I really think that this is the key to getting to the next level, so have been thinking more about how to decide when outsourcing is wise. My age old complaint with the people who chase after small deals or drive around to MS is that they don't value their time enough... but I'm wondering if that can be taken a step further.
The problem with the argument that 'you don't value your time enough' is that people retort with 'I can't make any more than this', 'I can make $200 in an hour...' etc... all good points. Outsourcing though, that allows you to be a pivot for great rewards.
The Sales Rep
Let's take an example I saw this week. A guy is hiring a sales rep for his company. The company sells $400 subscriptions, and the rep will earn $40-50K plus some bonus/bennies.
When is it the 'right time' to hire that rep?
If you are bootstrapping, or indeed if you are VC backed, too soon means you fail. Why?
The reason why you fail is that you don't fully understand the process, how long does it take to sell (the cycle) what is attrition, what is the market depth, etc... it may be that you start with a great idea, but it just doesn't work in reality.
Those early days of sales are not just going through the motion of selling, they are process building, data gathering steps. Once you have a system in place that works, you can then accurately forecast the revenue. From that point on, the decision to hire is the decision to outsource the management of the process, not the development of it.
What does this mean?
It means that you can look at things in isolation, and you can ignore your hourly rate. The outsourced event (the hire in this case) is in fact a standalone business, it has a P/L. You know the process, you know that you need to convert X, you pay the sales person enough that it covers X and incentivize (bonus commission) anything beyond what you were already capable of yourself.
At no point here have you mentioned your hourly rate, its all about 'does the employee make a profit'. Now, of course you need employee management systems in place to ensure that they perform, and you'll still have some costs of time to manage this, but you're getting 40hrs per week for perhaps 2hrs so a huge leverage point.
Now lets look at the value of your time
Rather than look backwards and say 'i'm worth $100 per hour' you look forward. You have freed up 38hrs of a 40hr week in exchange for income of $50K per year. Moving forward, you could replicate this another 19 times, or you could move on to something else entirely.
What's YOUR rate?
What would you give away for someone to take over an established process? What if we were to consider buying money orders at walmart on your behalf. Let's say you currently earn $10 for $5 in fees if you DIY, could you earn $2.50 if you just took profit, and others did all the work?
I think, until you can give up that $2.50 you are always going to be a low baller. Call yourself a heavy hitter if you wish, but you are limited to the extent of your own personal reach, which is limited by time. What's more... you're never going to be able to enjoy things because as soon as you take your foot off the gas to have some fun, you aren't earning anymore.
Find your own rate, and play with it.. give away too much and you lose out on some margin, give away too little and you lose out on opportunity.
The problem with the argument that 'you don't value your time enough' is that people retort with 'I can't make any more than this', 'I can make $200 in an hour...' etc... all good points. Outsourcing though, that allows you to be a pivot for great rewards.
The Sales Rep
Let's take an example I saw this week. A guy is hiring a sales rep for his company. The company sells $400 subscriptions, and the rep will earn $40-50K plus some bonus/bennies.
When is it the 'right time' to hire that rep?
If you are bootstrapping, or indeed if you are VC backed, too soon means you fail. Why?
The reason why you fail is that you don't fully understand the process, how long does it take to sell (the cycle) what is attrition, what is the market depth, etc... it may be that you start with a great idea, but it just doesn't work in reality.
Those early days of sales are not just going through the motion of selling, they are process building, data gathering steps. Once you have a system in place that works, you can then accurately forecast the revenue. From that point on, the decision to hire is the decision to outsource the management of the process, not the development of it.
What does this mean?
It means that you can look at things in isolation, and you can ignore your hourly rate. The outsourced event (the hire in this case) is in fact a standalone business, it has a P/L. You know the process, you know that you need to convert X, you pay the sales person enough that it covers X and incentivize (bonus commission) anything beyond what you were already capable of yourself.
- EG Annual Sales are $100,000
- Sales salary 40,000+employee costs (ER tax, bennies, etc) for gross cost of $50k
At no point here have you mentioned your hourly rate, its all about 'does the employee make a profit'. Now, of course you need employee management systems in place to ensure that they perform, and you'll still have some costs of time to manage this, but you're getting 40hrs per week for perhaps 2hrs so a huge leverage point.
Now lets look at the value of your time
Rather than look backwards and say 'i'm worth $100 per hour' you look forward. You have freed up 38hrs of a 40hr week in exchange for income of $50K per year. Moving forward, you could replicate this another 19 times, or you could move on to something else entirely.
What's YOUR rate?
What would you give away for someone to take over an established process? What if we were to consider buying money orders at walmart on your behalf. Let's say you currently earn $10 for $5 in fees if you DIY, could you earn $2.50 if you just took profit, and others did all the work?
I think, until you can give up that $2.50 you are always going to be a low baller. Call yourself a heavy hitter if you wish, but you are limited to the extent of your own personal reach, which is limited by time. What's more... you're never going to be able to enjoy things because as soon as you take your foot off the gas to have some fun, you aren't earning anymore.
Find your own rate, and play with it.. give away too much and you lose out on some margin, give away too little and you lose out on opportunity.