Outsourcing for Startups

Guidance for startups on leveraging outsourcing to scale operations

Outsourcing for Startup Scale

Admit it, you are the bottleneck. You can only grow to the maximum extent to which you are the direct report and decision-maker on everything. That number is typically 10 people. Until you are +$1,000,000 in sales, and/or have raised capital, you’re in the “messy middle” of being:

Too small to attract top-tier talent domestically
Too large to continue micromanaging every task

Outsourcing may have a negative connotation for some, with images of noisy call centers, inefficient processes, and misaligned outcomes. However, these perceptions are outdated and stem from three common fears:

Fear about Communication Issues
Fear about Quality Issues
Fear about Control Issues

Meanwhile, your more strategic competitors are embracing outsourcing to gain cost advantages and operational flexibility that you currently lack. It’s time to shift your perspective and leverage outsourcing to propel your startup forward.

Knowledge vs. Wisdom

What frustrates you is the fact that your direct competitors are outsourcing every day, providing them with financial optionality. They improve their gross margins, cost of customer acquisition, and can scale product/service delivery faster than you can. I want to plant a few seeds for you to help you leapfrog your start-up:

KNOWLEDGE IS KNOWING THAT TOMATOES ARE A FRUIT…

WISDOM IS KNOWING THAT TOMATOES DON’T GO IN A FRUIT SALAD.

Take this as wisdom from a guy who’s built three 7-figure agencies in 15 years.

80% Done By Others

“80% done by others is 100% better than done by yourself” – Dan Martell. You will see mistakes, quality issues, missed opportunities, and customer churn. It takes the wisdom of owning and scaling three agencies to realize that letting go of day-to-day authoritative control through others unlocks growth. Sure, there are days, weeks, and even months where we feel like we’ve taken a step backwards, and it makes me feel like I have limited control. Then we’ll have radical growth, and I also recognize that this is only possible through others. When you stop becoming the hero of your story is the moment the journey to scale starts. I can only see that now, upon reflection.

Profit Creates Optionality

Profit creation allows for unlimited optionality, while narrow/no profit allows for only one option: get profitable. There is a fantastic saying about the problems that Billionaires face: “A billionaire who has control of their health has unlimited problems to think about, whereas an unhealthy Billionaire has only one problem that matters”. The same can be said for your start-up. The only thing that matters is your ability to grow while still creating cash reserves (retained earnings) for the inevitable ups/downs that you will encounter over the next 10 years. Today, you might only make $50,000, $250,000, or $500,000 EBITA. You need talent, and that talent in Toronto, Chicago, or Austin will cost you $100,000. You just hacked your profit tree down to a stump. Outsourced talent is 1/3rd the cost to acquire a team to tactical multiple people’s workload. This leaves you the remaining 2/3 to redeploy those savings into multiple options:

New Products
Retained Earnings to access more bank LOC
Dividend Distributions
Paid Media Campaigns
I could make a list 10 pages long

Why It Matters More in Services

If you’re in a services business, you are 1 absent employee from the machine coming to a screeching halt. To prevent this, you have scaled an outsourced team to become your redundancy/bench that unlocks tasks/projects on a good day, and becomes your overnight emergency and/or sick, holidays, leaves of absence, etc., when you need it.

Stay in Your Zone of Genius

If your super-power is sales or product development, I can’t stress this enough… You need to be 10x down on that strength every day. All the other components of the business have to be tackled by others to scale. Within every job role/job function, 80% is tactical and 20% is strategic during the start-up phase. Don’t pay “strategists” $100,000 a year to do $5/hr tasks. They’ll get bored, and you’ll be overpaying for a lack of execution. They want to think, not act. You need action and activity at this phase of the business.

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