Outsourcing for Entrepreneurs 101
In the 1830s, Charles Babbage pioneered the concept of a programmable computer.
One hundred and sixty years later, in 1991, his design was assembled by a museum — and it worked!
But that wasn’t Babbage’s only contribution to the world of significance. He also put forward the Babbabe Principle which declared that highly skilled, high-cost laborers shouldn’t be wasting their time on low-skilled work that low-cost laborers should be doing.
Babbage noted that highly skilled workers were spending part of their time on jobs that were more aligned with the skillset of lower-paid workers. Essentially, employers weren’t getting dollar for dollar value when it came to highly skilled worker pay, because they were paying for skills that weren’t being used all the time.
He suggested that employers could get more value by dividing labor, and by matching worker skillsets with the jobs to be done.
His principle went on to characterize the division of labor, and the distribution of wealth during the remainder of the industrial revolution.
Didn’t Get the Memo?
Almost two centuries later, today’s organizations are yet to get the memo.
Whether it’s MBA-graduates on six-figures painstakingly laboring over the correct positioning of a table in a Powerpoint proposal, or an entrepreneur spending hours reconciling transactions in their accounting software, Babbage’s principle is just not being heeded.
Author Perry Marshall put forward the following table in his book, 80/20 Sales and Marketing.
“But I’m a lowly entrepreneur with a team of two — I can’t afford to outsource!”
Actually, you can’t afford not to outsource — especially because you’re a resource-strapped company of two.
If you truly value your time and your abilities, you’ll focus only on tasks worth at least $100 and above, if not more.
The cost of not doing so is far greater than the $10 you save by doing it yourself.
Having worked with hundreds of entrepreneurs, I often present them with this table and ask, “what percentage of your time do you spend on ten dollar an hour tasks?”
Most respond with half their time.
When I press them on why they don’t invest more time into outsourcing their rudimentary and repeatable tasks, they respond without a hint of irony, “I don’t have time to do that”.
“I don’t have time to do that”.
The Real Value of Outsourcing
I outsource about 30 hours of weekly effort that I previously performed myself, without any noticeable decrease in quality (and sometimes an improvement!) — that’s almost a standard workweek worth of tasks.
But the real saving is exponentially greater.
By outsourcing rudimentary tasks, it frees you up to invest my time on high-value tasks that align with your strengths.
This creates a lot more value than repeatable process-oriented tasks because it means better results that feedback into your motivation to invest your time, and so the cycle goes on.
But if you find yourself doing all manner of monotonous tasks on top of your value-adding tasks, then you’re likely to find it much harder to keep going and stay enthusiastic about your work — because it feels like, well, work.
Process-oriented tasks that can’t be automated can definitely be delegated or outsourced.
Set a Value on Your Time
Entrepreneur and thinker, Naval Ravikant, suggests setting an aspirational hourly rate for yourself and sticking to it.
“Never do anything with your time for less than that amount — whether it’s attending a meeting or returning a package from Amazon… If I have to return something, and it costs less than my personal hourly rate, I’ll throw or give it away”
If you can hire someone for less than your hourly rate, do it.
Nowadays, there can be no excuse for not outsourcing rudimentary tasks that can’t be automated. Platforms like TaskRabbit, AirTasker, Upwork, Fiverr or GetMagic, among others, can get you up and outsourcing today.
You should look to outsource not just professional tasks, but personal tasks that don’t deliver you any joy — because this will ultimately free up both mental and physical energy for work, life and play.
Hate mowing the lawn, but you currently devote two hours a month to it? If your hourly rate is $100 and you can get someone to mow the lawn for $50, then you should do it, particularly if you’re not strapped for cash, and can reinvest that time into more pleasurable or profitable endeavors.
For some, mowing the lawn might be a form of therapy, and that’s fine. Don’t outsource it if it brings you joy.
When to Outsource
People often ask me “what kinds of tasks should I outsource?”.
You and your colleagues should pay top dollar for the tasks that (a) you’re strong at, (b) are mission-critical, and to a lesser extent, (c) tasks that you enjoy.
For example, a website with strong UX is mission-critical, but it is not aligned with our strengths. We outsource it and pay top dollar as a result.
As for developing educational workshop content is; that is something we tend to do ourselves, or partner with reputable third parties we trust to co-create.
You’ll want to determine whether or not you can outsource mission-critical tasks in a way that doesn’t fundamentally compromise quality delivered to the point where it compromises customer satisfaction, retention, and referrals. If you are in doubt, run some experiments, and then if all of your experiments fail, do them internally.
From a purely financial perspective, you’ll also want to factor in how long the task will take to perform, factor in the time it takes to write and communicate the task instructions, as well as any teething time that may or may not apply. This type of thinking is particularly necessary if you’re outsourcing a one-off task, less so if you’re outsourcing a repeatable task.
You might also want to factor in urgency around a one-off task, and whether it might just be quicker to do it yourself and not risk the downsides of being late (eg. preparing a proposal that’s due in 2 days).
Refer to the following chart for easy reference.
Outsource Your Weaknesses
One of my business philosophies is to focus on your strengths — because no matter how much you work on addressing your weaknesses, there’s going to be people out there who excel at that area, and whatever time you spend, say, coding — even though you’re mediocre at it, is time you don’t spend, say, selling — which is where your strengths may lie. Essentially, you’re losing out with every minute you spend coding.
Look at it this way.
If you have two marketing channels, and one generates $2 for every $1 you spend, while the other generates $3, every dollar you spend on the former is actually costing you an additional dollar in returns from the latter.
You should put all of your chips into the latter until it is an exhausted resource, then you can reallocate the returns generated into other opportunities.
The same goes with how you choose to spend your time.
Having said this, you’ll want to develop a requisite understanding of what you’re outsourcing so that you can truly monitor the quality of work, effectively communicate with your freelancer, and ensure that the end product is sufficient for your purposes. When I outsourced the production of my podcast, I had already been producing it myself for several months so I knew the basic ins and outs of podcast production. The same would hold true for design, marketing or development work.
When to Pay a Premium
You would be forgiven for thinking that outsourcing is all about cutting costs, and getting people outside of your company to do rudimentary work for bargain-basement prices.
But it could also extend to just the opposite — paying top of market prices.
When something is mission critical, but not a strength, you essentially have two choices.
Hire a superstar and pay them accordingly
Outsource to a freelancer and pay them accordingly
Say I need a gun digital marketer to run our company’s SEO and SEM function.
I could hire and pay six-figures.
I could outsource and pay six-figures.
But, there’s a third choice that I’ve become increasingly fond of.
Outsource the strategy work to a gun SEO consultant, and outsource the execution of said consultant’s recommendations for a much lower rate.
Essentially, pay top dollar for strategy and bargain basement prices for implementation.
I’ve had no qualms about paying several hundred dollars an hour for an expert to help me on projects such as marketing and sales automation, or a search engine optimization project for a website.
While the hourly cost might be high, we’re tapping into expert talent, and only have to pay them for the duration of the project rather than bring on full-time talent, who we may or may not always have valuable work for.
Instead of paying $100,000 a year, you end up paying $5,000 for up-front and ongoing strategy work, and another $10,000 for the execution, saving you 80%, or over $80,000 a year.
Types of Tasks you can Outsource
Here’s a short but inexhaustible list:
- Content Creation, Curation and Distribution
- Conversion Optimisation
- Scheduling and Administrative Tasks
- Data Entry
- Graphic Design
- Web Development
- Call Answering
- Email Management
- Social Media Marketing
- Marketing and Sales Automation
At its core, anything that can be effectively codified into a clear, actionable step-by-step process, that doesn’t come with unacceptable privacy, intellectual capital or quality risks, then it should probably be outsourced.
(Just Some of) What I Outsource
- Curation of weekly email to database
- Podcast guest shortlisting, outreach and scheduling
- Podcast editing, mixing, publishing and distribution
- Infographic creation
- Web design
- Web development
- Conference speaking gig research and outreach
- Lead generation
- Video development
- Content distribution (podcasts, blogs, infographics, ebooks etc)
- Social media management and influencer outreach
- Research and execution of growth hacks (but not review and selection of them)
- Analytics reporting
The Insourcing Fallacy
Nowadays, there is a trend for organizations to declare that “outsourcing doesn’t work” and that they are ‘insourcing’ instead.
But like any tool, outsourcing is only as good as how you use it.
You wouldn’t expect a permanent hire to succeed in their role without a sufficient onboarding and training protocol, so why would you expect a lone warrior sitting halfway across the world who you’ve never physically met before to do any better?
You’ve got to be explicit with your instructions.
Don't’ leave anything to chance as far as your instructions go. As Toltec spiritualist and author, Don Miguel Ruiz, put it in The Four Agreements, don’t assume!
Be explicit about every nook and cranny if you expect your hired gun to deliver what you envisage in the dark recesses of your mind.
For example, my process document for podcast guest outreach is about 14 pages long (that’s a 2,000 word Google Doc with 12 point font, complete with screenshots, arrows, bubbles and captions!).
Privacy and Sensitivity: sensitive intellectual property or personally identifiable information
Some questions to ask when considering privacy:
- what’s the risk and can we accept that level of risk? (you could use a risk matrix to rate the risk based on impact and probability and determine if it’s a low, medium or high risk — see the matrix below)
- can we sanitize the documents?
- are we bound by any regulatory requirements?
- can we put into place and enforce confidentiality agreements?
“I forgot my credit card at the bar, can you send someone to pick it up and deliver it to my apartment?”
“Can you book me a flight for the Atlanta conference? Try to get me an upgrade with my usual rewards program.”
“Can you log in and respond to our customer support Zendesk emails every day from 5pm-8am?”
These are the kinds of requests that you can literally text your VA via Magic.
Magic learns about your work and life, remembers your preferences, logs in to your accounts, and interacts with your friends and coworkers as your very own dedicated assistant.
Find out more at getmagic.com
TaskRabbit / AirTasker
Tools like TaskRabbit essentially help you find people for all sorts of odd jobs — whether that be the aforementioned lawn mowing, to cleaning and removals, IT support, furniture assembly or handy work around the house.
I found somebody on Airtasker to collect almost 100 six kilogram boxes of paperback books from my team’s old office, deliver them to my house, and store them in my spare bedroom’s wardrobe. This task was completed within just three hours of requesting the task, and cost me just $80.
If I had done this myself it would’ve taken me at least twice as long — because I didn’t have the necessary equipment or vehicle, cost me multiple trips, put me at risk of physical injury, and would’ve come at a huge opportunity cost.
Given that I value my time at more than $13 an hour, this was a no brainer.
Find out more at airtasker.com
Freelancer / Upwork
Platforms like Freelancer and Upwork are great for onboarding contractors for creative work as well as finding virtual assistants.
Whether it’s web or mobile development, design work, writing, marketing, inside sales, customer service, podcast production or video editing, platforms like these can hook you up with talented creatives to get the job done, often for less than $10 an hour depending on the type of task.
Call to Action
- Determine your hourly rate
- Take stock of your $10 an hour tasks and get to work preparing a process document and outsourcing them
- Review the tools presented in this chapter, and experiment with using them for your professional and personal tasks — thank me later
- Determine which of your weaknesses you should be outsourcing
- Apply the outsourcing calculation to your repeatable tasks, and any tasks that land on your desk
- Review the list of tasks that can be outsourced and determine what else you should outsource that wasn’t identified as part of step 2–5 (note: this could extend to tasks you haven’t started doing because you had no time, money or expertise, but you jow realize you can outsource them to professionals online for a shadow of what you had previously expected to pay)