I am an entrepreneur. I have been a client and I have been a manager. And for the last five years, my partner and I have been working with small and medium-sized enterprises (SMEs) all around the world. We provide outsourcing services. We serve over 200 clients, all of them entrepreneurs. Regardless of where they come from or where they’re located, they all have similar struggles.
But one struggle has recently emerged as perhaps the defining struggle of the day: What will benefit my company the most? Should I form an in-house team, or hire outsourced professionals? This is the question that I’ll address here and try to provide some clarity on, drawing from my extensive experience with entrepreneurs.
So, do you go in-house or outsource? The short answer: it depends.
The one thing I can say for sure is that there is no right answer, 100% of the time. This is a question that shows up at every stage of business development. It shows up at the start and during scaling or restructuring of a company. And at each stage, because the business has its own needs, the answer to this question will change.
At the start of a business, it is important to create a business plan, project concept and development strategy. You must craft plans for marketing, sales, finance and build a team from scratch.
As a business matures and crosses over the threshold of 3-5 years, it requires growth and scaling. The owner needs more time to devote to strategic issues and less for operational work. Generally, this is the most painful stage. Because it is difficult for all entrepreneurs to relinquish control and trust that all the processes that have been developed will continue to work. This applies to all types of services: finance, marketing, sales, and even law. These kinds of changes demand a certain level of business maturity and in some cases, we have found that the in-house team may not yet be ‘mature’ enough to handle these changes on their own.
I want to add a few notes about SMEs in general. Most business owners have an emotional attachment to their company, and this is normal. But, this attachment restricts growth. Owners are often hesitant to bring onboard new team members. Owners are often risk-averse and want to be in control of everything. They frequently experience financial crises and try to figure out everything on their own. Trying to ‘figure out’ problems on their own is the most fatal mistake in their business development.
Choosing the right format for your business
Assemble an in-house team. Start with a single specialist. Gradually increase the team size and divide responsibilities. In time, hand over all operational responsibilities to team members.
Hand off specific duties to freelancers or invite specialists onto project work.
Find an outsource partner for an ongoing relationship.
– The team works only for you and your company.
– You determine how to connect each specific member of your team
– Your team works in your office and you can always manage the process at any time
– You have clear levers of influence on each member of the team. You determine wages, motivators and you influence corporate culture.
– It’s difficult to select a good specialist (marketer / financial officer/business analyst/recruiter, etc)
– It’s not easy to lay out objectives for a department or measure their effectiveness.
– It takes time to form a solid team – upwards of half a year. Once your team is formed, you will still need to onboard and train your members.
– Many risks are associated with a large in-house team.
Bringing in Freelancers
– They are project-specific and you don’t need to pay their salary once the job is complete.
– You don’t need to provide benefits to freelances such as holidays, health insurance, pension, etc.
– They can be a challenge to control
– You won’t have full confidence that they will meet deadlines and get the job done right because they don’t intimately know your company.
– You don’t need to spend time selecting a team. They have already thought of and assembled a team of specialists (by the way, according to statistics, to find the right candidate for an executive position, companies typically spend 1 to 3 months, then another 1.5 months to onboard and another 6 more months to form a team)
– The team is ready and values its reputation. Thanks to this fact, they are interested in achieving the best possible result.
– They have a track record of success and don’t require any time to ‘become a team’ because they already are.
– The contract can be terminated at almost any time, which reduces the risk to the client.
– You will be in remote contact with the outsourced team and this can pose challenges in good communication.
This list is certainly not exhaustive, but it’s a good start for anyone considering these options. To provide a bit more context, I will share some of our personal experiences:
Junior marketing specialist (client) + marketing team (agency) – for day-to-day tasks
You always have a person at hand who understands nuance and can communicate directly with the agency.
Marketing specialist (client) + PR support (agency)
You do not need to hire another specialist and overload the marketing manager in your company.
Sales manager (client) + marketing team (agency)
The sales manager can give a full report on the work of the agency, and the marketing department only deals with lead generation.
Project manager (client) + marketing & sales team (agency)
You do not need to hire two departments, and the project manager, who understands all the nuances and specifics, communicates directly with the agency.
Client + CFO on demand (agency)
You do not need to hire a financial analyst or financial director and sacrifice resources on a large salary. The financial director has experience in various fields but also understands the market situation.
There are many more possible combinations. And if you find it difficult at the start to decide between an in-house or outsourced team, I recommend creating a hybrid and analyzing its effectiveness.
Your choice in favour of in-house services or outsourcing should first cover your most basic need and problem: what is the best recipe for success? Who will accomplish the required tasks? And what will create the ideal conditions for a positive corporate culture? Answers to these questions will help you decide what to outsource and what to leave in-house.