Why high-growth start-ups are turning to outsourcing

Few articles about start-ups don’t actually mention failure, with various statistics used to highlight just how difficult it is for entrepreneurs to turn their dreams into reality. This number of start-ups fail within the first year. That number of start-ups continue to operate after five years. This number of start-up founders will pull out every strand of their hair before so much as turning a profit. The picture painted by some articles is so grim it’s a wonder anyone bothers to dream in the first place.

Why high-growth start-ups are turning to outsourcing

The reason so many people do is they believe their idea, product or service can buck the trend and see their business added to that most fabled of lists – the start-up success story. Just as failure is a fact of start-up life, so too are tales of companies that find themselves overwhelmed by phenomenal growth in short periods of time. 

We’re talking about the likes of LIFX, which raised $1.3 million within six days of debuting its smart home light bulb on a crowdfunding site and doubled down by securing an additional $2.1 million from investors. Then there’s email marketing company Campaign Monitor, the brainchild of two university friends that was profitable from day one, sends more than 1 billion emails a month and has gone global on the backing of key investors.

While rapid growth is the goal of most start-up founders, the founders of LIFX and Campaign Monitor will attest that it can bring its own headaches. Juggling increasing demand with limited resources is a common issue for start-ups on the rise and all too often entrepreneurs make the mistake of trying to battle on as they have always done. They maintain their commitment to the leanest of business models, load up their few employees with more and more work, and usually end up drowning as they work harder and longer and all too often on tasks that have little to do with their area of expertise.

It is crucial at such times to think outside the box and one option that is gaining greater traction with high-growth start-ups is outsourcing. While some entrepreneurs will always struggle to turn to outsiders for support (and pay the price for not doing so), smart start-up founders are increasingly realizing the benefits that come from freeing up themselves and other key team members to focus on the areas they specialize in and ensure the best potential to deliver rapid growth.

Business philosopher Peter Drucker famously said: “Do what you do best and outsource the rest” and some of the world’s biggest companies have taken that advice onboard. In 2019 Google had more outsourced, temporary employees than in-house staff, while Github turned to an outsourced consultant to build its own website backend. Slack is another tech giant that appreciates the value of outsourcing non-core work, with its app design and logo created by a Canadian design agency.

Benefits of start-up outsourcing

Every start-up is unique and will have different reasons for considering outsourcing as a business strategy. Some may well decide it is not the right move for them right now but those who do choose to look outside their own four walls for support will find the benefits of doing so are extensive.

  • Lower costs: growing and scaling a start-up requires financial resources and there is little doubt that outsourcing can drastically reduce operating costs. This is particularly so when engaging an offshore service provider, with businesses able to save up to 70% on labor and operating costs by tapping into outsourcing hotspots such as the Philippines. Easing financial pressure is a boost for any young organization looking to make its mark and outsourcing can do that in sectors such as customer support, accounting, IT and human resources.
  • Reduced employee turnover: the cut-and-thrust nature of start-ups puts immense pressure on the shoulders of not only entrepreneurs but the people they employ. This means start-ups often experience high staff turnover in their formative stages and there are few things worse for growth and consistency than needing to constantly hire new people for the same position. Outsourcing eases this headache as quality providers can source recruits who relish the chance to work on such projects.
  • Instant infrastructure: outsourcing not only allows start-ups to access human talent but the equipment, tools and systems they need to do their job. The cost and resources needed to physically establish a team can be just as crippling as paying their wages, especially in the early stages of an operation. This is even more frustrating when the team has to perform a non-core task such as accounting or HR, which is why many start-ups relish outsourcing providers assuming responsibility for such tasks. 
  • Corporate knowledge: the very nature of entrepreneurship means some start-up founders are blinded by their own confidence in a product or service. Such passion can lead to poor decisions, which is why many start-ups benefit from the expertise and knowledge offered by outsourcing partners. Many service providers have an intimate awareness of the sectors they work within and can provide entrepreneurs with a different lens through which to see their business decisions. Likewise, they can guide start-up founders on expectations related to the amount of work they are trying to handle in-house with limited resources.
  • Avoid burnout: while the public loves tales of start-ups that achieve ‘overnight success’, anyone who has launched a venture knows the term is a myth. No matter how prepared an entrepreneur is, the pace of work in start-ups is usually hectic and can often tip into being unmanageable – but everyone pushes on just the same. Outsourcing for start-ups allows both leaders and employees to take the deep breaths they need to not only avoid burnout but continue pushing for the growth and funding required to take their business to the next level.

Ideal roles for start-up outsourcing

What makes entrepreneurship so much fun is the race to provide a product or service that is unique or offers something different or special from what else is in the market. That is a start-up’s unique value proposition and deserves much of the company’s focus. Conversely, there are countless processes or tasks that need to be done but could easily be handled by an external player.

Take the time to identify and study the processes that are potentially costing your in-house team valuable time or resources and whether they could be assigned to an outsourcing partner. To get you started, here are a few of the most common business processes that many growing start-ups outsource in a bid to dedicate their energies to more rewarding and valuable work.

  • Finance and accounting: while every business needs to be across its numbers, the vast majority of start-ups do not need to initially employ an in-house accountant or finance team. That day may well come when the organization grows to a more complex structure but until then there are a variety of financial processes that can be effectively outsourced. The likes of the Philippines are home to an abundance of qualified finance and accounting personnel, who are skilled in dynamic financial reporting and tracking tools and operate in a fiscal and financial system almost identical to conditions in Western nations.
  • HR and payroll: while some start-up founders may be in a position where they can only dream of having employees, fast-growing operations often need to balance the costs of hiring staff with the actual teams employed to look after them. From hiring and onboarding to training and payroll, human resources can take a significant toll on an expanding company’s bottom line, which is why many start-ups tap into offshore outsourcing solutions to manage the process and provide expert advice and consulting related to HR laws and compliance. 
  • Recruitment: while this role could have easily slotted into the previous topic, start-up recruitment warrants its own section. That is because staff turnover is a huge issue in the start-up sector, with the relentless and hectic pace of surviving and then trying to thrive often taking a huge toll on employees. One survey of 25 large, hyper-growth start-ups found that a quarter of their employees left the organizations within a year, which adds new meaning to the term ‘recruitment drive’. Recruitment Process Outsourcing is such a specialist sector that it has its very acronym (RPO), with providers boasting talent pools, systems and expertise that can be a godsend for start-ups needing quality people quickly.
  • Customer service: it’s a Catch-22 of the start-up world – your business is finally making a big enough mark that the calls and enquiries are streaming in … but you’re now spending all your time dealing with calls and enquiries. From emails and phone calls to social media and messenger apps, there have never been more ways to communicate with customers and that is why growing start-ups should consider outsourcing customer service to specialist providers. Be it establishing a call center for start-ups or hiring trained professionals to handle social media accounts, the time you save on customer enquiries can be better spent enhancing the product or service that makes your start-up unique.
  • Service desks and help desks: recruiting and retaining professional in-house IT staff has rarely been harder, with specialized local talent becoming more expensive and increasingly difficult to find. Then there is the challenge of actually retaining them once they are on the books. This extends to the IT support sector where quality service desk and help desk agents play a vital role in helping colleagues navigate issues and maximize workforce productivity, all the more so in a post-pandemic world where remote work has added another layer of complexity. Given this, it is little wonder that many start-ups are embracing the chance to outsource their service and help desks to offshore providers that pride themselves on keeping their partners’ businesses moving thanks to qualified staff, lower costs, first-rate technology and efficient systems and processes.

Outsourcing start-up development does not claim to be a one-size-fits all solution for businesses. Every start-up is unique and needs to carefully consider their individual needs and wants when it comes to seeking support from a third-party provider. That said, there is no doubt that outsourcing can play a key role in helping start-ups reach their goals quicker and sustain their growth potential. Every journey starts with a first step and yours should be imagining what your start-up would look like with a little outside help.

A lot of questions need to be asked and answered before setting up an outsourced team. How do you know if your organization is ready? How can you identify areas that will best benefit from an offshore investment? This simple Offshore Readiness Assessment will help you gain a clearer picture.

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