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When Should You Outsource Work?

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Credit: State Farm

We recently moved and for the first time, in my adult life, we have a yard. As a kid, I mowed our lawn with a self-propelled push mower… but our previous home was a townhouse with a postage stamp yard. (and our awesome neighbor did the mowing most of the time)

But this house… haha, the mowing gods have come back to exact their pound of flesh. The house came with a John Deere riding mower and it’s become a ritual that I fire that baby up every Friday afternoon and mow the lawn (Steve Chou has laughed at my afternoon activities on more than one occasion).

It takes me about an hour and a half to mow all the grass but I love it. It’s an excuse to listen to my favorite podcasts.

When we moved in, a lot of my friends asked us if we would hire a lawn service. I never even considered it because we had the mower, I had the time, and I wanted to do it. I wanted to know how long it took to mow the lawn. I wanted to get to know the property, get efficient at mowing, and mow MY lawn (I worked hard to get that lawn!).

I didn’t realize it until later but that encapsulates my approach to outsourcing work — whether it’s mowing the lawn, doing my taxes, or doing basic research.

Here’s how I decide whether or not I want to outsource.

Is it a cost center?

A cost center is a part of the business that is funded from profit — in other words, those parts don’t make money but it does support the business. These are the areas most likely to be outsources and it’s why there are so many standalone companies that perform these functions. Accounting, human resources, information technology (IT) — these are all cost centers.

What is a cost center in your business? It’s something you have to do but that doesn’t generate income. You probably do your own accounting, such as filing your taxes, and you probably do your own IT on some level. Those are all viable candidates for outsourcing.

What isn’t a good idea to outsource? Anything else! If you’re a blogger, don’t outsource your writing. You can hire freelancers to supplement it but having freelancers take over would be a mistake. If you’re running a bakery, you wouldn’t buy pastries from somewhere else and resell them, right?

How often do you do it?

Every month, I get a business financial statements from my accountant. I send them my financial records and they put together an income statement and a balance sheet. Then, once a year, we meet and do the business taxes. It’s fairly routine, mostly boring, and it happens every single year.

For the first few years, I did all of the taxes. I kept records of business income, I filled out all tax forms like the Schedule C (it was a sole proprietorship then), and kept up to date on all the quarterly estimated tax payments. It wasn’t hard, it just sucked up a lot of time I could be using elsewhere.

When I hired an accounting firm to manage that, I was able to free up a lot of time (at the time, this was still a side project so I was freeing up night and weekend hours) that let me focus on growing the business, rather than maintaining paperwork.

Can someone else do it better?

The idea of comparative advantage always enters my mind when I think about outsourcing. Comparative advantage, in a nutshell, is the idea that everyone should do what they are best at and then trade products and services with everyone else. Comparative advantage relies on the internal efficiency of each person.

How might this look in real life? How long does it take you to complete your taxes? A few years ago, the IRS reported that the average preparation time was 22 hours. That’s nearly three business days. If you’re running a business, you can probably do something productive for your business instead of filing your taxes.

(More importantly, those aren’t 22 hours during the day – it’s 22 hours spread across your nights, weekends, or days off!)

Do you add value?

If you want something done right, you have to do it yourself! That’s very true… unless it’s something that you can’t do well yourself. The difference between someone who is skilled at mowing a lawn and unskilled is time (unlike, say, mudding drywall). Follow a few basic rules and the lawn looks pretty good either way. You’ll get better with time and eventually develop enough knowledge to do a good job but you never add value. The lawn isn’t better off because I mowed it versus a lawn care company.

Have you ever tried to mud drywall? It’s really easy to do. It’s really hard to do it and not make it look like crap. I’ve tried several times and each time it looked like crap. Not only did I not add value, I actually subtracted value!

Do you absolutely hate it?

With only so many hours in the day to do work, shouldn’t you focus on the things that bring you joy rather than those things that bring you pain? You’re more likely to work harder and smarter on the things you enjoy, so outsource tasks you absolutely hate.

So why do I mow my own lawn?

If mowing the lawn fits (almost) all the criteria for outsourcing, why don’t I hire a lawn service? Two reasons. First, I want to do it because I enjoy it. I like the outdoor time, the time to my thoughts, and being able to enjoy the weather while I can.

Second, I think even if the task fits every criteria above, you have to do it yourself in the beginning so you are able to evaluate how well others are doing it. When you outsource work, you don’t outsource responsibility and accountability. You are still the ultimate arbiter and unless you can assess the quality, you shouldn’t outsource it. You’ll let shoddy work through and you suffer the consequences when that happens.

On Wednesday, I’ll share with you how seven successful bloggers and podcasters use outsourcing as a way to free up their time and focus on what’s important to them. We’ll go into what they outsource, how they find and vet their assistants, and how they manage the process. We also chat with someone who acts as a virtual assistant, in order to give you the view from the other side of the relationship.

What do you outsource and what systems did you put in place to manage it?

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Jim

In 2005, I founded a personal finance blog (Bargaineering.com) that became successful enough that I quit my career as a software developer in the defense industry. It is my goal to share everything I learned so that you can do the same - build an online business that let's you pursue your passion.

4 responses to “When Should You Outsource Work?”

  1. John says:

    Great tips. You must have a lot of grass. I like to think of mowing grass as cheap therapy. It’s basically pacing back and forth thinking for an hour or so.

    I try to go by the formula of calculating how much my time is worth. If it costs less than my rate, pay someone to do it. Unless of course it is a vital part of your business that relies on you (like you blogging).

    It’s funny, I know a lot of guys who mow their own grass even when they can afford to have it done. There is a certain amount of pride in a nice lawn. Plus, it’s always nice to sit back and admire your work once it’s done.

  2. steve says:

    Still think you are crazy. Your lawn is the size of the park down the street from my house

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