Is It the Right Time To Hire or Outsource to Grow Your Business?
May 5, 2021 Jenna Craig
At some point in your journey as a seller, you think about outsourcing. It becomes more stressful (and frustrating and exhausting) to keep doing everything yourself than it is to hire someone else. Enlisting outside help to relieve some of that pressure will even accelerate your growth.
How do you figure out when it’s the right time to think about expansion?
For David Toledo, founder of Power Practical and Thrasio’s Senior Director of Product Launch, the answer about when to expand involves a clear calculation. When you’re spending more of your day on administration vs. ideation, something has to give. “You can either be working on your business or in your business. When starting out as an entrepreneur, unless you’re already funded, you’ll be splitting your time doing both, but heavier on the working in the business by doing the various tasks that need to be done from day-to-day. At some point, you’ll realize you need to work more on your business, and the way to get that time is hiring people who can work in it for you, doing the tasks that were taking your time.”
Isaac Kuhlman, co-founder of REAL Coaching, an agency that provides business coaching services for FBA sellers, agrees. As an entrepreneur, your time is money and you need to allocate it wisely, he believes. “The biggest sign that someone needs to expand is that they are spending too much time on tasks that don’t grow their business,” says Kuhlman. “It doesn’t matter if you are making $500 from your business in a month or $5,000. If you can’t focus on the high-impact growth tasks, then you are bottlenecking your business from where you want it to go.”
Removing yourself as a single point of failure in the business, however, doesn’t necessarily mandate hiring an army of underlings. It’s about making strategic decisions that leverage outside resources to solve problems and smooth the path to success. As Tim Ferriss himself advised in a podcast episode dedicated to the tenth anniversary of The 4-Hour Workweek: “Look at your org chart. You don’t need a lot of headcount. It could still be a one-person business, but ask yourself, ‘How can I automate certain things? How can I empower, say, freelancers, fulfillment centers, or companies I work with to make autonomous decisions and otherwise create recipes and policies that replace me as a bottleneck who needs to make one-off decisions over and over again?’”
Outsourcing to a specialist vs. hiring an employee
Kuhlman says it comes down to how much you understand about the job to be done: “Don’t only hire people to perform tasks that you don’t really know how to do. Consultants are great for fulfilling responsibilites outside of your expertise. However, long term you probably want to find an internal solution to those problems.”
In addition to deciding when to expand and whether to outsource or build internal capacity, there are a number of other questions you’ll need to answer before you start recruiting.
Where can I get the most ROI?
You want to make sure the tasks you’re offloading are actually value-adds or that they free you up to go after those value-adds. And since you likely won’t have an unlimited budget for assistance, you need to prioritize what duties to outsource in terms of potential ROI. You’ve probably heard of the Pareto Principle, which broadly holds that 80% of consequences come from 20% of causes. Also called the 80/20 rule, it’s often translated to business as the maxim that 80% of revenue comes from 20% of clients or customers. For you, there is likely 20% of day-to-day work in your business that drives 80% of results. Start your investigation into expansion there.
Is there a clearly defined scope of work, including metrics for success?
Whether it’s additional revenue created, costs, or hours saved, you can’t manage what you can’t measure. What does success look like in a newly-created role or in an engagement with an outside contractor? What are the results you’re looking to see in 30, 60, 90 days? Have you clearly spelled out and communicated your expectations? It’s okay to be picky; it’s not okay to be vague or disorganized. Not only do you want this arrangement to benefit your business, you want it to be a win for whoever you’re working with as well.
What does this allow me to do instead?
And, no, the answer isn’t “crack open a cold one on the patio.” You are your business’s most valuable asset, so any effort to scale on the personnel side needs to be geared toward giving you more time to devote to those key growth opportunities. Be concrete and specific about where your time is going to be allocated in terms of projects and tasks or you risk running afoul of Parkinson’s Law and watching your reduced workload slowly expand to fill up your newly-pared down schedule.
Even if conducting performance reviews and managing payroll isn’t something you’re interested in taking on right now or you’re not in the market for outsourced professional services, there are other ways to creatively clear your plate.
Think broadly and holistically about how you’re spending your time and where you can optimize the non-essentials to-dos that fill your days. From dog walking to meal prep services to house cleaning help, freeing up time for more focus could also mean outsourcing routine, daily chores, and eliminating time-burning distractions.
Whether you bring on a virtual assistant, schedule a weekly standing appointment with Molly Maid or just make a mental note to revisit the idea of bringing on help after next quarter, it’s part of growing as an entrepreneur to accept that there’s a time to be a bootstrapping jack-of-all-trades and there’s a time to step back and let others share the load. The trick is figuring out when the former ends and the latter begins.