Outsourcing Rationale

Not having the right team is one of the top three reasons businesses fail. The other two are “no market need” and “running out of cash”. The right team, however, is much more difficult to assemble than most founders, CEOs and investors may recognize. Great people, doing what they are passionate about at an average to good employer, are unlikely to join your mission if it means uncertainty. It’s just too risky. What are the chances you are going to succeed, being the most attractive alternative? This is your outsourcing rationale: what work should you outsource?

If you don’t have the money, or your company just doesn’t have the traction to hire a full team, then no amount of convincing or delusion can change your situation. That’s why a world of outsourcing options are available—everyone from highly skilled freelancers to management consultants to serve as your outsourced CFO.

Outsourcing Rationale

So the question becomes: Given your business’s limited budget, who definitely belongs on the payroll?

I view this question from a unique perspective because I’ve experienced it from both sides. I’ve hired staff and contractors for my businesses, but I’m also a contractor myself. Through my consulting business other companies bring me in to be their non-staff solution.

After seeing how many teams (including my own) work with contractors, my recommendation is this. Think of your in-house team as your survival crew—and survival means having something that other businesses don’t possess or can’t offer. It’s your core value proposition. Who are the people who can give your company this edge? They’re the ones you hire. Everything else can come later.

Here are examples from both sides of my work.

First, as the guy who hires: When I started my investor relations business, Union IR, I knew that survival depended upon having the best analysts. Without them, we’re nothing. So I brought them on staff, and I outsourced almost everything else.

Short Game

Why is this a good short game strategy? Every staffer requires indirect expenses and time above their wages, including legal, HR, training, rent and supplies, to name a few. Outsourced consultants don’t—they are a direct expense.

In general, outsourcing should help most with the short game. Anything that can help growth today is oftentimes best achieved by outsourcing. That’s because you can assemble an entire team to move quickly, building systems to help manage processes that generate revenue and optimize productivity.

Remaining agile will enable you to shift gears or pivot as needed. Consultants bring experience outside your survival team’s realm, can help identify problems before they strike and don’t make avoidable mistakes. The right short game strategy will lead you to into a fundamentally sound long game.

Next, as the guy who’s hired as a business consultant: My consulting firm, ALIGNMT, will identify gaps and opportunities for our clients and provide them with strategy and tactical execution. We find gaps with product/market fit, finance/market fit and organization/market fit. Next we design steps to optimize them. Then we measure the results of the team’s activities against expectations.

We’re not the fundamental difference-maker in a business—we can’t be. Our typical role is to improve or amplify what our client has already built. If they’re looking for survival strategies from the outside, it means their business is flawed and at risk.

Maybe that means a consultant to help you design a financial planning and analysis (FP&A) system and implement the daily procedures to target high productivity, or someone to help with your marketing and communications.

There are also plenty of process-oriented jobs worth outsourcing. For example, for most businesses, operations management and admin work is a necessity, but those skills can be plug-and-play. When you’re not sure how to optimize these or have a limited budget, consider outsourcing them.

Long Game

Think of the long game every day of your journey.

Which jobs require commitment, innovation or unique leadership? Hire for those positions and develop those team members first. They’re key to survival and they’ll often help you avoid redundancy and a bloated staff later on. They’ll also propagate culture consistency with like-minded growth development. For example, in a product-based business, the person who created the product ideally can also manage the sales and assist with marketing. After all, who else knows the product better?

Then there are the big things like investor relations and mergers & acquisitions.

Related: Sell-Side M&A Strategy: 5 Tactics to Maximize Value

In growth there is never one model that works for every business. But it can usually boil down to this: Everyone on your team should play a key role in pushing your business forward. Everything on the outside should amplify your efforts. This is your outsourcing rationale: what work should you outsource?

©2023 ALIGNMT LLC | Financial Management | Mergers & Acquisitions | Investor Relations


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