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Which is the better first step: rebuilding a basement closet, or insulating the basement walls?

Recently closed on a split-level. The majority of it is well done, but neither my wife or I were content with the basement. It was partially finished, with a closed off utility room, some hideous carpet, and a hodge-podge closet (enclosed area in one corner of the basement with a door, separated from the rest of the basement). Ripped the majority of the carpet and intend to demolish the closet (it was built on top of the carpet).

In planning out the major milestones of the project, should I rebuild the closet or insulate the exterior walls first?

I have the rest of the project well lined up. Insulate the walls, put up a lattice structure, call an electrician to wire more outlets, put up drywall, tape and paint.

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