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Outsourcing vs. Hiring: Questions Small Business Owners Should Ask


Auguest 12, 2019

Small business owners wear a dozen hats an hour. The number of miscellaneous tasks that must be taken care of throughout the day can wear anyone down, and that's not even considering the business-crucial responsibilities that must be accomplished. There's an inverse relationship between the growth of a business and the time a business owner has: the more the business expands, the less time the owner has to get everything done.

A time-rich, cash-poor small business owner has the time to learn new skills, but once the business starts to grow, they face a tough choice: outsource or hire? The idea of using an outsourcing vendor or hiring an employee can be daunting, and there are advantages and disadvantages to both options.

The first question you need to ask yourself is simple: is your time better spent elsewhere? If so, how can you delegate the task to someone else?

Should your company hire an employee?

An employee is more than just a hired worker — they become a trusted part of your team that you don't have with outsourced workers. If you need help with a task that is reoccurring and crucial to your business, it's better to hire an employee. For example, if you produce videos for the web and need to create thumbnails for them, it's better to have an employee dedicated to this task than to outsource every thumbnail you need to make. When debating whether to hire or outsource, ask yourself these questions:

  • How important is this task?
  • Is it essential to the continued operation of my business, or can I do it in my spare time?
  • How much training is involved in teaching someone to do this task?
  • How difficult will it be to create a space for an employee?
  • Do I need part-time or full-time help?

Some jobs are important but not essential. Filing and organizing take time and make for a more efficient workplace, but your business isn't likely to shut down just because you're a bit messy. On the other hand, a task that requires a dedicated computer and a lot of time is something that an employee would be better equipped to handle than an outsourced worker.

That said, there are potential downsides to hiring an employee. You need to provide space for them to work (unless you allow them to telecommute), and you need to provide equipment for them to get the job done. If they work more than a certain number of hours each week, you are required to provide benefits, and you’ll also need to provide a W2 tax form at the end of the year.

There is extra work associated with an employee that can take away from your bottom line and increase the amount of work you have to do. However, if the benefits of an employee exceed these costs, it’s something to consider.

Why do companies choose to outsource work?

Hiring an employee makes them a part of your team — outsourcing work does the opposite. Outsourcing is perfect for when you need a one-off task handled that you can't do yourself. You probably do this in your life already — your taxes, for instance. Sure, you could do them yourself, but paying someone else saves time and ensures the job will be done correctly. If you need help with a task, ask yourself these outsourcing questions:

  • How skilled am I at this task? How much time does it take? More importantly, how much time can I save if I outsource it?
  • Will my business benefit if I spend my time on another task instead of this one?
  • Does the job I'm outsourcing affect my customers?
  • Am I paying for things I don't need when I outsource?

Outsourcing is a fantastic tool when used correctly, but you should never sacrifice quality for the sake of time. The reverse is also true: you should never sacrifice significant amounts of your time if you can't achieve the same outcome you might get with an outsourced consultant. Take web design, for instance. Free tools are available that make designing a webpage just a matter of dragging and dropping, but these can't compare to a professionally designed website.

Your customers should also not be affected by any outsourcing you do. If they come to you for the quality of work you provide, it may be unethical to pass the job to someone else. Any outsourcing work that touches a customer is a potential point of failure and removes your control over the quality of the service.

Finally, if you're outsourcing work through a service, make sure you aren't paying for anything you don’t need. The less you spend, the better your bottom line. Consider freelancers — you likely won’t spend as much for overhead, but there's greater risk when you're dealing with a single point of failure. Weigh the pros and cons of each of your options before deciding.

If you've put in the time and effort to build your business but feel as though you've hit a wall, think about how you spend your time. There's only so much a single person can do. If you’re finding that too much of your time is spent on tasks that aren't vital to business growth, it might be time to outsource or hire an employee.

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