ideal outsourcing company will design a customized pricing model based on the requirements and budget.

4. Improper communication

Communication is often found to be a challenge when working with an outsourced team. Inconsistent or improper communication often results in poor knowledge transfer and affects the project deliverables adversely. 

For example, if you have outsourced an ongoing web development project, having clear documentation will certainly benefit both your team as well as the outsourced team.

Focus on establishing clear communication with the outsourced team. Take time out to write proper project documentation before scheduling meetings. Be open to answering the questions the outsourced team might have.

5. Cultural differences

Outsourcing often involves working with diverse teams from around the world. However, a startup with zero experience in working with a culturally diverse team may find it challenging to adapt to national and cultural differences.

An ideal solution in situations like this would be to organize diversity awareness programs for the teams. This will help convey your values and culture to the teams. 

Further, establish clear communication channels to bring everyone on the same page. It will keep misunderstandings away and ensure that the assigned work is completed on time.

6. Data security

Although outsourcing seems to be an excellent solution for scaling business, it does come with a risk of losing intellectual property and data security. Important documentation, such as business plans, trade secrets, customer information, core operational processes, and other resources and tools can be potentially misused or stolen.

Signing legally binding contracts, like non-disclosure agreements is a must for startups today.

Learn more about the pros and cons of outsourcing here.

5 key functions that startups can outsource

Although startups can outsource any kind of work, it depends entirely upon the business requirements. For example, a software development company might be a pioneer in technology and innovation but might not have the same expertise in marketing or finance. 

In such a case, outsourcing these functions will help businesses streamline their operations. Remember there is no limit or restrictions on the type of work. 

In a survey by Clutch, it was revealed that accounting is the most common outsourced function among startups. This is followed by IT services, IT development like web development, software development, digital marketing, and human resources.

Here are five business tasks that most startups outsource for enhanced efficiency.

1. Customer support

Many startups outsource customer support functions when they have constraints with the resources. Ideally, customers expect support 24*7 irrespective of the geographical location. However, the customer support team cannot be available online all the time. So, instead of hiring new customer support executives, it is wise to outsource the task to a good company.

For example, if you are a startup dealing with customers mainly over the phone or via emails, outsourcing customer support tasks to an IT call center or a chat service would be advantageous. The outsourced team would be available for the customers round the clock. Thereby, ensuring faster query resolution and enhanced customer support. 

Some of the organizations that outsource customer support functions are Apple, Microsoft, and Disney. 

2. Accounting

Most startups do not require a full-time accounting department for managing their accounting and bookkeeping needs. Outsourcing these functions to an external accounting firm will help startups save time as well as money. 

The right accounting firm will offer you insights on planning the financial strategy and facilitate better cash management. It will also ensure compliance with all financial regulations. The outsourced team will help you prepare various financial documents, such as accounts receivable, accounts payable, and tax filings efficiently. 

Being experts in the financial industry, the accounting firm will ensure the startup stays on top of the financial reports without any hassles.

3. Human resources

Human resources play a major role in the growth of any startup. An HR team ensures the team’s growth by hunting down the right talent, offering them the best compensation and benefits, and promoting an excellent workplace. 

If the HR workload of your startup is minimal, hiring an outsourced HR team would be ideal for you to scale up the operations. Hiring the right talent and ensuring employee engagement and retention are the two primary functions the outsourced HR team would help you with. 

Besides, the outsourced HR team would also design the HR policies as well as contribute to developing a unique employee handbook. While maintaining the contracts, employee documents, and performance reports, the outsourced HR team will help you build and scale your dream team without any additional effort.

4. Social media marketing

Social media marketing is no longer about creating an account and posting content regularly. Having a social media strategy to reach out to the target audience and promote the products or services is essential for successful social media marketing. 

Focus on outsourcing the project of social media marketing to a third-party agency that has expertise and knowledge of the functioning of various social media channels. This will help you target the right audience with the best content. With the help of an excellent social media strategy, the social media experts will build an excellent brand reputation for better lead generation and customer satisfaction.

5. SEO and content marketing

Content is the key that helps attract the right prospects to the business. Publishing high-quality content that focuses on providing solutions to the customer’s problems is essential to appeal to the target audiences’ interest. SEO is the next driving factor that plays an important role in content marketing. 

As a startup, if you are finding difficulty in content creation and marketing, outsourcing it to a content marketing agency is a wise choice. You can leverage their expertise in content marketing to draft effective content strategies for the business. Content marketing specialists will create outstanding content to attract the best leads to your business. While regularly assessing the KPIs, these specialists will boost the brand identity.

Top 8 outsourcing best practices for startups

Here is a list of the top eight best practices for getting started with the outsourced team.

1. Document a clear project requirement

Draft a clear document that explains your project and its components in detail and share it with the outsourcing companies. This document will go a long way in helping you assess, prioritize, and shortlist outsourcing companies. 

A concise project requirement documentation will aid you as well as the outsourcing companies in understanding what it would be like to work with you. It gives accurate information about the project and your expectations to the outsourcing companies. It serves as an aid for these service providers in proposing timelines and pricing. 

Besides, it will help you gauge whether these companies are fit to be trusted with your project or not. 

The essential components of a project requirement documentation are –

• Overview and background
• Project goals  
• Target audience
• Project details

2. Select the right outsourcing firm

Choosing the right outsourcing company can be challenging for startups. Focus on what you want from the outsourcing company before making a decision. Here are some of the important things you should look for when shortlisting companies.

• Industry experience and technology expertise
• Strengths and weaknesses
• Ability to use the latest technology and tools
• Ability to provide references
• A dedicated team of specialists
• Easy communication
• Support model designed for the customers
• Confidentiality and security procedures 

3. Define design and content standards

Design, content, and aesthetics play a very important role in the success of your business. Having uniform design standards thus becomes mandatory. It not just contributes toward good visuals but also, keeps the outsourced team on the same page as your internal team. 

Your design documentation should contain all the design guidelines in clear and comprehensive language. You can include some examples to be more specific about your requirements. 

In addition to this, you could share some examples of completed projects. This can be further improved with detailed notes. You could also list down some websites your team follows for inspiration. 

Similarly, the content documentation should contain the writing guidelines. Whether you wish the writers to write in a conversational tone or formal tone or convey the structure for writing blog articles, detailed documentation helps keep internal as well as outsourced teams on the same page. 

This documentation will help businesses achieve consistent content across all platforms as it speaks about the voice and tone of the content. In addition to this, businesses can provide short guides for writing various forms of content. 

For example, the email newsletters for onboarding new users could follow a conversational tone while product update emails can be on the formal side.

4. Create a work tracking document

Mention all the assigned tasks along with their deadlines in this document. Ask your internal team to keep checking on this document. This will help you keep an eye on the work progress and its deliverables. 

Alternatively, you can sign up for a project management tool like Trello, Basecamp, Jira, or any other tool to manage the tasks seamlessly.

5. Schedule status meetings with both teams

Ensure that you have status meetings with your outsourced team to

discuss the current projects. If you have any other requirements or additional projects, you can also discuss the same with the outsourced team during these meetings. Such meetings will also serve to be the best time to resolve doubts and share new ideas.

6. Sign up for new tools for better results

Leverage technological advancements to your benefit by signing up 

for new tools and software. These tools will help the outsourced team with speeding up their processes and delivering quality work at the end of the day. Thus, ensuring better and faster results.

• Project management tool – To assign and manage tasks seamlessly. For example, Trello, Asana, and Toggl.
• Chat or communication tools – To connect with team members for real-time communication. For example, Slack, Skype, or Microsoft Teams
• Meeting software – To conduct meetings with the outsourced team for project updates and to discuss the challenges if any. For example, Zoom, GoTo Meeting, Google Meet, or Skype
• eSignature solutions – To sign contracts, receive quotations, and share agreements with the outsourcing companies. For example, GetAccept, DocuSign, eSign, or PandaDoc.
• Time tracking Tool – To keep a track of the amount of time spent on completing the tasks. For example, Time Doctor.

7. Discuss how to manage project scope changes

There are many instances where the scope of work needs some updates or some additional tasks are to be added to the project as it progresses. To accommodate such changes, you might need to make changes to the project scope and inform the same to your outsourced team.

The best approach would be to negotiate and plan out an additional scope of work with an ad-hoc invoice or payment agreement. It will ensure that additional work is completed while keeping your project on track.

8. Overcome the cultural gap

Misinformation about different cultures can often make you believe that it would be challenging to work with your outsourced team. However, overcoming these cultural gaps can help strengthen your partnership.

Be aware of the potential challenges you could face when working with an outsourced team. Try having an open conversation and building a connection with the team. 

You can always start with smaller tasks and once you are aware of their working style, scale it up. Be clear about your requirements and impart the required knowledge to the team on time. Also, provide constructive feedback and ensure it is well-received. 

Ask their thoughts or suggestions when making important decisions for the project as it will make them feel more valued. Take initiatives to help the team grow and build that trust for a healthy professional relationship.

Conclusion

It is no doubt that outsourcing business functions can help startups speed up their operations and garner success. However, remember that startups might face some challenges while outsourcing. 

Follow the best practices mentioned in this blog to tackle these challenges. Happy outsourcing!