Outsourcing vs Insourcing Operations: Making The Right Choice For Your Startup

outsourcing vs insourcing startup

There are many things to consider when building your dream team. A startup will take a lot of time and commitment for its founders and its employees. Should you outsource or insource your operations team? Which will make the most sense for your startup? 

Here are a few definitions to get us started for your startups: 

Outsource: to contract work out. 

Insource: to use your own personnel to accomplish a task. 

Positions To Consider Outsourcing 

There are a lot of options for hiring in this virtual age! Here are a few of the top positions to consider outsourcing

Human Resources 

Human resources includes tasks like payroll, recruitment, file administration, management, and benefits management. Proper management in these areas will prepare your startup for future growth! Disorganization, on the other hand, will greatly hinder growth and success. 

An experienced human resources manager will also enable employee retention. By establishing benefits and compensation packages, employees will be more satisfied, and more likely to stay with the company. 

Legal 

Like accounting, legal is very complicated. You’ll need solid legal counsel to establish your partnership with your founders, to establish your business structure, and to create contracts. It is important to have trusted legal counsel in place at the beginning of your startup. 

Accounting 

Bookkeeping is key for any business! As a startup, however, you probably won’t need a full-time, dedicated bookkeeper. By outsourcing this position to a third-party, you can gain quality accounting services, and save money. 

Taxes are extremely complicated. Unless you are an accountant, and are up to date on tax codes, you need a dedicated accountant to handle taxes. 

Marketing 

Marketing personnel is responsible for content creation, web design and development, social media marketing, and Search Engine Optimization (SEO). These can be very specialized fields and require previous background and knowledge. 

A successful marketing campaign will build brand awareness, educate your audience, and sell your product! Don’t try to skimp and save when it comes to marketing.

Advantages Of Outsourcing 

Focus On Growth 

Free up your founders and employees to focus on growth by outsourcing operations. Often, in a startup, employees and founders are required to wear many hats in order to complete every task. By outsourcing a few of these tasks, you’re free to focus on your goals and your product. 

Minimize Mistakes 

If your employees are spread thin across multiple roles, mistakes are much more likely. By outsourcing operations to a specialist, you will minimize the likelihood of mistakes. 

Minimize Payroll Costs 

Fewer team members mean fewer payroll dollars. Most startups operate with a pretty limited budget. 

Maximize Skill Available 

There is a lot more talent available via a third-party! In this virtual world, you can find the perfect freelancer from anywhere in the world. 

Quick Set-Up And Turnover 

Onboarding and training are minimal with outsourcing. If a freelancer is not a good fit for your company? Find a new one! Outsourcing simplifies the hiring process. 

Disadvantages Of Outsourcing 

There seem to be a lot of advantages to outsourcing! Are there any downsides? What reasons might a startup have to not outsource? 

Lack Of Coordination Between Employees 

If you’re outsourcing, great communication between you and your freelancers is a must! If you don’t prioritize communication, your in house employees and outsourced employees may not be able to work together to their full potential. 

Decreased Company Valuation 

Some investors look at the number of team members at your startup. Sometimes, to an investor, a team full of diverse talents, and abilities, working together indicates a strong company with longevity. 

Lack Of Commitment 

A third-party freelancer may not have the drive and passion to see your startup succeed, unlike an in house team member who starts out with you. 

Lack Of Core Competency 

A diverse team who can get things done is an asset! 

Advantages Of Insourcing 

A choice to insource operations usually depends on how much you as a founder want to be in control. An in-house team will be much easier to monitor on a daily basis. 

Product Protection 

You want to protect the unique nature of your product! If an outsourced position has access to delicate information, you no longer have control over the flow of information about your product. 

Regular Updates And Communication 

If your team is all together, all the time, you are more likely to be up to date on progress and issues. 

Streamline Processes 

Your team, your processes. A third-party freelancer will have their own processes and quality control. If you control the processes and the training, you can guarantee that all operations will be run your way. 

Improve Core Competency 

Dedicated, in-house team members are usually there for the long-haul. You’ll have a team that knows your goals, and missions. Potential investors will see the diverse skills of your team as an asset. 

Quality Control 

You will be able to hire and work closely with your team. You’ll have much more control over the quality of training, onboarding, and work produced. 

Disadvantages Of Insourcing 

Higher Payroll Cost 

You will have to pay for all those employees! Don’t forget to account for benefits, too. 

Training And Onboarding May Be More Time Consuming 

A third-party employee will typically be trained and ready to work. 

Smaller Talent Pool 

Unless you have a virtual work environment, your hiring options will be limited to local talent. 

Final Thoughts On Outsourcing Versus Insourcing

There are advantages and disadvantages to outsourcing and insourcing your operations team. A hybrid solution with some positions in house, and others outsourced, may be the way to go for your company. It is important to carefully weigh your goals, your options, and your budget before you decide on a plan for your startup dream team. 

About AbstractOps 

If you're an early stage CEO, AbstractOps handles and automates your HR, finance, and legal ops — so that you don't have to. We help you Be Scrappy, Not Sloppy. 

We understand that ops can be painful. If you have any questions or need assistance with your ops, drop us a note at hello@abstractops.com. We’ll do our best to help with your startup success. 

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