Outsourcing 101: The True Cost of Outsourcing (Or Not Outsourcing) In Your Business

There comes a time when just about every solopreneur takes a look at their to-do list, email inbox, or calendar and says, "I need help." If this is you, it's time to outsource.


Outsourcing in your business is a huge step towards both success and balance. (Making more money and working less? Yes, please!) If you've been considering hiring an extra set of hands (or putting it off), here's how to know when the time is right.


The True Cost of Outsourcing


When I talk to business owners about outsourcing for the first time, the biggest fear I hear from them is, "I don't make enough money to afford to hire someone."


When you start running the numbers, you'll see that outsourcing makes you more money - in some cases, a lot more money - than it costs. Here's how it works.


The Cost of Not Outsourcing


What's more expensive: hiring help or doing everything on your own?


Before you blurt out an answer, consider the true cost of not outsourcing:


Your time.


At the end of the day, your time is your most valuable business asset. The more available time you have, the more opportunities you have to make money. If you spend all that time doing non-revenue producing tasks or worrying over your to-do list, you are actively losing money.


Just how much money could you save or make by outsourcing? I'm glad you asked!


How to Calculate Your Hourly Rate


Before you hire extra help, it's important to understand how much your time is worth. Here's how to calculate that:


1. Determine how much your time is worth. Divide your average net income by your average hours worked per month. (Tip: This number will be different from the 'hourly rate' you give your clients.)

  • For example: Say you work about 160 hours per month and make about $4500 in revenue.

  • $4500/160= an effective hourly rate of $28.13

2. Determine how much your time has the potential to be worth. (Tip: This is where we'll use the rate you tell your clients!) Multiply the number of hours you'd outsource by your client-facing hourly rate, and compare that to the same number of hours at the rate you'd pay your contractor or employee.

  • For example: If you outsource 60 hours per month...

  • 60 hours x $100/hour (your rate) = $6000 in additional revenue 60 hours x $25/hour (hiring rate) = $1500 in additional expenses $6000 revenue - $1500 expenses = $4500 in additional profit!

Now, you can do the math from the first step again. Divide your new net revenue by the number of hours you'd work.

$9000/160= an effective hourly rate of $56.25


See the difference? When you actually do the math, outsourcing makes a lot of sense. It saves you time, makes you money, and opens up your schedule for more clients and projects.


When To Outsource in Your Business


"Okay, so outsourcing can make me more money. But how do I know when the time is right?"


Truth is, outsourcing (especially for the first time) is scary. It may never feel like the "right" time, but chances are, there will come a time when the cost of not outsourcing far outweighs the cost of hiring help.


Aside from the numbers, you should also pay attention to how you're feeling about your business and your work/life balance. If you...

  • Spend your free time thinking about your business or worrying about your clients

  • Dread work that you used to like doing

  • Miss working on the parts of your business that you actually enjoy

... consider outsourcing. Even if you just "break even" with your contractor, the difference in your stress levels will most likely be worth it.


Taking the next big step in your business?


Like I said, outsourcing is a big, exciting step. But before you hire help, be sure your finances are in order!


Book a Strategy Session with me to go over your current business finances, set some goals, and create a plan for reaching them. Plus, we can run the numbers and determine how much more money you could make if you outsourced a few hours.

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