What to Outsource (and What to Keep): A Bootstrapped Founder Framework

0:00Hey, good morning Micro. My name is Kevin Graham and today I'm here to share with you the framework of outsourcing everything that doesn't make your beer taste better. Yeah, if you listen to the acquired podcast, Ben and David from that talk about this concept frequently, it comes from a talk that Jeff Bezos gave at Y Combinators startup school in 2008. Over the next 15 minutes, I'll explain the concept, share some examples from my own business and then the framework that you can use when deciding whether something should be outsourced. But first, a bit about me and my background. Uh, as Lyanna already

0:34said, I'm the founder of Side Arrow. It's a proudly bootstrapped company. I started it in December 2015 with Bulkby Hosting. Uh we have six figure MR in the highly competitive web hosting industry doing a lot of things like comparison pages and we run all of this with three part-time contractors plus myself because we use outsourcing extensively. But first I want to start this presentation by telling you more about this photo here. This is an old electric power generator at a 300-year-old brewery in Luxembourg. And yes, that's Jeff Bzos there in the photo. About a hundred years ago, this brewery were one of the first businesses in Luxembourg to

1:14use electric power. A lot of companies around that time were discovering that they could improve their processes with electricity. There was no power grid at that time, though. So, if you wanted electricity, you need to generate your own. As you can imagine, generating electricity is difficult, technical work, and it's also capital intensive to

1:31buy and install all of that equipment. So you might be wondering at this stage, what does power generation and beer have to do with software businesses? Well, there's a lot of undifferiated work in running a SAS business. Hiring, managing payroll, collecting payments, blog content, pay-per-click ads, server in infrastructure, the list goes on. Now, it's essential to focus on the attributes your customers actually care about, which is the taste of the beer for the breweries that will be visiting this afternoon. And for your SAS, it's the value that your product delivers to your customers. Whether that's the speed and reliability of an email forwarding service or the time savings they get

2:08from your scheduling tool. Being a bootstrapped or mostly bootstrapped founder requires efficiency and making the most of the limited resources you have in both time and cash. Whether that's because it's a side hustle you're still working nights and weekends to do this and your time and money are limited or if you're funded and you have 24 months of runway before you either need to be profitable or

2:28raise your next round. Outsourcing gives you access to savings that come from economies of scale through uh services from shared service providers or fractional access to more uh specialized labor whether you've got like a fractional CFO or fractional marketer. Now I want to share the story of my journey to outsourcing support within our business. As I mentioned we started

2:51in December 2015 with Bolt by hosting. After about a year in the business with me doing support tickets every day, seven days a week, I hired my first part-time customer support contractor. And then six months later, I added a second. We're doing support during daytime hours only, though, which meant it could take up to 18 hours for a

3:09customer to get a reply. In 2018, we started acquiring some other web hosting brands. And with that really came the need for a true 24/7 support infrastructure. We tried for about eight months with a patched together team of three part-time contractors across the three different time zones. Uh you know working a few hours a day follow the sun sort of model slightly reduced support coverage over the weekend. Doing that we had a time to first response of like 2 to three hours which is great but still

3:38not really exactly where I wanted to be. And if any of those support contractors went on leave then I had to cover that shift. As you can imagine managing all that's pretty stressful. And in addition, while the support team were good at handling the customer side issues, I was still responsible for all the server infrastructure, which meant

3:56my phone was on 24/7. If a server went down, I had to wake up to fix it. This is one of the challenges that all of us face operating smaller companies, which is what led me to find an outsourced uh web hosting support agency in India. They provide us with proper 247 coverage for just a,000 bucks a month. In terms of how I found and selected that agency, I did the exact process that Dev spoke about before. I went on Google, outsourced web hosting support, contacted a few of them, went through their process and uh just

4:29decided which one I liked and went with. My fear around outsourcing the support though was that they could face a loss of quality uh in the responses to our customer tickets and also for the SEO hosting brands of bulk by hosting and launch CDN. I believed from the start that we need to hire and train our own support team because I thought it was a very unique service and like just couldn't be outsourced which I was proven wrong. So to alleviate the fear of uh the loss of quality, I started small and expanded later. This is what Jeff Bezos would call a two-way door which essentially means it's a

5:06reversible decision. If the customer support uh agency didn't work out, we transition back to our in-house team who are still supporting bulk by hosting and launch CDN and we could test another provider. So, we started them with the retail web hosting brands that we'd acquired as a smaller part of the business overall and very similar to the other clients they working with, which meant like it gave them the most chance

5:29for success. Surprisingly, or unsurprisingly, I guess, the outsource team were great at answering these tickets. We quickly built up uh confidence in their ability to do this and then after about six months we started testing them with bulk by hosting and launch CDN tickets as well. The end result of all this the support we now offer our customers is a lot better. Time to first response is 15 minutes or less. Most tickets are resolved in less than an hour and that's like much faster when we were doing it inhouse with our janky little team. Um, as the business grew, we upgraded to a dedicated team of six people with that

6:04agency in June 2021. By doing that, they're now taking care of all the server administration, whether that's server updates and also if a server goes down. So, if a server goes down right now when I'm on stage, they'll get a notification, they'll fix the server, get it back online. Key benefit of all of this is uh I don't need to worry so much anymore. like there's an agency there that are handling the

6:31rostering and scheduling for the agents. If one of them is sick or goes on leave, then they have a backup agent that um comes in to cover the tickets. And as well, I don't need to be on call 24/7. If a server goes offline, they're going to bring it back on. We still do quality control on all the tickets, though. So, one of the three team members that I have reviews all of the closed tickets to make sure they meet our quality standards. And then all I need to do at this stage if I'm not building new stuff in the business is just check in on the business for 15 to

7:0430 minutes every morning to make sure everything's running smoothly. This then gives me a lot more time to work on the business rather than in the business. So doing things like looking at um new businesses to acquire, building new web hosting brands from scratch or reading and learning and improving my skills. All of this freedom leaves leads to things like this which is uh giving me the ability to travel more. So uh two three weeks ago I was at the cloud flex uh conference in Germany and right now I'm here at micro in uh Denver but I swear it's not all business travel that I do. um

7:45while traveling like I can check in on the business just quickly and uh make sure that everything's working well and basically by building up that confidence in that support team I was able to go on a two-month rail journey through Germany and France last summer with my husband. Um so this here is the Schweber in the German city of Vupatal and I apologize to any German speakers in the audience because I probably butchered both of those words. It's a um hanging suspended railway that I found on YouTube in late 2019. And when I saw it, I was like,

8:17"Yes, I definitely want to go see this." So, I managed to get there last summer and check that out. So, here's some of the things I've outsourced in the business. As I mentioned, the 24/7 support. Um the key thing that I view though is those uh agents who work for the outsource support agency, we sort of treat them the same as our internal team. uh they still have access to our Slack, our wiki and all of that and we have direct access to give them any feedback and it's really just the uh undifferentiated stuff of running a support team that we've outsourced to that agency which is

8:53the hiring, the rostering, the HR payroll and that's you know the stuff that I just don't want to do because it's boring. Now worldwide sales tax compliance it's something that Justin Jackson and John Buddha have been discussing a lot on build your SAS recently a lot of countries including the US Europe India Singapore Australia are charging uh sales tax on digital goods and services which includes web hosting it includes a lot of the stuff that uh your businesses are selling as well and it's an absolute nightmare to ensure that you're in compliance with the laws in all of these jurisdictions using a solution that connects with

9:32Stripe type is still going to leave you with a bunch of paperwork to do to register and file with the various authorities as well as a legal risk of not complying with those laws which in some of those jurisdictions is prison. That's not a risk that I'm willing to take in my business. So I outsourced it. When our customers buy services from side arrow, they're not actually directly buying from us. They're buying from Paddle who act as the official reseller of all of our services. and then paddles uh responsible for the

10:01actual worldwide sales tax compliance. Now, server infrastructure, it might surprise you to learn that while we're a web hosting company, we don't own any physical servers or data centers ourselves. Rather than outlaying capital to buy our own servers, leasing space and data centers, and having to deal with all the headaches of owning hardware like drive failures, power supply units breaking, and waiting for replacement hardware. We outsource all of that physical layer to four cloud

10:28providers. We also outsource a few other things including done for you WordPress site builds which makes it easier for our customers to expand the number of sites they're hosting with us which is a great uh driver of expansion revenue and we also work with a wholesale registar to handle uh domain registrations so that uh customers can have their domain and their web hosting all in the one

10:49account. Now you might be thinking everything's amazing with outsourcing like no it's not. I want to give you a story as well of uh something that didn't work. So when bulk buy hosting started in December 2015 it started with duct tape in a dream like most of our bootstrap businesses do. Um it was some duct tape together WordPress Woo Commerce and an Excel spreadsheet. I wasn't developer at that time and you could think of this as a bit of a no code solution with a bunch of manual work on the back end. After about 10 months of running the business this way, I hired a contract developer

11:25to build an automated system for us in late 2016. He had several clients though uh which you know if you're a contractor you probably have several clients as well and so we could only ever get one to two days per week of his time. In 2019 though, after having built up some of my own PHP development skills and building some custom modules for the billing system that we use, I felt confident enough to undertake the task of actually rebuilding bulk by hosting systems myself using the WHMCS billing system that we uses for the core of that and then adding on the unique features and functionality that make our service

11:58offering different to our customers. took me about a month of full-time effort working five to six days per week to rebuild all that functionality for bulk by hosting in that system and do the like cut over. After we've done that transition and it went well, I basically used a lot of that code to rebuild the same stuff for launch CDN which was also built by that developer. Bringing all that development in house though has made a lot easier and quicker for me to add new features because either I can do that work myself or I can work with one of the many developers who experienced in building for WHMCS

12:31and we're also benefiting from all the work that WHMCS have done in building a billing and service management system for web hosting companies over the last 18 years. It's also a lot better for our customer support team as well because they're familiar with it from, you know, every other web host that they've worked with and it's easy for them to do things like update service expiry dates or cancel and refund a payment which would have previously required escalating it to our developer. The key takeaway here if you're a non-technical founder like I was at that time is to make sure you don't is to make sure that you do have

13:03access to the source code and the servers running that infrastructure so you're not creating a key person risk with the central business systems. We had one outage uh during that time when he was responsible for that technology where this backend provisioning was offline for over 20 hours before I could get in touch with him to bring those uh

13:20servers back online. So if you are wondering how you can get started today, start by mapping out every task that you or your team are doing. If you consider the uh 4-hour work week stuff from uh Tim Ferrris, you could also ask the question before asking these four of do we even need to do this or can we eliminate it? But the four questions to ask when you're considering outsourcing is is there a clearly defined scope of work there? Should this be a core competency? So when your business is small, your core competency needs to be whatever you're best in the world at whether that's writing code,

13:57delivering your service offering, or sales and marketing. for us like building or hiring all those technical support team members inhouse that I don't feel like that needs to be a core competency at our scale. Um thirdly, what will it cost to outsource this versus doing it in-house and how will you monitor the work that's being done by that outsourced agency? Finally, it's important to remember that most of these outsourcing decisions are easily reversible or two-way doors. As I mentioned before, if it doesn't work out, you can go back to the way you were doing things before or just choose a

14:28different provider. I know we are very much running out of time here, so please do come say hi to me during the rest of the conference. Uh I'll be on the beer tour this afternoon if you want to chat anything more about this. Thank you so much. [applause]

14:47[applause] I feel like we could do like one question, Kevin, if you're game. So no pressure, but if anyone has like the best question, um raise your hand. We have the best question, y'all. It's over there. Um, Tracy or Alex, do we have that uh box mic somewhere? I'm gonna back away from the speakers because I hear the Well, I have a question. I'm not sure if it's the best, but I'm curious how you're thinking about uh implementing AI

15:12in the customer support context. Um, we are starting to look at the AI stuff in customer support. Um the main thing we're looking at the moment because uh the majority of the support tickets are handled by a non-native speaking team in India. Uh we're pretty close to adding in a feature to do the cleanup work on that. Um we haven't looked at uh I know that there are other solutions out there where they can sort of prefill the response. Um

15:42yeah, we haven't looked at doing that. Thank you Kevin. Another round of applause for Kevin please. [applause]