A Startup’s Guide to Outsourcing

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During the life of a startup, the question of outsourcing can arise frequently whether for PR, marketing, product design, sales or engineering.

Outsourcing can be very attractive: consultants bring new points of view, relevant experience and (potentially) immediate results. Of course, consultants charge high fees and after their contract expires they leave with their knowledge and insights in tow.

Founders may be challenged when deciding when and what to outsource. To simplify the decision, reflect on your startup’s key competencies needed to win your market. Like people, startups must focus on a few key skills to be successful. Typically, startups win share by focusing on their strength: product design, sales effectiveness, marketing deft or technology advantages.

Startups never should outsource their main advantage or the skill required to win in the market. If a team of founders believes product design will revolutionize mobile social networking, the team would blunder to outsource that design. Instead, the startup must cultivate a team to master that discipline.

Other terrible candidates for outsourcing include long term projects without clear success metrics. The high churn rates of the PR industry reflect this reality. Most PR firms strive to win business, work diligently for a few quarters and then wane as ideas for stories become exhausted and new clients arrive. In my experience, hiring PR firms for particular launches and events works well. Otherwise, anointing an internal storyteller and empowering that person to achieve long term goals achieves success more reliably and at less cost.

Startups should leverage consultants for narrowly defined, non-core initiatives when developing an expertise isn’t valuable to the business. For example, AirBnB didn’t need to build an internal team of cameramen to photograph the insides of homes all over the world.

Consultants offer tremendous leverage to a business and work best when tasked with ancillary, commodity services not required by a startup to win their market.

What are your lessons from outsourcing? Join the conversation on Branch.

15 March 2013

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