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When should Startups outsource?

In a startup there’s a ton of things you need to do, and a limited amount of resource to do it with. It’s tempting to do everything in-house to save money, but this isn’t always a smart move. Let’s look at why that is and how to tell when you should do a task in house and when you should outsource.

What is the job of a startup?

First of all, consider what a startup is. There are many definitions but Steve Blank’s is useful here:

A startup is an organization formed to search for a repeatable and scalable business model.

As a startup founder, your job is to oversee the learning that will get you to that validated business model. All your activities should be aligned to achieving that goal. Anything that detracts from that should be culled. Focus is the number one challenge for a startup, and founders should not allow their staff’s time to be eaten away at with busy work or work that could be outsourced.

Of the necessary work, what can be outsourced?

Once you have stripped away all busy work, which of the remaining tasks can you outsource?

There is a spectrum you can use to help you decide. Generally speaking, any work that is novel, never-been-done-before, highly uncertain and exploratory should be done in house and adaptive processes such as Agile will be appropriate. If you have tasks which are well understood and don’t require you to invent something, you should seriously consider outsourcing these.

Borrowing a visualisation from swardley , you can see how this would look for a startup. Note: The split between work items on the left and those on the right will be more nuanced for your own startup. This is illustrative only.

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The trap you will fall into is using your engineers to build your website because they have the skills. Or using your VP Marketing to run adverts because it’s under their jurisdiction.

As Jeff Goldblum’s character in Jurassic Park famously noted:

[They] were so preoccupied with whether or not they could that they didn’t stop to think if they should.

Your engineers should be working on the product, which you cannot outsource, not the website that you can. Your VP Marketing should be working on messaging and strategy, which you cannot outsource, not cranking out adverts on LinkedIn.

There is huge hidden cost to doing outsource-able things in house. It’s opportunity cost. While your engineers are building the website, they could have been building product.

When to bring things in house

Once you have your validated, repeatable and scalable business model you can start to think about bringing things in house. Do this with great caution! This will only be appropriate once the business is maturing into its operations and you need to start optimizing rather than discovering. As a rule of thumb, it’s better to leave things outsourced for longer rather than to rush to bring them in house.

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