So, you have outsourced a part of your startup business operations. And the provider delivered the results that you wanted. But now, you have arrived at the end of the contract. Where do you go from here?
That can be a common dilemma for many companies who have done outsourcing. Here, having a good exit strategy will help you in resolving that concern. So, how do you develop and implement an effective one? Let’s take a closer look.
The Importance Of An Exit Strategy
An exit strategy is a plan that you implement once the contract with your provider ends. Its goal is to help your business and outsourcing partner part ways effectively. The plan can also facilitate the move to another provider. There are several important roles that your exit strategy will play.
An Overall Guide For The Startup Business’ Future
While it might be dealing specifically with an outsourcing contract, your exit strategy will have a significant influence on your overall business direction. It provides you with a blueprint on how to handle future business relationships. Note that this is not limited to outsourcing partners. You can also use this for handling the end of other types of business partnerships.
Providing Contingency Measures
Despite its benefits, outsourcing also carries certain risks. An exit plan will serve as a contingency measure you can use for those risks. Firstly, it will provide you with ways to lessen the effects of these risks. On the other hand, it is the strategy you will employ should these risks be greater than expected.
Preparing For Negotiations
In some situations, you might want to end a current contract in preparation for entering into a new one. An exit strategy will help you prepare for the negotiations that preclude that new contract. It will help you settle any liabilities that might prevent you from being in a better position for negotiations.
Mental Preparations
An effective exit strategy is not just about your startup business dealing with the technicalities. It will also help you to prepare for the exit. You might not realize it but waiting for the end of the contract and thinking about what happens next can be mentally taxing. The exit strategy will give you some peace of mind knowing that you can execute it smoothly.
When Do You Exit Outsourcing
An essential aspect of creating an outsourcing strategy for your startup business is knowing when to exit the outsourced partnership. The most obvious instance is when you finish the project and don’t need the service anymore.
However, there are still other circumstances where you need to weigh whether it is time to exit. One of these is when you feel that the outsourcing partner cannot satisfactorily fulfill their part of the contract anymore. Be clear about the grounds for possible termination due to contract non-compliance.
Image from Law District.You and the provider should have a clear understanding of what the thresholds are. Constantly track and discuss the metrics to ensure that they are still accurate determiners of performance. You don’t want to terminate a good partner just because of a misunderstanding.
Another type of termination happens when you end the contract due to a change in strategy. In this case, the provider as they are now might not match the needs of the new direction. Note that this is the simplest type of termination to handle. Providers are ready for such situations as part of their business. Nevertheless, you should be clear as to how such circumstances will apply.
Situations Where you Can’t Terminate
However, there are also circumstances where you can’t terminate a contract easily. In such cases, you need some additional legwork to finish the contract. Take such circumstances into account when planning your startup business exit strategy.
One such instance is when a provider contests your decision to terminate. In this case, you will need to go to the appropriate arbitration office to present your arguments. While these are not always present, your exit plan should consider such situations. Review the laws in the country your provider is located in as well. In some cases, these might be more applicable.
Managing Risks For Your Startup Business
Another aspect that your outsourcing exit plan needs to cover is risk management. As it is, there are various risks that you need to navigate when exiting. These include:
- Disruptions in the services your company depends on
- Unplanned costs
- Loss of critical assets, knowledge, and intellectual property
- Delays in the exit process
- Loss of critical staff
- Insufficient termination assistance by the provider
- Unwanted disclosure of confidential information.
The exit plan should help you spot potential signs of these risks as early as possible. From there, you need to address these risks at the start of the outsourcing period. Here, you need to ensure the provider’s commitment to mitigating these.
Other Considerations For Your Startup Business
Your plan should also cover several other key areas to ensure a successful exit. The goal is to facilitate a successful transition into a post-outsourcing work setup. These areas are still related to lessening the risks you have to deal with.
Exit Timeframe
Be clear about how long the exit process will take place. This will give you and the provider enough time to prepare and do the necessary tasks. As this would be an estimate, you should account for potential changes in the schedule.
Additionally, be clear about the duration and extent of the assistance the outsourcing partner provides. For instance, while they might start pulling out some of the key services, they could still retain others to provide enough support for the transition. You would also need to take note of your obligations for transitioning these services.
Terms Of Transfer
If the provider has developed intellectual property for you during their tenure, you should discuss how the transfer of these assets will happen. For instance, you will need to iron out any licensing requirements to acquire some proprietary tech that they might have used.
You also need to facilitate the transfer of data that the service provider has gathered for you. Ensure that these go through the relevant data protection protocols to safeguard them. Additionally, you need to review the data for consistency with your existing ones so that your internal team can readily use them.
Give Your Startup Business Outsourcing Efforts A Satisfying Close
Closing your outsourcing contract partnership with a provider is by no means easy. But with a well-laid-out exit plan, your startup businesses can effectively bring all the work back in-house. And with that, you can get ready for the entry of a new provider if you need to. So start preparing for that graceful exit today.