2016-03-28 00:00:00Grow your BusinessEnglishWhen should you hire an employee and when should you outsource work to a freelancer? The answer will affect how your business will grow and...https://quickbooks.intuit.com/global/resources/row_qrc/uploads/2016/03/2016_3_22-small-AM-The-Guide-to-Deciding-on-Whether-to-Outsource-or-Hire.jpghttps://quickbooks.intuit.com/global/resources/grow-your-business/the-guide-to-deciding-on-whether-to-outsource-or-hire/The Guide to Deciding on Whether to Outsource or Hire

The Guide to Deciding on Whether to Outsource or Hire

5 min read

When it comes to adding people to your team, there are distinct advantages and disadvantages to the ways in which you bring people on board. Do you hire a person for the long run? Or do you outsource the work to a freelancer or other type of temporary employee? There’s a time and place for both, and here’s a guide that can provide some further insights to guide your decision-making process.

Business Strategy: Outsource Anything That Isn’t Strategically Important

While you might think everything is strategically important—important enough to hire someone full-time—this is not the case. Only some tasks are vital to operational performance; those tasks for which, in the long run, will positively affect results. Another way to interpret that idea is not to outsource a job that requires developing a strategy, which is typically done at an executive level.

Anything strategic should be handled by an employee, not an outsourced individual. This is because employees need to be there at all times, as they are involved in every decision that preserves strategic alignment. An employee is also much more vested in the thinking of the company, and is much more loyal than an outsourced individual. You also don’t want anyone who is only working temporarily for the company to have this type of insider information.

But when a task doesn’t involve strategy, it’s a good idea to outsource it. Over time, I’ve learned that these tasks include some content, graphic design, programming, customer service and accounting. Having an outsourced talent base for these tasks means that they can run at high-efficiency without generating some of the overhead costs that come with having employees.

Consider What’s Appropriate for Your Business

When I started my online business, because there was no physical presence or office headquarters, I knew that I didn’t necessarily need any employees. I also didn’t want to spend the money. My target audience was not concerned with having a face to go with the offering, which affirmed that outsourcing made sense for my business niche.

Of course, if my business had a brick-and-mortar location or, in the case of my current company, now has a physical office headquarters due to our rapid growth, then having a full-time physical staff of employees in place would be important. If your business requires a staff, remember what was previously mentioned: keep your strategic staff full-time, and outsource the rest.

Business Function

Many business functions have become quite specialized. As a consequence, these functions require a certain set of skills that you or your co-founders do not have, yet may not necessarily need on a full-time basis. This is when you could benefit from outsourcing, because the skills can be procured—at will—for certain functions when a project arises.

That could be making a new app, a marketing campaign, graphic artwork, or some content marketing strategy. Maybe you are now developing marketing materials or other information geared toward other countries, and you could really use the skills of someone who knows that language and culture to help you break into that market. Even if you have some of these skills, you and your co-founders will reach a point when you are scaling where you need other people who can help you.

I reached this point with content. I hired a few people who knew my voice. Over the years, this decision allowed me to take what they wrote and put in my own voice. It’s also allowed me to guest blog anywhere.

But if it turns out that your strategy includes ongoing specialized projects to where it makes fiscal sense to have a full-time position, then you can transform the outsource position into a full-time one. I’ve had to learn over time what to take in-house and what to keep external.

Business Maturity

Depending where your business is in terms of maturity, you may be able to add more employees as you scale up. But if you are in seed/build-out stage, there is not a great need for a full staff. At this stage, you may also not have much funding in order to “afford” employees, including covering the benefits and salary that they expect.

In the early stages, most of your work will likely be split into separate projects. Outsourced talent realizes the temporary nature of the work, and is used for working on a project-by-project basis, whose frequency is based on need and funding. Because outsource talent most likely has other clients, they can fill in their time and be available when you need them.

Consider this example from CNN Money. It noted that one entrepreneur who looked into the cost of hiring programmers in Silicon Valley. To bring them on as employees would cost nearly $600,000 in one year. Instead, by outsourcing the same work to programmers in Eastern Europe the cost was only $37,000. The same article referenced an Elance survey that found that freelancers cut costs by at least half over hiring employees, which is a significant difference, especially for a startup that has little to no funds.

Another reason you might want to opt for freelancers in the early stages is the sobering possibility that your startup just won’t make it. Not having employees early on saves the heartache of having to let them go. When you are far enough along and see revenues growing and work piling up, this is the time to start the hiring process.

A Word of Caution

With the consideration of both hiring employees and outsourcing talent, there is no guarantee that every choice will work out. Selecting the right talent for any position can be challenging, and involves risks. Those risks include information and asset theft, poor performance or high turnover. That’s why any type of hiring should involve a thorough process of research to find those that align with your values, culture and strategic needs.

You also need to be compliant. Hiring an employee—and the payroll requirements that come with it—is vastly different that what’s required when you outsource to freelancers. Not only are payroll requirements different, but so are things like scheduling, job descriptions and more. Make sure you’re ready to meet whatever obligations your choice calls for.

Case-by-Case Basis

Every business is different with respect to strategy, niche, function, maturity and budget. However, these circumstances frame certain directions—and results—that arise from choosing whether to outsource or hire. If your outsource talent works out, then they could eventually become employees when the time and money is right. If he or she isn’t the right fit, then you’ll always have the next project with which to start fresh.

With reports that now state that over 53 million people are now working as freelancers, there is certainly a tremendous talent pool out there to consider outsource individuals, to source future employees or to develop a hybrid team that consists of both types of workers.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

Bookkeeping Course Online: How to Become a Bookkeeper?

In this article, you will learn: How to Become a Bookkeeper? Is…

Read more

How to Stay Organized During LLC formation

In this article, you will learn: What is an LLC? How to…

Read more

How to close a business: A 10-step guide for small business owners

The coronavirus has forced thousands of businesses across the world to close…

Read more