3 Clear Signs That Your Startup Needs To Hire A Team Abroad

Behind every great company, there are great people who run it. And just like every other company, startups need to invest in their people.

But startups face a major challenge, when it comes to hiring talent. Although people are the most important resource, it can also prove costly to hire the quality talent.

Startups have limited runway thus, they have to be smarter in spending their money than their more established counterparts. Startups need a balance between hiring the best talent, and managing their expenditures.

But the good news is, that there is a ready made solution for the dilemma that startups face.

A practice done by big multinational companies for the longest time was to locate their back-office business processes abroad, most notably to India and the Philippines. But with the advent of the digital age, and globalization, smaller businesses and startups have been exploring this avenue too.

Hiring and managing a team abroad can save operating costs by 70 percent.

Outsourcing or Offshoring?

There are two ways your company can source talent overseas. Either through outsourcing, or offshoring.

To many business owners, offshoring and outsourcing have the same meaning, but when examined closely, they are very different models.Outsourcing means, contracting a party to do work for you; while offshoring means to move that business process abroad.

For example, if your company needs a website, and you contract a freelancer or a web development company to make it for you, then that is outsourcing. An example of offshoring would be; hiring a team of developers overseas to create and maintain your website.

Should You Hire A Team Abroad?

should you hire a team abroad?

In choosing between outsourcing and offshoring, it really comes down to what your business goals are. If you’re caught in between deciding which one of the two options is perfect for you, here are three clear signs that offshoring is your best bet.

When your startup is scaling fast

Dream scenario: You launch your new dog-mind reading app into the market, and the users love it so much that they tell all their friends about it, those friends tell their friends, and before you know it, the dog-mind reading app sensation is sweeping the nation, and even gets referenced on popular Netflix shows.

Your business is growing faster than you anticipated. Sounds like you’re all set, right?

Actually no, it’s not. A study by Startup Genome tells us the number one reason startups fail is because of premature scaling.

As a founder, the problem with scaling too fast is that you don’t really know if your product is here to stay, or is just a flash in the pan. Ideally, you would be setting the company for long-term growth.

One way you can ensure this is by setting up your team abroad. Building your team in the Philippines will cost almost one-third as compared to developed countries, making long-term growth more sustainable, and reducing risk associated with running out of money to sustain the business.

This runway allows you to judge if there is really a product-market fit, and still have more resources to grow and supplement your team’s efforts.

Struggling to keep up with the business’ overhead cost

Building a team in the Philippines has also been a solution for entrepreneurs to save their business.

Mike O’Hagan, founder of Minimovers went face-to-face with the possibility of the company going bankrupt during the Global Financial Crisis. Minimovers does short-distance furniture moving in Australia, and employs hundreds of Australians.

When the GCF hit, the market quickly contracted, putting his business and hundreds of jobs at risk. The cost of running a business from Australia was taking a toll on his business, and despite attempts to reduce their expenses, the cost of managing, and growing a team in Australia was proving too much for Minimovers.

In order to find a solution, Mike took a gamble to relocate his back-office staff to the Philippines.

This move became a turning point for Minimovers and Mike. They found Filipino workers to be efficient, hardworking, and easy to communicate with. He was able to hire people to do sales, digital marketing, accounting, research, and virtual assistants.

Offshoring the team saved Minimovers, and hundreds of Australian jobs.

Nowadays, Mike is an advocate of setting up business in the Philippines. He helps other Western businesses looking to outsource or offshore in the Philippines, with Mike’s Business Tours.

You have a new or untested business model

Who would have known renting luxury bags online like Hermes’, Louis Vittons’, and Burberrys’ would make a good business model?

Renting out luxury bags seemed like a good idea for Rui Rapazote and Gui Faria, so they founded Uncloset. At the time they founded Uncloset, online rental for luxury bags was still a novel concept, but they already had a few competitors like Bag Borrow Or Steal, Rent the Runway, and Bagtropolis.

When you launch a business that still does not have a developed market, there is a risk that you’ll run out of resources for your business to take-off. There is an uphill slope to climb with the roadblocks such as, creating a demand for your product or service; and battling against more established competitors in your space.

Knowing that they’ll have to compete in a niche space against established competitors, Rui and Gui looked into locating a back-office team in Asian countries.

When you launch a business that still does not have a developed market, there is a risk that you’ll run out of resources for your business to take-off. There is an uphill slope to climb with the roadblocks such as, creating a demand for your product or service; and battling against more established competitors in your space.

In fact, 50 percent of startups and small businesses fail in their first four years, mainly because of cash flow problems. Contrary to popular belief; most startups are not backed by venture funding; and 82 percent of startup funds are bootstrapped.

For many early to mid-stage startups, offshoring allows them to build a team for the long run. Growing a business needs loyal team members who share the same vision, and can guide the company with you.

Offshoring your team gives you a longer runway to operate, and reduces the risk of burning your money faster than your business can handle. This gives smaller bootstrapped startups the opportunity to hire more people, and retain them.