Should My Small Business Outsource Our Admin Work?
Outsourcing can be a game-changer for any business striving to balance its growth with operational excellence.
The allure of delegating certain tasks to professionals outside of your organization is often met with critiques of losing touch or control over a crucial aspect of business management.
As a small business owner or founder, you have likely thought about outsourcing before or at the very least come across the concept.
But it’s hard to know if it makes sense for you.
The Boutique COO has a super simple, easy-to-use rule of thumb to use to decide if outsourcing any given service makes sense for your business.
Curious to know what it is? Read on!
The Rule of Thumb: Understanding Your “Time-Value”
Outsourcing, as a concept, isn't novel, especially in the modern business world. It's a financial strategy in countless entrepreneurial success stories. However, its application in your specific case is what matters.
All you need to do to know if outsourcing is a good path for you, is to compare the price of your own time to the cost of outsourcing.
The rule of thumb: If you can spend a given hour of your week charging a customer for your time or producing a product that can be sold, instead of doing whatever it is you’re considering outsourcing, you’ll make more money for your business.
Examples of Running This Calculation
Situation 1: Professional Services and Time-Valuation
Say you’re an electrician and can charge $200 per hour for your services. You could spend your Monday morning from 9-10am charging a client $200/ hr for servicing their property, or you could spend that hour answering your emails. Imagine a virtual assistant who can execute these at a $35 hourly rate.
Does it make sense to delegate? Yes, because, for every $200 customer-facing hour you reclaim, you're yielding a net benefit of $165 after outsourcing costs.Situation 2: Strategic Scaling through Task Outsourcing
Or, consider an interior designer considering taking on a project for a client, for a total of $25,000. The problem is that this interior designer doesn’t currently have any more bandwidth to use to put towards this new project. If the interior designer can outsource 10 hrs of work per week for the month, or a total of 40 hrs per month @ $35/ hr, that’s a total of $1,400 paid to the virtual assistant, while making the $25,000 on the project. In other words, the interior designer makes $23,600 that they wouldn’t have made otherwise.
Does it make sense to delegate? Yes, this strategic manoeuver not only delivers the agreed output but also expands capacity for future projects.Calculating Your “Time Value”
Incorporating the 'cost of your time' into the decision matrix for outsourcing is revolutionary in its simplicity.
It articulates the value of your core business functions and juxtaposes it with the price of offloading secondary operations.
The analysis is clear-cut: if outsourcing means you can focus on high-yield activities, it's a resoundingly strategic move.
Need help running the calculation? Download our free playbook on auditing your business operations costs here.
Does Outsourcing Make Business Sense?
Armed with our 'time-value' rule of thumb, you're well-equipped to make informed outsourcing decisions that resonate with your business's immediate and long-term objectives.
By weaving a strategic outsourcing ethos into your business framework, you're not merely shedding tasks.
You're carving a path for your business to thrive, innovate, and steer through the challenges of a dynamic marketplace with agility and foresight.
To entrepreneurs on the fence, remember that in the art of business, outsourcing is akin to specializing—allowing you to do what you do best, and letting others do the same.
Need help with this calculation or want to talk through what outsourcing might look like for your business? Schedule your free strategy chat with us here.
