Should You Be Outsourcing Work Or Not? (A Step By Step Process)

In this blog post, I’ll share my thoughts on outsourcing. Hopefully, this information can help you with making a decision if you should be outsourcing something or not. We first came across this concept called outsourcing when we read a book called The 4 hour work week by Tim Ferris. I recommend that you read that book if you’re interested in online business. You’ll discover a lot of valuable information regarding outsourcing, automation, and elimination.

The 80/20 Rule

The 80/20 rule is also called the Pareto Principle. It was created by an economist named Vilfredo Pareto who’s first insight came when he realised that 80% of the land in Italy was owned by 20% of the population. He later came to realise that it applies to almost everything. In business the 80/20 rule states that:

  • Around 20% of your actions will be responsible for approximately 80% of your income.
  • About 20% of your customers will stand for around 80% of your sales.
  • Approximately 20% of your products will be responsible for roughly 80% of your revenue.

The list could be a lot longer, but I think you see the point. The 80/20 rule has been right for us in our businesses. Of course, the percentage might fluctuate and be 75% and 25%, but it’s around those numbers. Now, try to figure out which activities that are the highest leverage thing that you could be doing. Find the 20% that will be responsible for 80% of your income. I’ve stated before that in Self-Publishing the 20% is niche and keyword research. That does not mean that the other things are not important, like getting reviews and so on. But most of the other things can be outsourced. Let’s go into the reasons why I think you should leverage outsourcing in your business.

What Is Your Time Worth?

I mean you can’t put a price on time. It’s the most valuable commodity we have since it’s running out for all of us. But if we had to put a price on our time, what would it be? For example, a waiter might earn $15 an hour. Find out what your hourly income is, either at your job, school or from your business. It’s harder to place a dollar amount on your time if you’re a business owner, but you can still divide your yearly income with the number of hours that you think you have worked.

Okay, so let’s face the truth. If you’re doing something that you don’t enjoy that could be outsourced for $3 an hour, then you’re valuing your time at $3 an hour. Which I honestly think is insane, unless you live in a third world country. You could probably work some extra hours and thereby earn almost ten times as much. That’s how you leverage your time. That’s why some people seem to accomplish so much. It’s because they are not doing all the tasks by themselves. They’ve become masters at leveraging their time in the most efficient manner. Let’s now go over the outsourcing process to learn if you should be outsourcing a particular task or not.

Step 1: Let’s First Eliminate

Now, think of the tasks in your business that you’re doing that you don’t enjoy. The first question you want to ask is if the work is necessary? Believe it or not but a lot of things that you might be doing could be a waste of time. For example, let’s say you’re doing marketing on Google+ and Facebook. If you see that none of your followers on Google+ buys your products, it’s time to eliminate. I think that I would remove it and focus more on Facebook even if Google+ stood for 20% of the income. You always want to put your resources into the right place to get maximum profit. Giving someone else unnecessary work that is wasting resources, is plain stupid. Avoid that mistake by going through the elimination step first.

Step 2: Should You Be Outsourcing This Particular Task?

Okay, so now we’ve eliminated some useless activities that are not fun to do and that ultimately don’t give any results. Now, you might be stuck with some activities that you have to do but that you don’t enjoy. Ask the question, could this task be done by someone else for a small cost? The answer to this issue will either be a yes or a no. Understand that you might not be able to use outsourcing for all tedious tasks. You’ll have to live with that. But the one’s that can be, you’d want to make sure that you leverage outsourcing. Just remind yourself of what your time is worth whenever you feel hesitant. You’re doing yourself a disservice by not outsourcing the tasks that can be. The reason for this is that you want to work on your business and not in your business. If you work on your business, you’ll be able to scale and grow your income faster as oppose to always working in it.

Step 3: Create A Positive Cash Flow

The ultimate goal with outsourcing is to create a positive cash flow. Your paying your VA:s to work on something that the company has to complete, increases sale and therefore grows your business. While they are doing their tasks, you work on yours. That could be, market research, planning, thinking, managing and so on. After a while, you could also hire a manager, but I think you still want to be the strategist. One word of caution: At least in the beginning, you want to check in on your business from time to time! Don’t just assume that it will be an independent money machine right away and continue forever. You’re still the one responsible for the wellbeing of the firm. So be prepared sometimes to work the 4 hours a week! Again, if you haven’t read the book I recommend that you do. The 4 hour work week does exist, it’s not a fantasy, so go check out the book.

To start with, you might have a negative cash flow. That’s how it was for us. We expanded by investing in our business, and it took awhile before the income exceeded the expenses. Keep going as long as you see progress. If you do not see improvement in sales, and you keep paying your VA:s for tasks, then it’s something wrong with the method that you’re using. Regularly change or tweak your plan to stay on the right course.

Thank you for reading! Remember, that comments are welcomed and appreciated.

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