We have already highlighted the benefit of outsourcing for a startup in some of our previous articles. To emphasize again: A startup should focus on its core area while using the expertise and resources of a service provider by outsourcing their peripheral activities to them. The objective is to free yourself to do what you do best and take the help of others in what they do best. Of course, there is a slight downside in that this service comes at a cost and it is important that a startup is able to extract the value for the price charged for it.
How should a startup decide what to outsource
There are plethora of articles that illustrate the factors which help in deciding the functions that can be outsourced. Below are the main points from those articles:
1) Focus on your strengths, never depend on others for it: It goes without saying that one should not outsource their core activities. But it is also important to identify functions that can be potential area of strength in future and, therefore, should be developed in-house. Startups should utilize the service provider’s experience and expertise in domains that are peripheral to its business and building an expertise is not a viable and economic option. Unfortunately there is no single rule to identify these areas and, therefore, impossible for us to provide a list of those activities which you should outsource (although we would like to gently remind you that outsourcing Finance and Accounting to us is generally a good idea)
2) Work out a plan to outsource: Outsourcing is not a panacea for all the startup woes. To extract maximum value from outsourcing, the client has to invest time and money to work out all the details of outsourcing thereby ensuring smooth operations and long tem cost benefit. We, as a service provider, have learnt the hard way that detailed planning of operation is extremely important to serve our clients better and avoid catastrophes.
3) Doubt first; trust later: As a client, one should take ample time to scrutinize the outsourcing proposal and communicate their doubts clearly with the service provider. There may be a tendency to rush into outsourcing to buy some instant relief from their problem areas and it seldom works. But once the activity is outsourced and the service provider has demonstrated credibility in their work, then the client should trust the service provider to consult them in their decision-making. At Aristotle Consultancy, we take pride in the fact that our client trust us to provide out input and advice for taking important financial decisions and it drives us to provide more value for our clients.
4) Have an exit plan: Things may not always work out and it is important to plan for contingencies in any business. The client and the service provider must agree upon the terms on which they will part ways. An ugly break-up leaves a lot of heartburn and unneeded stress. While deciding on the terms of engagement, the parties should also decide on the exit plan and process.
Treating outsourcing like a medicine for a disease is a mistake startups often make at their own peril. It is important to view outsourcing with a strategic objective and invest time and effort to plan out the outsourcing process and the long-term benefit that can be extracted it. Feel free to provide your views and share any experience around outsourcing in the comments section.
Learn more about accounting outsourcing at Aristotle Consultancy.