Running a small business is not easy. Your business and its growth possibilities keep changing fast. As your business grows, there just are too many things to do. We get caught up in the details.
In the initial days of my company, I did everything myself. I spoke to customers; I interacted with investors; and wrote business plans. At the same time, I cleaned my office and went long distances just to deliver legal documents somewhere. I spent a lot of time on those tasks which were not strategic or something that contributed to my customers. I did everything because I had nothing better to do. If I hired someone else, I would pay them and I’d have to sit idle!
As a small business grows, and as the scale at which a task is done increases, you have to find ways to get the time to focus on the bigger picture. If you don’t, you will get caught up in myriad routine activities, and can’t progress on strategic areas of your business. You have to make time to steer your business in the right direction. And you can do that by delegating work to others, by outsourcing, and at times, it’s as simple as asking other party to visit your office instead of you visiting them!
My startup has been growing gradually. And some of the rules I had learnt in the initial days are obsolete already. Though I saved precious dollars in the initial days doing all the routine work, time and again, I found myself asking myself, “Why am I doing this? How does my customer benefit from it? Should I not be working on something that enhances value to my customer?”
So now I do what is strategic and outsource many activities like coding for my website, marketing material work, accounting, graphic design, etc. In areas I do outsource, I am glad I do because it led to a lot of progress. On hindsight, the decision to outsource my work to others has greatly paid off in the following ways:
1. Where it was not my core competency, I rode on other’s competency and made wonderful progress.
2. When the project (such as product development) was over, I had the ability to scale down the activity reducing the “burn rate” without having to fire employees (had I hired them).
3. I was able to save time and could focus on the strategic aspects of the business.
But I must say that there still are areas where I think I could have outsourced to a person who was more competent.
Outsourcing has its limitations. What you should outsource depends on whether the other party can do it better (and whether “doing that thing better” is necessary); whether your time has alternate and better use to it; whether delegating to a full time employee (but not outsourcing) is a better idea for that task.
Here are a few resources about delegation and outsourcing that you might find interesting:
- The 4 Hour Work Week
- Tips For Outsourcing Small Business Needs
- The Benefits Of Outsourcing For Small Businesses
Coming back to the bigger picture: If you want your business to grow, you should not become the bottleneck. You must learn to delegate and outsource.
* * * * *
Chaitanya Sagar is the Co-Founder and CEO of P2W2, an online marketplace for services like writing, software, graphic design, virtual assistance, business consulting and research. Chaitanya blogs at p2w2 Blog. He is fascinated by entrepreneurship and the difference technology can make in people’s lives.
Martin Lindeskog
Chaitanya Sagar: Have you studied Dr. Eliyahu M. Goldratt’s management philosophy, Theory of Constraints?
Chris
Hi Chaitanya, excellent contribution to the site. But I’m wondering if you could share the percentage of your businesses growth that you think was a direct result from outsourcing? Just a rough estimate. Would you say it was responsible for half your businesses growth, a tenth, or more like 80% – do you have any figures with regards to that?
Craig Sutton
I understand the thought, the biggest issue I have with Outsourcing is Quality Control. Some portions of the operations of a business may be Outsourced, but in my service business it cannot be anything directly related to the customer relations.
I must agree, Chaitanya. “No one is an island” — it’s just that we have to be careful in choosing the staff to help us with the demands of your growing business.
Chaitanya, very smart move on your part to outsource and delegate work to others. It brings with it a whole set of issues to deal with, but as you have discovered, letting go is the best way to help your business grow and prosper. Too many small business owners never get that. I look forward to hearing about more of your experiences as you grow your company.
Chaitanya Sagar
Martin, Yes. I read Goldratt’s The Goal. I am afraid, in a small business, the small business owner himself or herself is the bottleneck most of the time! Small biz needs high level of discipline.
Chris, hm… it’s difficult to put a number to that. Specially because I think the progress I made till now was ‘made possible’ because of outsourcing. However, I would not like to attribute 100% of my business to it.
Craig, most stuff related to customer relations tends to be ‘core’ to your business. If it is, I would be careful before outsourcing. I can only outsource when I know that the process is well documented, and the person/company taking the job can perform at least as well as I can on quality, time and price.
Arthur, Denise, thanks!
True, it indeed hard to “let go”, especially when everything from conception of an idea – to – executing it has been “looked after”.
Well, guess thats how business grows , much like our children.
Regards
I think it’s smart to know when you have hit your personal limits. Some people take on too much without realizing that they cannot get everything done timely and at the best quality that they would like. Recognizing that and outsourcing the work is a giant leap for most. Kudos to you for being able to make the leap and with successful results.
That’s a good one Chaitanya. The one type of outsourcing i do for my small business is getting the help of my friends and colleagues who are the best in it. ( A cost effective way of outsourcing ). when i was designing my website, I got the help of my old co-workers who helped me free of cost and some MCA students in my college. But I cant really afford outsourcing at this point of time other than getting the “help” from friends.
Chaitanya, I applied this concept right from the beginning by outsourcing marketing of my services to partners, and got some good results as I could focus on my key strengths. But there are some dangers as well. Some of my partners learnt the whole business concept and have started on their own. Now they are my competitors. However, the benefits I got from outsourcing far outweigh the losses.
Peeyush Agarwal
Continuing from Johns reply, I’d like to add that there’s a lot of ways to actually outsource your work. I personally used p2w2 and found that it would be a smart way of outsourcing. You needn’t really go through every prospective companies website to decide whom you are outsourcing to. And a potential market you can tap into is students working part-time. The pay is flexible too. So really kudos to you Chaitanya on that front as well.
Good article, Chaitanya. Captures quite a few of the challenges faced by start-ups and entrepreneurial ventures. However, must agree with Craig on quality challenges. There is a trade off in terms of greater engagement with an outsourcing solution provider (to ensure quality) and doing it oneself, and there is a tiping point to making a go or a no-go decision depending on the quality and capability of the outsourcing solution provider.
Simply put; you need a system that will cut time in half researching and be in compliance for any and all issues in a business. If you haven’t heard of GoSmallBiz.com – this is a resource center for business owners.
Other services can be found with the Business Plan on http://www.prepaidlegal.com/hub/rhorvath
Martin Lindeskog
Chaitanya: I have seen a film based on the book. I have read the Critical Chain.
Hi Amitabh Saxena,
I’m sad to learn your experience with outsourcing. Honestly, outsourcing did really benefit us here in the Philippines as it really brought a lot of Jobs for my fellow countrymen. Maybe, with that experience, as business owner we should learn the boundaries of what we are going to share to our outsourced staffs.
Krishna Kishore
‘…in a small business, the small business owner himself or herself is the bottleneck most of the time’
I agree to this statement totally. The first constraint to overcome for a small business owner will be the limitations of his own capacity.
Then again I’d think that delegation and outsourcing, particularly in a small business where the volume of each task is considerably lower, comes with the disadvantages of lower scale. Unless the curve is on a rapid upward swing, multi-tasking within a closed group should help better.
Kiran Kumar Kaza
Chaitanya – Very good article. To grow, whether small or big houses, one has to identify and remove the bottlenecks. With this article you helped to get an idea on what is the true bottleneck for the growing businesses, which most of the entrepreneurs overlooked and wondering why their business growth is not increasing every year though they are pushing themselves hard.
Chaitanya Sagar
Vinay, you are quite right there. In a small business context there’s a twist. Though you can do it yourself, many times there are numerous ‘can-do-it-myself’ items that you can’t get to. In that context, outsourcing or delegating to employees is a much better option than hoping to do it ‘oneself’.
Deepa, Amanda, Johns, Amitabh, Piyush, Rosalinda, and Mary, it’s great that you responded to this post.
vipul
Hi chaitanya,
Well I am really attached with p2w2 because it was the first place to test my skills.
That is a truly inspirational and a masterpiece of work you did there. First of all i would like to congratulate you for your achievements. It is important to remove the obstacles and loopholes first but all said and done, unless you move and work by yourself in the initial days, you wont get the hang of the baby. Well Chaitanya can you guide the newbies as to what made you come across such an idea for being a great entrepreneur. The post says a lot, but would you like to provide some additional suggestions for the to-be entrepreneur.
Thanks
Vipul
venu gopal
hi chaitanya,
it is really a good one.
Great article. Outsourcing and independent contractors are definitely a small businesses best friend. Thanks for posting the small biz resources too.
Vasudevan
Hi Chaitanya,
Thanks for forwarding the link to this post. Some 20 years back, my self and a couple of my friends started a business that willy-nilly shaped itself entirely on the “outsource” model, except that back in those times, the word “outsource” had not yet become the buzzword and we had often used the word “sub-contract” to explain what we were doing. We were into proper manufacturing of capital equipment and we “outsourced” whatever we COULD not do by ourselves – either for want of space or for want of equipment of for want of money to invest in those … and we were very successful in what we set out to do. The “core” activities that we retained in our own hands were (1) Engineering (consisting of design, drawings, componentisation etc.) and (2) final assembling and execution of the turn-key deliverables. In between these two extremes, all that fell into the category of “manufacturing” or “production” were parcelled out to suppliers who had the specialized capability to deliver those sub-systems but who could never understand the bigger picture which ONLY we had.
This model helped us to grow from a miniscule outfit doing about Rs. 3.0 lakhs (Rs. 300 K) per annum to a respectable Rs. 2.5 Crores (Rs 25 Million) within 4 years. Today, after 20 years of founding, the company is still following the same model, to a large extent, and is doing around Rs. 125 Million in terms of business volume.
Venky
Chaitanya,
Good article. I went thru similar pangs. The idea of “letting go” is important if we want to concentrate on our core competency rather than trying to do everything to save money and ensure quality. The small premium one might pay is justified and reasonable in the end.
All the best!
Hi Chaitanya…surely this is one of the most debated topic in recent times considering pressure on cost and flexibility desired for scale up.
Your transition from Selfsource to Outsource is something all of us have gone through realizing the possible value delivery of our own time.
Still one concern based on my experience is on knowledge management of outsourced activities. I have always found challenging to build back up of outsourced functions and I would be happy to have some insight based on your & your friends’ experience.
Sridhar Rao
Chaitanya…it’s a good and frank explanation of “things to do” for a start-up. I do confess that small business enterpreneur need to do all “unnecessary and uncontributory important things” to go ahead (it’s a price one pays for small funding of one’s business).
But how fast we move from one stage of business set up to the next stage of business development by concentrating on startegic areas is the key principle for faster growth of bottomline.
In enterpreneurship it is always the passion for learning new things by being your own boss and getting more satisfaction by concentrating on how “I” can contribute to make the life of my customer happy – these are the two main ingredients for the recipe of success. Rest of things will automatically follow, whether it is delegating or outsourcing (considering risk and return analysis). It’s good that you are on the right track for faster development in your chosen area of work. All the best.
Chaitanya,
Makes sense.
At what point you think the delegation and outsourcing becomes tough? Managing the outsourced work may be frustrating experience. How do you trust the vendors and what if they dont deliver?
Figuring out the right vendors in itself is a huge task. But your customers will not wait till you have finally found out the perfect outsourced vendor. What is the back up strategy? IF you want to have multiple trial vendors, can you pay them all and pay them well so that you get decent quality?
I think outsourcing has a learning curve and one need to sustain till he finds the right vendors to get this right.
What say?
I work for a cost management business in the U.K. we are finding that Iin this current economic climate more organisations are turning to outsourced providers of cost and purchase management services. By doing so, they can access specialist insider knowledge, eliminate the financial loss of taking key individuals away from their core responsibilities and mitigate the cost of employing in-house specialists as well as taking advantage of a thorough methodical analysis of their expenditure. We also offer a “no saving – no fee” proposition ensuring that a business can safely trial our service.
Raghu Patri
I had one observation. During the initial times of setting up and running companies, it is very necessary to meet your customers and know them. It cannot be delegated. Even as the business grows, while you might have marketing people and relationship management people working, it makes sense to do some small work for a customer even it is once in a while. While you may not see a value add in doing the task, it gives the customer a satisfaction of knowing that the owner is involved in the work. I will give you an example in my early days when I started the NIIT business. I used to visit all the colleges in Begumpet to try and get them to endorse my centre. In St. Francis College for Women, I faced a lot of resistance from the then Principal of the college. She would not give me appointments to meet, even if she did, she would make me wait and then give me an excuse and see me for just a few minutes. I used to co-ordinate most of my visits through another college lecturer who was quite friendly and co-operative. She used to sympathise with me every time I was waiting in the college or would spend some time talking to me whenever possible. The next year, the Principal was transferred and a new one was appointed. It did not take me very long to get through to her thanks to the recommendation of the lecturer. Eventually, St. Francis became a very happy hunting ground for me. I would not visit as often as I used as had safely handed over the task to my marketing team. The continuity of the business came from the fact that I had been able to build a relationship and take it forward. After I closed the centre in 2002, NIIT struggled to make headway in that college. I used to get calls from the college asking if I would be involved in the campaigns that NIIT was conducting. When I told them that I was no longer associated with NIIT, they would refuse to entertain them. Much as I attribute my initial entry and continuity of business to the NIIT brand, it was my ability to interact with them on a continuous basis which kept the business going. It just taught me that however big the brand, the personal touch makes a lot of difference in the long run. It may be a very small gesture that you do to your customer but it is necessary on a continuous basis.
Chiranth Channappa
Often it is difficult to evaluate whether an activity is “critical enough” to be done internally, or should be outsourced. In my last job, we would run onboarding activities for new team members instead of outsourcing this to the HR department. Now, not outsourcing was certainly inefficient; but being one of the most people-oriented teams in the organization was critical to the success of our team. And this prevented us from outsourcing what would ordinarily be a routine activity.
Of course, you could tie this instance back to the idea of Quality Control.
Chaitanya Sagar
Kishore, Kiran, Vipul, Venu, Tina, Vasu, Venky, Suhrid, Sridhar, Venkat, Raghu, Chiranth,
THANK YOU for the time you have taken to comment on this post.
Vipul, I am not sure if I am eligible for those superlatives. And the question you have asked does not fit in here. We can catch up later on it. But I am glad that you are attached to p2w2. We are happy to be of service.
Vasudevan, thanks for sharing your experience here. It is valuable.
Ameya Hardas
Dear Chaitanya,
Pl accept my Congratulations on your article.
You have indeed touched on some very minute details on the topic of outsourcing Vs delegation.
According to me one can arrive at an ideal balance between outsourcing and delegation only by one’s sense of accumen. Hence either the enterpreneur relies on his own judgememt being absolutely sure about his ability and expertise, and with being spent some years in an industry (coupled with management training and on-job experience) one really can judge self ability, or he hires established and proven managers like you Chaitanya.
With the new technical complexities (requiring core competence) faced by enterpreneurs, outsourcing and delegation is an essential part of the growing up process.
But last and not the least is the “ability to monitor” the developments for the work outsourced or delegated. So an enterpreneur needs to have the qualities of an outstanding leader.
Best wishes!
Kusuma Harikar
Congrats Chaitanya on this wonderful article !
Best wishes
Kusuma
Arun Varma
This is really apt Chaitanya. Especially since I share some of your angst around the transitive thought process and focus as the organization matures from a start-up.
Thanks for sharing.
It is a human instinct to appear or try to be busy. So we do things that take our time, even though sitting idle could actually add value to our customers.
To realize this and fight the urge to act upon all and sundry and instead focus on the necessary and strategic – is tough! Indeed, if you have been able to do that, it speaks well of your learnings from a startup.
Good luck!
Chaitanya Sagar
Nice thoughts Ameya! I agree with your point about judgment.
I did not get the link between monitoring and the need for a person to be an outstanding leader.
Chaitanya Sagar
Kusuma, Arun, and Enakshi, thanks for your comments.
Ravi Kiran
Hi Chaitanya,
Congratulations. Entrepreneurs are realizing that outsourcing is important to SMBs and your article helps them to understand how it can help in business growth.
All the best,
Ravi.
Hemanth
Its so true , I shall start outsourcing my work very soon now!
Kiran K Karthikeyan
Nice article Chaitanya.
While outsourcing does have its advantages, and it does free up the founders to focus on strategic areas rather than operational tasks, the operational tasks themselves add a lot of good experience.
I recently joined a startup – http://www.investmentyogi.com while earlier working for large to mid-sized companies. I have enjoyed negotiating for office furniture, making sure the internet works etc. Apart from this, there are some tasks which I’m directly responsible for as Product Manager I would be wary of outsourcing. These include anything which reflects or influences the brand of your product. These I feel the founders and senior management staff need to keep a close eye on, because when you outsource (and that too to save costs), these are overlooked. And as a startup, this would include more activities than you would normally consider in a mid-sized to large company.
I agree with Raghu’s comments in this regard. Meeting the customer is invaluable during the initial stages.
Shabbir Batterywala
Dear Chaitanya
Congratulations!! One important point you have raised is that for non strategic activities of any SMB is it better to hire and than fire or is it better to outsource.
Good Luck!!
Shabbir
makes sense , what you are saying. Outsourcing genesis, cost savings is now replaced with can-you-do-it-better-and-more-cost-effectively. Core of any business is sales and marketing, how you are positioned (branding). However Outsourcing works for you when you have performance parameters placed correctly and monitored well.
Shweta Aggarwal
Hello Chaitanya,
Nice Article ,One of the good point you suggested is about critical decision on what to outsource and what not to outsource…
Outsourcing makes economic sense however as stated earlier by others “There is always a quality /trust related issue” .
If I am outsourcing multiple task to different vendors ,it will increase the transaction costs , first the selection of the vendor and then establishing relationship but as everyone can not be good at everything , outsourcing is one of the best ways to get the best value for your investment
For outsourcing,I have gone through multiple sites like elance,odesk, p2w2..etc..Needless to say ,Assignments as well as the service providers on p2w2 are good..Service providers are of great calibre with talent ranging from ivy league schools to people having decades of experience…
In India, especially small family owned companies dont have required bandwidth and management expertise. These busines houses can utilize the services of channels like p2w2 for marketing ,HR ,sales related work or anything on ‘as and when” required basis
Outsourcing is the watchword and the paranoid experts in their field have greater potential to earn in this shrinking e-world
Hope we will get to read more articles written by you
Best regards
Shweta
kare anderson
The key to outsourcing as all of us entrepreneurs have learn the hard way – and in good ways is that
• the quality of the outsourcing is good
• the time to interact with the outsourcer + the cost means one is actually saving time
Your start-ups obvious passion for excellence will help you gain our trust that your business model enables us to benefit from the outsourcing
Then we can accomplish more with others than we can on our own (“Me2We”)
http://www.movingfrommetowe.com/
Dear Sagar,
I read your article, and its very true from all perspectives. As a small business owner, reliance on trusted outsourcing partners to get most of the initial setup & mundane work such as accounting, payroll, web hosting etc implemented is very essential….It helps th business owner focus on the most essential activity i.e. development and marketing the organisational core competancy.
I request you to check out my business portal (to be released in a week or 2), which is again full fledged outsourcing concept & service provider of Individual & Corporate Taxation, Incorporation, Accounting, Payoll Processing and Business Consulting.
I look forward to your partnership on this initiative.
Keep such good blogs coming!
Regards,
Sudhir Pai
Coming soon – http://www.globalvalueadd.com
Sugandh Rakha
Hi Chaitanya,
I have been in a regular follower of your blog. This one is surely one of your gems. I would further like to read on when to choose to delegate and when to outsource. I think if a company has long runaway, the CEO should choose to hire employees to delegate the work to, rather than delegating it.
Sugandh
Chaitanya Sagar
Kiran, Somehow, outsourcing need not necessarily mean a decrease in quality. In many cases, outsourcing enables you to complete tasks especially where you are unable to hire right people (for want of branding of your company etc.).
Shweta, thanks for your comments about availability of quality Professionals on p2w2. I am glad you pointed it out.
Sudhir, all the best for your venture. Let me know if I can be of any help.
Sugandh, thanks a ton for your support. I am glad you like this post.
Ravi, Hemanth, Sachin, Kare, Thank you for your comment.
Mamtha Banerjee
Great article Chaitanya! Agree with your thoughts on outsourcing and delegating. More often than not founders tend to “do-it-all” themselves and don’t realize that their time is better served focusing on their “core” – whether its marketing, product strategy, client relationships, strategic partnerships, customer acquisition, fund raising etc.
All the Best!
Mamtha
http://investmentyogi.com
Vivek Krishna
Very relevant..One must always stick to the core competencies and outsource the rest. This is not new..Ricardo – the famous economist outlined this principle in the early 19th century.Called Comparative Advantage (http://en.wikipedia.org/wiki/Comparative_Advantage), it focuses on opportunity cost and not absolute cost. You can add much more value to your business by not doing something like graphic design etc(even though you may be better in absolute terms).The opportunity cost of not serving customers is high in your startup phase.
Good luck
Vivek Krishna
Amit Mullerpattan
Chaitanya,
Your article makes excellent points. Outsourcing helps businesses scale beyond what would be possible by solely relying on internal capabilities.
Outsourcing, when done right, can add best of breed “components” to your own service or product, and let you deliver a far superior product. Key of course is striking the right outsourcing relationships and measures of success.
Every business needs to constantly re-evaluate what they consider “too important” to outsource. In an organization I worked with, the CEO resisted outsourcing the internal travel desk for a long time thinking this gave him a better control over a major component of the company’s cost. When this was finally outsourced, service quality improved tremendously and the experts the vendor brought in got the company much better deals.
Chaitanya Sagar
Amit, Mamtha, Vivek, thanks for the comments.
Susan
Great article.
Delegating and outsourcing is a key skill to business success. As a virtual and personal assistant, I try to educate my network regarding the benefits of outsourcing – low cost, high impact results, enabling my clients to focus on what they do best, working on income generating activities.
Chaitanya Sagar
Susan, that’s a nice three line summary. I particularly like “enabling my clients to focus… …on income generating activities.”
Premium domains
Very nice article. Outsourcing is definately the way forward for many companies nowadays. I work within the hedge fund industry and for small funds the ability to outsource their back office and administration is essential to their success.
CAD outsourcing
There are so many benefits that a company get in return for outsourcing. It does not matter if its a big company or a small one.The speciality of the work force is done better and cost effective that in fact meets the parameters of the company.
Ultimately the small business owner is almost never the right person to wear all of the hats of the business, although they start off that way. The need to “boot-strap” during start-up can create some very bad habits, and some business owners are reluctant to give up the control of all of the functions of the firm.
Excellent point about outsourcing tasks – it allows you, the business owner, to focus your time and energy on your business. Plus, outsourcing to experts can have a better end result for your bottom line.
Richard Lockyer
Hi Chaitanya,
great article i agree with your points.
Outsourcing is definitely an excellent option but the key of course is deciding WHAT to outsource and i believe that is vital to keep in house any thing that is core to the business.
Out sourcing can be a bit nerve racking as the ‘ no one do it as good as us’ attitude can kick in, so start off gradually and get over the nerves before you plunge in.
Also make sure that you really audit any company that you intend to out source to, get references, do your homework the penalty for not can be very high.
Jonathan
It’s a fine article – it points out the differences between delegating and outsourcing and highlights all the best that we can do with outsourcing.
huuuh amazing, really it is a useful article, thanks for sharing
Thanks for sharing this article this will help us to explore more about deligating and outsourcing.