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STRATEGY

When You Should Be Outsourcing

There's a period of time in a company's growth journey when outsourcing makes sense. Here's when and how to plan for it.

As a young company, there really isn't an option to hire employees for a lot of core functions. There just isn't the income to do so. Instead, you have to buy resources that are critical to surviving the start-up phase that you cannot successfully do yourself. Is it a core skill? If not, you should probably purchase some time from an expert to handle it.

When the amount of money spent to purchase a resource reaches about one-half or three-fourths of what the wage for an employee would be, then it's probably time to hire one. While it's not a directly comparable cost, you will be getting all of the focus and attention of your employee rather than a billable portion of time from your hired expert.

That is phase one of outsourcing. As a company grows, more of the core functions will come in-house. However, not every function should necessarily be handled internally. As business picks up, certain jobs will become too difficult to scale. This is especially true for companies that are growing rapidly.

For OtterBox, one of those functions was manufacturing. In the early days, we did it ourselves. Actually, in the early, early days, I did it in my garage. Obviously, that wasn't going to work for very long. As we grew the brand and the product offerings, it didn't make sense for us to keep manufacturing in-house. There was no way to keep up with demand and respond to cyclical business patterns.

Instead, we were able to find solid partners that specialize in flexible, scalable manufacturing. It wasn't an easy transition at first and a hard decision to make, but it was so necessary to the success of the company. Without it, OtterBox would not have been able to survive because it wouldn't be able to meet demand.

What should be outsourced will be different for every company. Determining early what those functions are will save a lot of frustration and failure down the road. Strategic planning can help identify those potential pain points before they become insurmountable problems. Look for the areas where your company should really be focusing its time and money. What are those key differentiators that only you can do?

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Last updated: Jun 17, 2013

CURT RICHARDSON | Columnist | Founder and CEO of OtterBox

OtterBox founder and CEO Curt Richardson created the first prototype of a waterproof case in his garage in the early '90s. OtterBox evolved into a leader in protective cases for mobile technology.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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