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Balancing time vs money
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Time vs Money or when should you outsource?

It’s a hard balance when you work for yourself; maximising profits and maximising time? Everything is a priority and you seem to be short on both the money and the time. But you know we actually make outsourcing decisions more than you realise. Don’t want to spend a week decorating your kitchen? Pay someone to do it. Don’t want to spend money on a cuddly new blanket? Take time to make it yourself… hell, maybe it’ll be fun.

It’s never as simple as a one for one trade off but broadly the phrase Time = Money isn’t that far off.

Assessing all the elements of your business

For every activity, you will value one more than the other so it’s just about assessing which one has more value when looking at tasks within your organisation. An easier way to look at something might be effort vs enjoyment which will give you the time part of your equation.  Spending 3 hours doing something you enjoy doesn’t feel like anywhere near the effort of an hour on something you loathe, does it?
For example, if you are a numbers person that is very organised, filling out a tax return might be something you don’t mind doing and find it only takes you an hour or two. However, for others the very idea makes them feel nauseated so giving money to an accountant feels like a no-brainer. Expertise is also a factor; something that takes you days may be something an expert in that field can turn around in hours.

But can I afford to outsource?

I know every penny counts and deciding to pay someone to do something you could probably do yourself feels like a luxury right? The thing is there are only so many hours in the day and only one of you so deciding how to spend those hours is as important as deciding how to spend your money. If you are clear on what you are trying to achieve (read my article about Strategy) and how you plan to achieve it, some of the decisions about what needs to be outsourced may become obvious.

Next, look at how much your time is actually worth (slightly easier to do if you actually charge by the hour) and then put that against the job you are thinking of outsourcing. How does this stack up?

Another point to consider is legislation requirements. For example, in the UK all employees must have a pension to which you contribute. The rules on tax for employees is ever changing. If you are already time poor then a task that needs a dedicated person to deal with it may well need to be the first thing you outsource.

On the other hand with a little structure an a few document improvements in your business perhaps something you currently outsource could come back in-house.

A checklist for outsourcing

Based on all the thoughts above here is a checklist for you to work through. Have an idea of how you would value your “hourly rate”

Is it a day to day task or strategic? One doesn’t necessarily shout “outsource” over the other but you need to understand how the task relates to your business
Do you have the skills to do the task This is where you need to be really honest with yourself. How long would it take to gain the skills? Are they skills you need? Could you outsource the first one, learn from it then do follow up tasks yourself?
How does your value weigh against the outsourcing cost? Include training time/thinking time
  • If I am worth £50 per hour, it will take me 5 hours and the outsourcing cost is £100 Then (50 x 5)-100 = £150. Outsourcing is worth an extra £150 to you.
  • If I am worth £30 per hour, it will take me 3 hours and the outsourcing cost is £150 Then (30 x 3)-150 =- £60. Outsourcing will cost you £60
  • Note that this is a very blunt instrument and should not be used alone!
Does the task have legislation / legal requirements? Are you fully on top of legislation for this task? Does the legislation change often? Bear this in mind with the frequency of the task
Is there a deadline for this task? Can you realistically meet this deadline yourself? Can the third-party meet the deadline? What are the implications of missing a deadline? Could anything be dropped from your workload to meet that deadline? How would the other task stack up with these questions?
What is the frequency of the task? Is it recurring or a one-off? 2 hours every week is quite a chunk of your time.

 

What do you outsource? What would you never give to a third party?

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