Outsourcing for Entrepreneurs: How to Get It Right
Kathleen B. Schulweis, Founder and CEO, Confidence Connections™
As the founder of a consultancy focused on enabling entrepreneurs to build better businesses, I’ve discovered that many clients get "taken for a ride" by outside companies providing services that range from marketing to finance. To help them navigate the difficult task of identifying when and how to hire an outsource provider, I’ve researched the subject. My findings are surprising: although outsourcers can help companies keep costs down while benefiting from expert advice, there is nonetheless a considerable downside.
The best reason to retain a third party is to gain expertise. Smart entrepreneurs know what they know and what they don’t know. They resist diluting their expertise by trying to know it all. Instead, they focus on their strengths and hire experts to balance out their weaknesses. That said, outsourcing hurts when founders farm out tasks in advance of needs or hire the wrong individual or team. In addition, most entrepreneurs make two more mistakes. They hang on too long to the wrong contractor, and they forget how to treat and nurture a good relationship with the third party. Here are five tips to help you get outsourcing right, save your pot of gold, and maybe even avoid a few gray hairs.
1. Put your horse before the cart
Entrepreneurs may be passionate about their business even while not always being sure about the direction in which they will take it. As such, they could make the serious mistake of turning to outsourcers prior to identifying strategic goals. Outsourcing professionals, being only human, are more than willing to execute in exchange for money, even if the entrepreneur isn’t quite sure what he or she wants to accomplish.
For example, public relations and marketing professionals are happy to take you on as a client even if you aren’t sure about what product or service you are really selling and to whom. However, the result could be a lot of wasted time and effort chasing the wrong customers, creating materials that are obsolete as soon as they are ready, and eating up precious time that should be spent discovering your real business.
Therefore, prior to investing in an outsourcer who will follow orders, establish your strategic direction and goals so you can be sure you are sending your money down the right path. Think carefully about why you are outsourcing. What will the outsourcing accomplish for you? Are your priorities in order, or are you filling a need that is 10 steps away? It’s great to have a 10-year plan with goals in place. However, if you are not ready to put up the building addition, why hire the architect? If your software is in beta, you don’t need to start advertising your product.
One entrepreneur I met years ago paid one of those big law firms $50,000 to create her company on paper because she thought that would impress venture capitalists and protect her interests. Yet she hadn’t laid out a plan for what she would sell and to what market. As you might guess, the paperwork didn’t impress and was a sad waste of her retirement savings. If she evaluated the purpose behind why she needed the paperwork, she might have invested that hard-earned money in a more useful manner. As it was, she ended up with nothing.
2. Hire the right contractor
Ask questions so that you hire third parties who know your business. What have you done in the past? What don’t you know about this business? Who is going to do the work—you or an underling? For example, if you’re outsourcing the construction of your Web site and hire a big firm, chances are the person building the site is not the person who sold you the services. Find out upfront who will actually build the site.
In my research, I heard story after story about entrepreneurs retaining companies and individuals who did not have any experience or contacts in their client’s business. One woman starting a speaking business hired a PR firm that didn’t have any experience in that field. After six months, it was painfully obvious that this was a terrible match. While both sides lost out, the entrepreneur was worse off because she had squandered her most critical assets: time and money. She should have been promoting herself, making her own calls, and finding her own strategic partners instead of sitting around waiting for the PR firm to do the work for her. If, on the other hand, she felt she had to start big, she should have at least hired a PR firm that understood her business.
Find the right person. Everyone has a sweet spot, some combination of personality and expertise that fits your needs. When entrepreneurs call me about my coaching, the first thing I tell them is I am not for everyone. I have strengths and blind spots. If you are looking to hire someone who cannot admit that, seriously consider moving on. You have got to know what they can do and not do for you.
If you need a specialist and hire an assistant, don’t expect that person to rise to the occasion. It’s not going to happen. If you hire a specialist, make sure the specialist can either help you figure out what you really need or that you can explain exactly what you want. If the specialist doesn’t get it, move on.
In general, it is OK to hire someone new to the field as long as you take into account that inexperience will be part of the package. As a rule of thumb, however, it is better to hire someone with some credentials and a track record.
Finally, trust your gut. Although referrals are helpful, your gut may tell you that while the contractor’s work was fine for your friend it’s not going to be OK for you.
3. Determine deliverables
Once you know what you need and find someone qualified to do the work, your next step is to determine exactly what must be accomplished to meet your goals, what roadblocks might impede progress, and what schedule will be necessary to bring the project in on time.
One entrepreneur reported to me that her publicity consultant was taking thousands of dollars each month with no results. The consultant, in turn, blamed the entrepreneur for failing to provide a press kit at the beginning from which the publicist could make pitches. What is wrong with this picture? Namely, four months of "work" without either party mentioning the need for this critical element. Discuss upfront what you need if you want the work to pay dividends for your company.
In coaching, we call the process of negotiation creating an alliance. You hash out all the details, goals, expectations, and deliverables so that you and your client are in agreement. Without this work, you might as well be on different planets, and you can pretty much figure you’re going to lose your shirt before you build your business. If the outside provider doesn’t know what you want, how can that third party deliver for you? If you don’t know what the contractor is promising, how can you know what to expect?
If, on the other hand, you’ve determined the deliverables with the right partner, things should begin quickly and work smoothly. I once tested a copywriter on materials for my coaching business. After one session, it was obvious she did not understand my business. While I knew what I wanted to get across, she could not write to it. Instead, she was writing to a formula that did not make sense for me. She may have been perfect for someone else, but not for me. I wanted uniqueness in my copy. So I kept searching for a better match, and once I found it, the results were powerful and virtually immediate.
4. Cut your losses
If you are not getting any response to your questions or concerns, if you are not seeing results, if you don’t get itemized deliverables, if you are getting the run-around—or if you find you don’t want to talk with your contractors, are uncomfortable with the direction of their work, their excuses, or their results—then it’s time to move on. Sometimes you just have to walk away. Make sure you know your contractual commitments. Maybe you cannot just walk away (which is why a month-to-month contract makes sense). You might or might not want to consider a lawyer to recoup some of your losses. That’s your call. However, the important thing is to get out and move on.
At this point, it is critical that you evaluate your mistakes. How did you get into this predicament? Why did you invest $35,000 in six months and have nothing to show for your effort except an empty checking account? Know where you went wrong. Were you putting your cart first, did you hire the wrong person to do the job, or did you fail to discuss deliverables? If you don’t evaluate your errors, you are destined to repeat them.
While you will undoubtedly make mistakes in your business, don’t pay twice for the privilege. Without evaluation, you will feel like a victim. With evaluation, you may feel foolish but at least you will have made something of the experience and learned a valuable lesson or two.
5. The golden rule
Outsourced relationships are heavily based on the personal interaction between you and your contractor. Regardless of how professional he or she is, you set the tone for the relationship. So treat your outsourced expert as you would like to be treated. If you want to outsource to someone who is serious, then ask serious questions. If you want a contract, ask for one. If you want your calls taken, take that person’s calls. If you want reasonable timelines, give the same to your contractor.
In addition, understand that the best relationships with outsourced providers are those that are open and honest. You should treat your outsourcers as valuable members of your team and provide them with the same information about your company’s vision and ambitions as you would a high-level executive. This will allow them to better help you and feel more motivated to support you. For example, I treat my virtual assistant as a Vice President at my company. As a result, she has become a trusted advisor.
Above all else, remember, you get what you pay for. Outsourcing is not cheap, and it should never be free. If you entertain the tempting option of bartering, think carefully about what you will likely get in return. Beginners often use bartering as a tactic to build a clientele, and that could mean you’re giving away your time and money and getting little or nothing in return. In addition, paid work always takes precedence over free work.
In sum, outsourced providers can enable entrepreneurs to build stronger companies by taking over all of the tasks that aren’t related to a young company’s primary objective of making and selling a unique product or service. While price is always a factor when considering contractors, what is really important is expertise, quality, reliability, and service. Focus on those factors—and your contractors will deliver for your company.