Unlocking Founder Potential: The Strategic Advantages of Outsourcing for Startups

Warren Browne, Founder & CEO of Browne Consulting smiling in office meeting. This is for blog post on outsourcing for startups.

Tom Linden

As an Associate Director and Project Manager, Tom has been leading several company-wide initiatives to maintain our rigorous quality controls. He has advised clients on a variety of operational accounting matters, such as ERP & procurement system implementations, operational accounting, initial budget setting, and strategic HR (e.g., guidance on initial benefits, payroll and first hires, local regulatory compliance).

“If you’re going to be an entrepreneur, you’ll have to get used to wearing a lot of hats.” How many times have you heard this quote or something similar? While there’s truth in this, it should be taken with a grain of salt. Like most things in life, founders need to strike a balance in their business. Finding this equilibrium involves taking responsibility for tasks where your expertise is required for the good of the business. This includes selectively delegating responsibilities to others and outsourcing for startups.

The earlier this balance is found, the sooner you free up your founder and the better their business will be. Founders must understand the advantages and costs of outsourcing for startups. This includes establishing criteria for outsourcing functions versus keeping them in-house, and identify suitable outsourcing partners. This blog post aims to provide tips and tricks for building a framework to help free up your startup founder.

Why Outsource for Startups?

There are a few obvious answers to this question, such as the time savings it provides, the cost savings it enables, and the focus it allows founders to devote to core competencies. However, there are additional benefits to consider:

1. Expertise

Outsourcing allows entrepreneurs to access specialized skills and resources without hiring full-time. If the right partner is found, it also allows founders to benefit from years of experience across multiple companies with similar operations, leading to more (and quicker) data-driven decision-making.

2. Cost predictability

Outsourcing can save a company money by hiring fractional resources instead of full-time employees (to an extent). It can also provide predictability in the costs associated with these functions, which ultimately makes it easier for founders to budget for them.

3. Flexibility

By finding partners that offer fractional services, it allows the business to stay nimble across ancillary functional areas while fostering rapid decision-making. Adjustments can be made swiftly based on expected operational needs. This establishes a  foundation for flexible scaling. This also reduces the need for direct oversight by founders (and eliminating time spent making decisions in these areas).

For example, if you decide to outsource a function like Accounting, HR, or IT, you are also outsourcing decisions related to that function, such as:

  • Should we hire another resource to help with this function?
  • Should we adjust the salary and benefits of the team to align with the market?
  • Do we have the technical expertise and tools available to meet new requirements as they arise? 

When decisions in outsourced areas do require your input, then the team you’ve outsourced to should be able to provide options, pros and cons, and a recommendation.

4. Risk mitigation

It’s not uncommon to run into founders who prefer to become familiar with and personally take care of regulatory requirements for their business. While it’s admirable and impressive to meet founders with a breadth of regulatory awareness, it can be argued that the time and effort invested in learning these requirements, and taking action on them, is better spent elsewhere.

Additionally, being proactive in these high-risk areas can lead to complications for the business down the road. It can set off alarm bells to a specialist who lives and breathes in the details of any given regulatory process (i.e., taxes, state registrations, and reporting). 

Which functions do I outsource?

As founders build their business plan, they should consider the above benefits generally. But this doesn’t necessarily answer the question of why their business should choose to outsource. To make that decision, it requires contemplating a number of other questions. Which functions are pointed toward producing outputs to give the business an edge over competitors? These functions are the ones which should be kept in-house. Are the skills required to execute these functions going to provide the company with a strategic advantage? If so, you may want to consider building this skill set organically versus contracting it out.

“There are so many activities that as founders we think we need to control in order to progress our companies,” says one of Browne Consulting’s clients, Crystal Brown, co-founder and CEO of CircNova, Inc. “Most CEOs have strong business sense and financial acumen, but the time expended managing those tasks (for me) was not productive or efficient. By outsourcing certain functions, you are able to give attention to the areas requiring prioritized attention. I would encourage other founders to review their management activities and outsource activities that will contribute to the growth of your company, not take away from it with non-value added tasks.”

For biotech, this decision isn’t as easy as simply outsourcing for startups all G&A functions (i.e., IT, accounting, and HR). These companies must carefully consider where research is being conducted and perform a cost-benefit analysis.

Once the decision is made to outsource, the next step is to find the right partner to manage these functions.

How do I find the right outsourcing partner?

When I meet new founders, I like to let them know why I’m passionate about working with startups. Prior to joining Browne Consulting, I spent nearly 10 years working in and with very large corporations. During this time I learned about the ramifications of a poor decision (or one that is poorly-implemented), and the impact on the company over time. What I enjoy the most about working with startups is getting involved at “day one”. This allows me to take what I’ve learned and advise clients on what speed bumps might arise on path A versus path B. The goal, ultimately, is to set the founder and their company up for success. 

Startup companies are kind of like babies. Founders can very much act like helicopter parents early-on. They contribute to its every want and need, protecting and nurturing it from seed to Series A, always with an eye toward the future. It’s not surprising that some founders would be reluctant to bring outsiders into their “circle of trust.” 

Building your “Circle of Trust”

In order to find the right outsourcing partner, founders are strongly encouraged to get recommendations from trusted colleagues and advisors. Once referred, they should continue to do their own due diligence. Have an introductory meeting. Ask questions to confirm firm qualifications and if they can demonstrate an ability to “talk the talk.”

“From day one, the team at Browne felt like our internal partner or team member,” says Crystal Brown. “That’s incredibly important for newer companies and startups. Investors and partners want to know companies are sound financially. Working with the team at Browne allows me to communicate the confidence I have in our financial management.” 

This initial conversation should help build trust (if it doesn’t, then perhaps they aren’t the right partner for your business). But it doesn’t stop there. Outsourced providers come with expertise in their function(s) and exposure to a number of clients in the industries they serve. During follow-up calls, these service providers should be able to walk you through a playbook of some kind. This playbook should include steps that are proven to lead to success. Browne Consulting has developed a playbook for biotech startups, for reference, which is the first thing we walk our client founders through.

In my experience, this is a key inflection point in the relationship between a founder (or founding team) and an outsourced service provider. The playbook is on the table, the tasks are ready to be assigned. It’s now up to the founder to take the leap and offload responsibilities. This does not mean that trust has been built, necessarily. But it’s typically the first opportunity that we get as advisors to ADVISE! By providing advice, and equipping founders with information that leads to high-quality decisions, the foundation of trust is made stronger.

Reaping What You Sow

Unfortunately, founders won’t really know if they’ve found the right outsourcing partner until a few delegated tasks are completed successfully, in a timely manner, and at a reasonable cost. Once the “rubber meets the road” and the partnership is up and running, founding teams should begin to see the side effects of decisions made in tandem with these partners. This means more time to devote to strategically important functions, less time worrying about ancillary functions, and comfort that the business is on the right track.

As a trusted advisor to more than 100 startups in the biotech industry, Browne Consulting has navigated this delicate dance many times, and we understand the gravity of outsourcing for startups. We obsess over the pursuit of those moments where our advice leads to sound decision making, and decisions that we play a part in lead to operational success for our clients. 

 

About Browne Consulting

Recently named Top Places to Work in 2023 by The Boston Globe, Browne Consulting is an industry leader in life science accounting solutions that set the standard for providing operational finance and accounting support to next generation science and technology companies. Their top-caliber professionals deliver best-in-class services, enabling clients to focus on breakthrough solutions such as financial planning and analysis support (FP&A), operational accounting, tactical HR support, and more.

Inspired by an agile process for over 100 venture backed life-science companies, Browne Consulting’s expert professionals are ready to address their clients’ greatest challenges by providing flexible, on-demand solutions and support. To learn more about Browne Consulting’s innovative expertise, please visit www.BrowneConsulting.com.