As entrepreneurs, we have many various skills. One of the traps we fall into as we grow is to continue doing the things we did when we started. This sentiment not only goes for ourselves but also for our organizations. As a start-up, we are typically the salesperson, chief developer, production manager, service technician, customer service representative, and janitor. While this is necessary when we begin, as we grow and scale, we must evaluate the best and highest use of our time. For most of us, we only went into the business of bookkeeping or HR management if we provided these valuable services to other business owners. We often maintain specific roles that we could easily delegate to others in our growing organization or outsource altogether. We need to evaluate why we entered the business in the first place to determine individual and organizational focus.
The functions we do that are part of our original vision for what we wanted to provide to the world are our ‘Core’ functionality or capability. An example of ‘Core’ functionality is our unique way of providing a service, the technology or methodology, the materials we use, or how we reach our end users. All these things make our business what it is and are critical for us to lead, outperform, or transform our target markets. These core capabilities must be nurtured, protected, and executed by those who believe in them the most: your company. Consider why you first entered the business and what you could add that was absent.
What gives you a competitive advantage? What makes the organization stand out? Those functions and ‘Big Ideas’ are your CORE. Write them down. Get your organization to help you identify them. Doing this will bring organizational focus and help the organization make better decisions, protect what is essential, and promote buy-in at every level.
Part of this process is figuring out our ‘secret recipe.’ What do we do that others don’t that causes us to be successful? How do we measure this success? Growing our sales year over year is one obvious answer. But another part of our success is clarifying our measures of success. One business founder, owner, and friend shared with me after the pandemic that one of his measures of success was to provide for over 25 families during this dark and challenging time. What is your ‘why’ you are in business? It is usually not the first answer that presents itself. Many of us immediately respond that it is to ‘make money.’ While this is necessary for a business, it is not typically the real reason. Another typical answer can be to ‘provide the best for my family.’ While this is also essential because we want to spend only a little time on our business with some tangible benefits to the ones we love, we could do the same thing with an excellent job without the risk and burdens. We need to dig a little deeper. Besides providing a living for others, how do we justify what we strive for in our souls? I have heard it said many times that success is not financial gain but the freedom it gives us to do what we desire. Now we are getting to our real ‘Why.’ What is yours?
Based on our Why, we must evaluate how and what we and our enterprise must do. So, as we evaluate how we spend our time day-to-day, month-to-month, and so on, what tasks are not part of this core? Accounting, taxes, legal, and marketing likely come to mind. We contract specialized individuals to perform these functions during the early stages of company growth. Later in our maturity, when a company has grown, we may add to these functions organically. But before you seek to justify doing them yourself, this point is farther down the line than you might think, and usually only after the function has been performed adequately by some outsourced specialist outside the organization. Does hiring or assigning someone to perform this function make sense instead of partnering with an outside provider?
While functional outsourcing is an obvious choice for accounting, bookkeeping, vehicle maintenance, website development, and others, another viable option is outsourcing to scale the business.
It could mean contracting out everything from marketing, sales, distribution, product development, component manufacturing, or assembly or contracting employees. These require some specific circumstances, all depending on finding the right partner. But your vision for growth should rely on something other than you simply working harder, longer, or doing more to achieve this growth. If we already work harder and longer and feel stretched beyond what we can reasonably achieve, it is time to rethink our strategy. The definition of ‘scale’ is growing an enterprise beyond the individuals involved.
Conventional logic is often based on the belief that no one can do a particular function better or cheaper than we could do it ourselves. This logic has caused the downfall of many businesses. While there may be some things a business could do better, that focus should be on tasks defined as ‘Core,’ as we mentioned earlier. But even if you have the capability, you can’t do it as well and cost-effectively as an organization that does it all day long as their single purpose. Also, just because ‘you can’ doesn’t mean you should. A business that competes in a particular market has honed its capability over the years, learned from its customers and early missteps, invested in the appropriate equipment, develops and attracts specialized skilled labor, and can often provide a better price, delivery, and quality than you can do it in-house with significant investment in time, training and equipment. Once you calculate the actual costs of doing something in-house: best and highest use, burdened cost of labor, space required, specialized skills, learning curve, overhead absorption, or asset utilization, is there something more critical to your business that you should invest these resources in?
As you follow these steps, articulate why you are in business in the first place, define your ‘Core,’ and evaluate the best and highest use of your time and resources, these outsourcing decisions become more apparent. Invest in this capability if this function is core to your success and key to your competitive advantage. Consider contracting it out if it is questionable or a readily available ‘commodity. Even if you outsource temporarily, you can always bring it back in-house when conditions change. Be ruthless at cutting your focus to your core to achieve your true why. This approach allows you to become more agile, innovative, productive, competitive, and intentional in investing in the most critical capabilities.