It’s a well-known fact that most startups are short on money. Perseverance is key, and every penny counts when it comes to actually reaching the point when you start making profit.
In fact, most investors want to see some sort of revenue before they decide to take a risk on your company. This is why it’s critical to be extremely smart when it comes to managing the limited resources of a startup.
There are many ways to cut costs, and outsourcing production and/or some services is one of them. However, it is highly advisable not to outsource accounting, quality control, and sales. And here is why.
When it comes successfully managing a startup, you need to know what is happening daily. Things change much too fast for you to depend on accounting reports that are several weeks or even a month old.
You need an in-house accountant to understand the true cost of your business expenses, because it’s almost impossible to get these critical numbers in a timely manner from an outsourced accountant. In fact, most businesses fail in the expansion phase, because they weren’t able to grasp how much it would cost them to manage their increasing sales and provide the customer service necessary to protect their reputation.
In-house production is the biggest financial burden of a startup. This is why outsourcing production is great cost saver.
However, even when you decide to outsource production, it is good to keep your quality control in-house. This way you make sure that that your products always live up to your quality standards. And if they don’t, you can refuse to pay for them until they do.
When you are a startup, with unproven products, you need your own salespeople to make sales happen for you. If you outsource this job to brokers and distributors, chances are they are not going to do the job well, because they have lots of products to sell, and they’ll whatever is the easiest. Also, you will want to hear customer feedback directly, if you want to stay competitive, relevant, and priced right.
- Outsource – obtain (goods or a service) by contract from an outside supplier
- To be short on something – to have less of something than you should have
- Perseverance – persistence in doing something despite difficulty or delay in achieving success.
- Revenue – income
- In-house – done or existing within an organization
- Grasp – understand
- Feedback – information about reactions to a product, a person’s performance of a task, etc. which is used as a basis for improvement
- Relevant – appropriate to the current time, period, or circumstances
Questions for Discussion
- What are other important functions that, in your opinion, should not be outsourced? Explain.
- Aside from production, what else can you outsource if you want to save money as a startup?
- Do you think this advice is true for all startups? Why or why not.