A guide to outsourcing tasks for startups

Whether you are well-versed in establishing a startup organization or are jumping into the world of startups for the first time, startups are notorious for failing. This is often as a result of a lack of planning, funding or a pair of 'rose-tinted’ glasses that the excitement and anticipation startup ideas bring.

So, what can startup organizations do to minimize their chances of falling into the 90% of startups that fail category¹? Outsource.

In this blog, we address the statistics surrounding startup success rates, how outsourcing can increase those odds and the tasks your organization can start outsourcing today.

What is outsourcing for startups?

Outsourcing for startups involves delegating certain business functions to external service providers instead of handling them in-house. This approach allows startups to focus on their core competencies while leveraging the expertise and efficiency of specialized providers. Whether it's customer support, IT services, marketing or HR functions, outsourcing helps startups access top-tier talent and advanced technologies without the overhead costs of hiring full-time staff.

For startups operating on limited budgets, outsourcing offers a cost-effective way to scale operations quickly and efficiently. By outsourcing non-core tasks, startups can free up resources to concentrate on innovation, product development and market expansion. It also reduces the risks associated with managing in-house teams, such as training, benefits and turnover.

Moreover, outsourcing can provide startups with flexibility, allowing them to adapt quickly to market changes and scale services up or down as needed. In a fast-paced business environment, outsourcing is not just a cost-saving measure; it's a strategic tool that enables startups to stay competitive and agile.

What are the benefits of outsourcing for startups

Outsourcing can be a powerful strategy for startups aiming to grow efficiently and stay competitive in a fast-paced market. By partnering with external experts, startups can focus on their core strengths while benefiting from specialized services.

Here are the key benefits of outsourcing tailored to your startup's needs:

• Achieve workforce cost savings: outsourcing allows you to take advantage of lower labor costs in other regions, enabling you to reallocate funds to more strategic initiatives and drive growth.
• Remove recruitment roadblocks: by tapping into a global talent pool, outsourcing provides access to specialized skills and expertise that might be hard to find locally, enhancing your team’s capabilities without the hassle of recruitment.
• Enhance operational agility and efficiency: outsourcing enables you to strategically embed the right skills at the right time, allowing your startup to maintain a sharp focus on core competencies while improving operational efficiency.
• Facilitate digital transformation success: with outsourcing, you can reinvest time and resources into transformative technologies, continuous innovation and digitalization initiatives, ensuring your startup stays ahead of the curve.
• Elevate service delivery: outsourcing allows you to consistently deliver high-quality services, improving customer satisfaction and strengthening your brand’s reputation.
• Build a high-performing workforce: by integrating future-ready, high-performing teams through outsourcing, you can build dynamic, cross-functional capabilities that drive your startup’s success.

What tasks can your startup organization outsource?

Your startup organization can, theoretically, outsource any task or job role function. Think of it this way, if you are looking for, say, a payroll specialist in the U.S., chances are, there are going to be qualified people who process payroll in other parts of the world too. It just depends what positions you believe, after taking the time to reassess your startup requirements, are better suited onshore vs offshore.

Common tasks that are outsourced for startup organizations include:

• Administration support: back office admin can be crippling to business growth. This is because highly qualified staff are often being assigned to back office, routine admin tasks that distract them from completing the core tasks they should be doing in their role. This in turn can have a major impact on an employee’s job satisfaction and can lead to decreased productivity. The solution is to give your local staff the back office support they need through outsourced teams.
• Customer service: offshore contact centers, especially in the Philippines, are renowned for their excellent English language skills and dedication to customer service. Because of this, startups can build highly skilled, qualified contact center teams in the offshore market for up to 70% less than if they were to recruit talent locally.
• Creative services: from marketing and content writing to design and animation, you can offshore creative services and build the ultimate team to deliver on projects faster. Establishing offshore creative and design teams overseas is one way startups can leverage the expertise of experienced creative professionals.
• Data cleansing: startups often have a need to hire quality data cleansing specialists who have the necessary data interpretation skills while keeping employment costs low. Outsourcing opens up a large market to find the necessary talent to do just that.
• Data processing: startups offshore data processing to take advantage of efficiencies in terms of both cost and human resources. Given the advances in data applications and cloud computing, data processing can be performed anywhere in the world and can represent a huge cost saving.
• Digital marketing: startups can capitalize on the top tier talent available in offshore markets to help improve their online exposure, lead generation or sales and overall brand presence through offshore digital marketing teams.
• Accounting: with a qualified finance and accounting team, skilled in dynamic financial tracking and reporting tools, you can grow your organization sustainably. The workforce in the Philippines, for example, is known for its technical competency and attention to detail, operating in a fiscal and financial system almost identical to conditions in Western countries.
• HR and recruitment: with almost 70% of U.S. employers claiming they are having difficulty filling jobs², outsourcing recruitment and HR to offshore experts can allow your onshore team to focus on higher value activities while significantly reducing costs.
• Technical support: the global information technology industry is expected to reach $1123.57 billion by 2026³. This forecast growth does not consider the cost of labor to hire staff to keep up with the aforementioned growth. Offshoring can be a solution for startups that want to reduce overheads to focus on upgrades and develop technology to facilitate growth.
• Operations: offshoring a specialized operations team can expand the capabilities and productivity of your business. Common startup and future business challenges such as shrinking product life cycles, the outsourcing of labor, the requirements of environmentally sustainable business practices and the rapid digitization of almost every aspect of our working lives have revolutionized business operations. For many companies, offshoring in operations management gives them a stronger operations team, which allows them to stay competitive in a fast-changing business climate.

Startup outsourcing statistics

While every organization is different, the risks of embarking on a new business venture are universal. While your startup may not necessarily fall into the unsuccessful category, it’s important to understand what you are up against and why efficient contingency planning and being flexible when it comes to change are key to heading in that direction.

Here are the must-know statistics around startups, from success rates through to the future of startups:

• 10% of startups fail within the first year⁴
• Only 40% of startups are profitable while 30% break even and the final 30% lose money⁵
• According to Forbes, the strongest factors affecting the amount of funding a startup receives from a pitch includes the time of year, the detailedness of the data and and the value of the entire pitch deck⁶
• Business leaders who had previously created a successful startup have a 30% chance of success with their next startup⁷
• 14% of startups fail due to not meeting customers’ needs⁸
• 42% of startups fail because they misread market demand and 29% fail because they ran out of funding⁹
• Only 1% of startups evolve into these ‘unicorn’ startups such as Uber, Slack or Airbnb¹⁰
• Unicorn startups often accumulate large debt in order to become successful¹¹.

These statistics showcase the stark truth surrounding the start of a new venture. But, those who push through these boundaries are the founders and business leaders who understand that you can never plan too much and are always on the lookout to make their new venture more profitable and sustainable.

So, how can outsourcing help to minimize this chance of failure?

According to a FreshBooks Survey, 66% of new businesses will outsource services to other businesses¹² and in another study, 90% of businesses attribute their growth success to outsourcing¹³. Why?

Well, cost savings is a massive benefit, if not THE benefit. The most expensive startup expense is labor, which averages around U.S. $300,500 for five employees annually¹⁴. Nevermind payroll costs, 46% of startups fail because they run out of money¹⁵ and with outsourcing allowing organizations to save up to 70% on employment costs (depending on your outsourcing provider), it’s no wonder 27% of companies today outsource¹⁶. The below table illustrates the reasons new organizations cited their startups failure.

It also takes around six months to hire someone new for a startup organization¹⁷. Outsourcing providers can hire a new employee in six to eight weeks depending on the level of experience, skills and qualifications required.

Not to mention the increased time efficiencies outsourcing presents. Around 40% of startup founders or business leaders' time is spent on tasks that are not income-generating such as time-consuming and transactional, repetitive tasks¹⁸. Imagine having a dedicated team who can solely focus on these tasks while you focus on business growth strategies and nurturing sustainable relationships to facilitate this growth?

18% of startup organizations note that inexperience or a lack of skills or knowledge is a huge reason for slow growth or startup failure more generally. Outsourcing opens up your recruitment to view hiring on a global scale. You now have access to a global talent pool of candidates.

Startups fail to expand or even survive in a highly competitive business environment because of lack of funding, expertise and other resource constraints. Outsourcing can help do more with the limited resources and focus on improving business efficiency by outsourcing non-core activities.

Key outsourcing tips

There are a few key things to remember when outsourcing for startups, from ensuring your business processes are outlined, to understanding which outsourcing provider is a match to your startup needs. Check out our ‘Things to remember when outsourcing’ tip sheet.