Startup departments often face the challenge of limited resources, making it difficult to create a comprehensive range of functions. According to the RBI survey, only 14% of startups employed more than 10 people in the first six months of their operations, but as the sector matured, that percentage rose to 40% at the time the survey was being conducted. In an effort to manage costs, startups frequently opt for a leaner structure with fewer departments. While this approach may seem cost-effective, it can have significant implications for the startup’s performance and growth trajectory. To address this challenge, startups must seek effective solutions promptly.
There are two ways to solve this problem. First, you can assign all the work to the employees, and second, you can outsource the your startup departments you do not have. If you allocate all the work to your employees, it will become hectic for them, and then they will leave you at some point. Also, they cannot work efficiently because of a lot of work pressure. Hence, I would not recommend doing it with your employees.
Now, startups should have internal departments for the core tasks. And they can outsource other tasks if required. Choosing between in-house and outsourcing startup departments is the key here. I will explain nine departments which I feel are the most important ones. Also, we will discuss having them as your core departments or outsourcing them.
In-House Startup Departments
The departments related to your product or services should have a dedicated in-house team. A startup cannot compromise on the product that you offer. Also, a rapid change in your product is necessary as per the customer feedback. Departments such as sales, product, operation, and tech must have teams within the organization. Let’s discuss why you should have them in your core team.
Sales
The one department that brings money into the business is sales. No rational business person would outsource the department that is making money. Therefore, entrepreneurs must have a sales department within the organization. It is crucial because you want to know the precise market situation. You want to get customer feedback and improve as quickly as possible. Outsourcing the sales department will delay this process, and your competitors will benefit from it. So, the sales department must be within the organization.
Product
The role of the product department is the key for any business. Understanding the consumer and delivering the right product to them is the key to a successful business. It involves constant work on the customer, market behavior, competition in the market, and improvement in the product. It is a never-ending cycle, and you should have someone in your company who understands this. Outsourcing doesn’t make much sense because they are just going to throw data that is already available in their system. Whenever it is directly related to your product or customer, having an in-house team is the way to move ahead.
Operations
Building a strategy is essential but successful execution is more important. Operation is the department that executes those strategies made by the product team. The operation team can be a mix of outsourced and in-house. For example, you are a D2C glass utensils manufacturing company. Your core function is manufacturing the utensils. Since you are a D2C company, you also need to deliver the product to the end consumer. In this situation, you will operate the manufacturing within the house and outsource the product delivery to a logistic company. Building a whole new logistic network is not logically accurate in this example. So, depending on the core functionality of the business, you have the flexibility to choose between in-house and outsourcing.
Tech
In the modern world, technology is the new asset of companies. We have seen a drastic change in technology after the pandemic. There has been a rapid expansion, and it will continue to do so in the coming years. For startup departments, the integration of technology has become imperative, representing a non-negotiable necessity. Also, it is a lot more affordable than outsourcing it. The company needs tech support almost 24X7. It can be data security, prevention from hacking, etc. Also, when it comes to scalability, you need to take care of things on your own. Your team knows the market, and they can modify and update your product. Most importantly, they are a dedicated team, so you have all-time access to them. A startup should only outsource the tech team if their core product has nothing to do with technology.
Marketing
It is the most thought-provoking department in any organization. First, let me tell you marketing and sales are different departments. Sales generate revenue, whereas marketing is an expense to the company. Depending upon your business, you can either outsource this department or have a dedicated team within the organization. For a B2B company, outsourcing the marketing is logical because there is no frequent change in strategy. Whereas, for a D2C startup, you must have a dedicated marketing team in the digital world. I feel social media marketing is one of the best tools for interacting with your customers. But, it requires constant updates with social media trends, influencer marketing, content creation, ad campaign, and many more. If you outsource this, trust me, the cost is not affordable.
Outsourced Startup Departments
When it comes to managing startup departments, a strategic approach involves outsourcing tasks that aren’t top priorities or don’t demand frequent attention. These are generally consultancy jobs. Startups can outsource hiring, administrative, legal, and CFO-related work. Having an in-house team for these departments can cost a fortune. Let’s understand why it is better to outsource these departments.
Human Resource and Hiring
Hiring is a crucial part of any organization. But, having HR is not at all cost-effective for a startup. Generally, startups hire for a particular task and do not keep long-term relations in mind. When a company grows, we look for people who will stick with us. Since a startup is generally a small team, you need to handpick your employees and interview them yourself. You can use LinkedIn to get in touch with people. You already know what you are looking for, and it becomes easy to pick the right choice for your team. To eliminate this filtration process, you can outsource the HR work. But, keep in mind, you must interview the candidates by yourself.
Admin
The role of the administrator is to maintain the day-to-day activities in the company. The administrator is responsible for stationary, cleaning and maintenance, food, transportation, or other office services.
Honestly, you do not need such an employee in a startup. You can outsource these things periodically. In an emergency, you will find many people around you who can get things done. So save your cost and outsource your administrative work.
Chief Financial Officer (CFO) / Finance
In simple words, we can say that a CFO deals with the finances of a company. There are three roles of a CFO in the organization. These are, bringing the money, investing the money, and distributing the money. As you must have understood, it is a consultancy job. When you need financial advice, you can consult a finance expert who will get the job done. A permanent CFO is required when the company has a bag of money in the bank. A small startup should outsource a finance expert when necessary.
Legal
The legal department takes care of all the legal compliance of an organization. This may include the drafting of contracts, complaints filed in consumer courts, etc. The legal department helps you keep your company under the law and orders. For a startup, a full-time legal department is unnecessary. Startups can consult or hire lawyers when necessary. The main focus of startups is to generate revenue and build a product. Therefore, having a legal team as a central department is not appropriate.
Conclusion
In conclusion, I would say that startups should prioritize their product-related work. Everything else will be in order once they start generating income. A Startup must have a limited internal team in the beginning. These departments include sales, products, marketing, etc. I hope you have a clear idea of optimizing your cost and what departments you need in your startup. Please share this article with your fellow entrepreneurs if you find it useful.