OutsourceSurvival.com

This article follows on from ‘Why you should consider outsourcing – PART 1’ which you can find here. It discusses how outsourcing can offer your business a low cost, low risk avenue for achieving scale and labour efficiencies.

Nobody makes their own toilet paper.

It’s cheap, it’s commoditised, it requires a multi-million dollar infrastructure investment to make it, and you have to sell tonnes of it to cover your costs. Why would you want to go to all that trouble when you can pick it up at the supermarket for a few cents a wipe. If someone told you that you should make it yourself to save a few bucks on the cost of a roll at the supermarket, you’d think they were nuts right?

Have a think about what services you or your business consumes.

Are they commoditised? Are you consuming your limited infrastructure (office/house space, IT equipment, phone lines etc.) to produce goods or services that someone else could do more cheaply, because they have a volume, skills or infrastructure advantage that you don’t. If it’s done on a computer, or requires a phone line there’s a very good chance that you can achieve efficiency savings just by outsourcing it.

I know of dozens of business owners and entrepreneurs that stubbornly make their own toilet paper. Here are a couple of examples:

• a mechanic that made his own website. Looks terrible, puts an unprofessional face on the business and doesn’t generate income (as any business site should)… but he did save a few bucks by making it himself… or so he thinks. He bills his customer’s around $70/hr for labour, but values his personal time at $0/hr? Can’t help but think that given his long work hours, it represents several evenings that would have been better spent with the kids!
• a medium sized manufacturer who has created their own labels and packaging. Looks pretty cheap, and they wonder why they have problems convincing customers to pay a premium for their goods;
• a plumber that runs his own web marketing campaign. Does a good job… but the grunt work could be more effectively done by someone else for pocket change. He could be free to bill more hours or spend his off time relaxing instead of working.

Consider:

• Why pay someone $50 to do something when it can be done faster and better for $5? Even $3?
• Why spend hours of your personal time and energy on a task that someone else can do cheaper and better than you, and requires only a fraction of your attention?

If your business is profitable, you have even more reason to consider outsourcing. Once you’ve started to make money, it’s time to stop valuing your time at $0,  and start focussing on the essential activities that only you can do. How can you better spend your time to make more money, help more people, or have more spare time (or whatever your particular goal is). Chances are you have better things to do then spend 4 hours on something you aren’t skilled at, aren’t paid for, and causes you to put off work you’ll have to catchup on.

Now, obviously it’s a little more involved then just saying ‘I’ll get someone to do it cheap’ but the above points are at the core of why you should consider use of freelancers within your business. If someone can do it cheaper and better then you, it would be crazy to do it yourself right?

So my question then is, are you making your own toilet paper?

A LOW COST, LOW RISK way to build SCALE in your business…

Probably the most attractive reason for using a freelancer within a small business is that it creates scale. Using freelancers or contractors overseas means that you can ‘bolt-on’ the skills you need when you need them. Even as a 1 man operation, you can afford to have a graphic design team, a web developer, a sales/marketing writer, an admin assistant, technical support team or just about whatever your business needs to support it’s main income producing activity*. Depending on the size of the project, you can hire a team of professionals for a flat rate, which may include a project manager, team leader, technical lead, and quality assurance. They may all be from the same company, or depending on the circumstances you may choose to outsource different aspects of the work to different freelancers/companies. This strategy can have a powerful effect on quality and performance.

*I will generally refer to this activity as your Core Competency, and it’s not something I would recommend outsourcing, but that’s a discussion for another article.

You don’t need office space to house your team, you only pay for their skills when you need them, and if you don’t like the work someone is doing you can very quickly and easily switch to someone else (except on very large projects, where switching providers can become tricky). Outsourcing creates the deep talent pool of a large company and leaves you with the flexibility of a small one. For example:

• Need a website? Don’t waste hours mucking around with a 10 year old version of MS FrontPage that you learnt to use at school;
• Want a tidy logo? MS Paint and an evening in front of the PC won’t cut it;
• What about a receptionist or Personal Assistant? Are you finding yourself too busy to answer the phone or provide polite responses to emails, but can’t justify the cost of a full time admin assistant?

It’s low risk because you can set a defined and finite budget, and because you pay only for a specific outcome (once you are experienced, you can start to dabble with open ended projects, but this introduces a variety of additional challenges). You can start small ($30-$50 jobs) and scale out as you grow in experience and confidence.

No good? No pay!

If it’s not done as required, you don’t pay. You are not hiring a local, so you are not subject to the same hiring and workplace laws as you would be in your local area. I’m not endorsing unethical work practices here, but I am aiming to illustrate that it is far easier to fire an unproductive freelancer than it is a temporary or permanent employee. No workers compensation (or insurance) to worry about, and no nuisance claims for unfair dismissal or fake workplace injuries to get back at you for the firing (yeah I’ve seen it done).

It’s low cost because you’ll be taking advantage of the Purchasing Power effect that we discussed previously. Additionally, the ‘recruitment’ process is fast and easy. You post what you want, how much you’re willing to pay, and the freelancer’s will do the work to convince you that they’re the right choice. For a small project (like a logo) you can get someone working for you in less then 45 minutes. That’s a pretty low time commitment, and it gets faster if you’re working with a freelancer on a regular basis.

Getting a bit off track here, so to wrap up, you’d have to be nuts to overlook outsourcing some aspects of your business. It is an opportunity to unlock many of the time and money constraints that you face every day.

Of course, there are disadvantages. If not properly managed, outsourcing can be time consuming, it can be difficult working with foreign cultures (particularly with regards to expectation management), and there are frequent quality control issues. This blog will equip you with all you need to know to overcome these. Limitations and management strategies will be covered in a future posts.

And remember, nobody makes their own toilet paper