How 3 Outsourcing Mistakes Led to Closure of my Startup

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Written By Jasmeet Singh

Rank My Leader was my dream startup — a unique idea which allowed citizens of a country to rate their leaders real-time based on the latest news.

I had discussed the idea with a lot of friends, who all validated the scope of this unique concept.

The validation gave me the confidence to take it to the market

Rank My Leader, my venture was going to be my vehicle to the entrepreneurship journey, and I was now ready to take the first step to become an entrepreneur – From Idea to MVP. 

From Idea to MVP

Since the inception of the idea, I was the only employee and founder of the venture, and I decided to let it this way until the MVP was ready.

Like most of the startups who are bootstrapping, I decided to outsource most of the work. 

Now I was new to the world of outsourcing, and I had no clue on how to handle the offshore teams.

All thanks to the hundreds of articles and books written on outsourcing – ranging from how to outsource smartly to benefits of outsourcing, I was convinced that outsourcing would help me take this idea to the stage of MVP.

Within a few months, I was down by a few thousand dollars and Rank My Leader was nowhere near the launch date.

Outsourcing mistakes

Yes! You read it right. The outsourcing experience left me with a bitter taste. Rank My Leader never saw the light of day as I expected it to.

The failure left me with learnings, and one of the key learnings from the last experience was “How not to outsource – A list of mistakes one must not do while outsourcing.”

Whenever you plan to outsource, always start with a simple thought – outsourcing is not simple.

All the articles on the internet around how outsourcing can save time, the money will make you biased or complacent.

Do not trust them. 

Outsourcing for all its good reputation, spread by paid article writers, has its share of problems.

The trust in my concept blinded me so much that I forgot to apply some basic rules of outsourcing while getting work done by freelancers.

I would not be wrong in accepting that I overestimated the benefits of Outsourcing.

Startups and outsourcing

How 3 Outsourcing mistakes led to Closure of my Startup

Startups outsourcing work will face different challenges than more significant enterprises as startups have to work in an optimal budget and have to get the value for money.

Startups founders also tend to make more mistakes than established business owners because they are new to the market and are themselves learning with time. 

They might not have the skill to manage the work outsourced to vendors, and this is where they slip in closely working with vendors who at times will not deliver on time or will deliver a substandard product.

Rank My Leader failed because we were a startup trying to get too many things from vendors via outsourcing.

Here are the three lessons I learned while outsourcing our startups’ work. 

1. Never outsource ideas

Ideas are dangerous. They are not tangible. Anything which cannot be measured is open-ended.

You can never set up a budget or a timeline to complete the same.

When you hire an outsourcing agency to convert your idea into a product, you are making a big mistake.

I got the design done for Rank My Leader not once not twice but thrice.

The first time, it was an idea which took shape.

The second time, the idea was not as how I envisioned it. I had more ideas to make the design better.

By the time I approved the design (more ideas from end-users), I had consumed my marketing budget.

The outsourcing of idea was a cruel, unforgivable mistake. Every time the idea evolved, I came down with a few hundred dollars.

I paid – as I wanted the best product. The agency I hired for the job never complained.

How stupid was I?

I forgot I was outsourcing idea not a document with proper workflows and mockups.

I lost a significant chunk of my budget on “ideas” which evolved.

Lesson learned was “never outsource ideas. Especially the one-line ideas”.

Note, one-line ideas are vague ideas like “I want a clone of Uber” with less commission deduction for drivers.

The more you rely on your vendor to make something out of your idea, the worse it gets for you in terms of time and money.

2. Do not outsource what you do not understand

With a limited budget, I wanted to win the race.

I should have exercised prudence while deciding on taking the easier route to success.

It so happened. I wanted to be numero uno as soon as possible in my field.

In pursuit of winning it fast, I hired a PR professional on a contract basis. I outsourced PR work of the website.

I had no idea how the PR industry works.

I also did not take the pain of studying how to pay them or what should be my expectations of them.

The PR person I outsourced work promised to get me published on “major publications”.

She wrote to a few reputable websites to publish our story. One of them, a popular website in startup space, refused to entertain us.

The PR person put the onus on me and the concept.

I timidly agreed to “the article not getting published” as my concept’s mistake. I thought this was the norm of the PR industry.

How wrong was I?

In PR, if someone cannot get you published. The person is not well-connected.

Donkeys get front-page coverage if their PR is good.

So my outsourcing of what I did not understand costed me dearly. I was wasting precious money.

Earlier it was designing now PR.

Now the stage was set for the final disaster or as they say “the final nail in the coffin”.

3. Outsourcing to a wrong vendor

No doubt, you save money by outsourcing. 

The problem creeps in when you try to save a fortune by finding cheap freelancers or inefficient freelancers who have no clue about freelancing.

Worse, you do not do your homework before hiring freelancers to outsource the job.

I was on a limited budget. I wanted a cheap yet reliable service provider.

I hired an SMO person to promote the website. I asked him “What type of contract do you want?”

He said “Hourly”.

I asked, “What is your hourly rate?”

He gave me an unbelievable number. The price was too good to be true. I never knew you could get vendors at such a low price.

I was getting a real deal. I hired the freelancer immediately.

From day one, the work was low quality. English was as horrible as mine.

It looked like the guy was promoting my website in Chinese.

I started teaching him English. He began teaching me “how to promote without knowing English”.

I wasted a lot of time and money in unlearning what I had learned in SMO.

To save “a lot of” money on outsourcing, I ended up spending more money.

I hired another guy who promised to work closely on the project. He came through a recommendation.

We agreed on some monthly pay-outs. Again, affordable service provider.

Few days into the job, he said: “I am going to Goa with my friends on vacation”. By the time he came back from his vacations, I had moved on.

The third contractor was the best of all. Since he was visiting my city for some work, we decided to meet and discuss my concept.

I explained to him the concept. He liked what he heard and decided to work with me.

Once he was back home, he suddenly turned unresponsive.

He made campaigns which would put worst of minds to shame.

When one of the prominent leaders in the country died in a car accident, he made a Facebook post with some stupid comment.

I had to pull down the post before I was beaten black and blue from some political goon.

One thing common in all the above contractors was “cheap OUTSOURCING”.

I was looking for cheap contractors.

Luck or bad outsourcing?

By the time I stopped the SMO and SEO campaigns, I was out of money.

Cheap vendor. Unreliable vendor. Dumb vendor.

I know I planned the finances poorly for my startup.

But was it only lousy planning or bad outsourcing, which led to the closure of my startup?

I would say – it was a mix of a lot of factors. The failure of Rank My Leader because of outsourcing taught me to outsource smartly.

The outsourcing model does not always succeed. Startups need to check their outsourcing models. 

If outsourcing is not done the right way, the cons of outsourcing are bound to outweigh the pros of outsourcing, which will sink your boat for sure.

Outsourcing might not be the one making to the list of why startups fail in all the articles you read on the Internet.

But that does not make it a reason less scary to kill your startup dream.

What is portrayed as a model to save cost, money, time can lead to spending more money, time and energy?

I just learned it the hard way by seeing my dream startup fail.

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