Outsourcing for Entrepreneurs

If you’re an entrepreneur, you should try to outsource as much as you can possibly get away with.

In the tech industry, ‘outsourcing’ is a dirty word. Outsourcing. The very word invokes thoughts of high technology jobs being sent overseas from the US to be fulfilled by people in India or China. This is seen to be unfortunate for tech workers in the US. It’s a widely accepted misconception that if you don’t speak English well, then you’re somehow less intelligent. If you don’t speak English at all, you’re somehow better off than if you spoke it poorly. No English means you never learned and it’s not your fault. Poor English translates to idiocy. This is obviously wrong, but I digress.

What many people don’t realize is that outsourcing is an entrepreneur’s best friend. Now, before you track me down and smash my car headlights with a baseball bat, let me explain what I mean.

Most businesses outsource various functions and it’s widely accepted as standard practice. Don’t believe me? Go look up the definition of “outsource“. I’ll wait.

Done yet? I didn’t think so. Seriously. Go read the definition, it’ll take you 10 seconds and prove the point I’m about to make.

Basically, the definition of outsource is to subcontract work, to contract work out, or to obtain goods or services from an outside supplier or source. While in the paragraph above, I mentioned outsourcing from the US to China, that’s not in the official definition at all. The idea of outsourcing to China or India are connotations of the word that we have become accustomed to. To help out the every day entrepreneur, I’ve put together a list of five things you should always outsource which illustrates the areas for outsourcing that you can clearly benefit from as an entrepreneur.

1) Payroll – You can do your own payroll, but it takes time and effort. You can also be on the hook for any mistakes that you make. Is it worth it to do it yourself? In my experience, it isn’t. Payroll services from either ADP or Paychex will only cost you around $25 per pay period. If you assume it would take you an hour to do the work, then $25/hour isn’t a bad price. If it would take you 2 hours, then this is an absolute bargain. Unfortunately, as companies expand beyond one employee, the cost increases for each employee and it can add up quickly. Most companies still outsource this function, if for no other reason than to shift liability and to get the benefits of direct deposit.

2) Tax preparation & Accounting – I still do my own accounting, mainly because I feel like I need to have a solid handle on my business finances. On the other hand, I haven’t done my own taxes in ten years. I remember the first year I owned a business and tried to do my taxes on my own. Ten hours later, I wasn’t even half way done. I cut my losses and paid H&R Block to do them from scratch. It took them two hours and about $350.

3) Health/Dental care – I’m not going to bother buttering you up with this one. I know some doctors self diagnose and all, but I’m hardly a qualified physician, and even if I was, I can’t write myself a prescription for Vicodin, as nice as that might be sometimes.

4) Website/Email hosting – Website and email hosting is one of those situations where if you know enough about running your own server to be dangerous, you can easily make the wrong choice. There are a lot of things you need to think about if you’re going to host your own website and mail servers. I’m not referring to colocation or dedicated hosting. I’m referring to running a server out of your basement/office that is publicly accessible and hosts critical business services. There are so many things that you need to worry about. Sure, it’s cheap enough to take an old computer that’s lying around and slap a Linux distro on it, but what about a static IP address? It costs a lot more for that. How about UPS backup systems? Tack on a few hundred for a good one. And what happens when the power goes out for two full days? Your measly UPS isn’t going to cut it. I actually considered doing this for a while to save myself an extra $50/month and eventually decided against it. When your business depends on things like this, it needs to be reliable. There are plenty of low-cost alternatives out there.

5) Legal services – This is basically the same as health/dental care. You’re just not qualified to do it. If you know what to look for, you can certainly cut down on the amount of work that your attorney has to do by pointing out your concerns, but don’t think that you can completely replace him. There are nuances to the law that you’re just not familiar with.

There are certainly many other things that companies outsource, but this list clearly illustrates a number of areas where most companies outsource services and don’t think twice about it and you should too. These forms of outsourcing are perfectly acceptable because for most companies, it is not the core business to provide health or dental care for anyone, let alone company employees. The same goes for payroll services or utilities. Last I checked, I wasn’t aware of any company that had a giant hamster wheel in the back of the factory where workers could run to turn a generator so the lights would stay on in the warehouse. For the record, if the “employee hamster wheel” ends up in a Dilbert cartoon, I want the credit.

There are two fundamental reasons why a company chooses to outsource a particular task or job.

1) It is not your core competency.
2) It is not cost effective to perform the task in-house.

Obviously, if you don’t know how to do something, then you should outsource it. But number two is a lot trickier. Most entrepreneurs know how to do a great many things. That’s why they’re entrepreneurs. The trick is being able to differentiate between what you need to do yourself, and what you could do but makes more sense to outsource from the standpoint of either time or money. I’ve been giving a lot of thought to what time really means to an entrepreneur. Time is far more valuable than money. Once spent, you can’t get it back. I read that somewhere once, so I won’t be taking credit for it. But it’s so very true. If you know where that came from, please leave a comment and I’ll give credit where credit is due.

The bottom line is that if you have the ability to outsource a job or task, you should seriously consider it if doing so is going to save you time or money. What are your thoughts?


  1. […] more here: Outsourcing for Entrepreneurs October 13th, 2009 | Tags: a-dirty-word-, a-widely-accepted, english, from-the, india-or-china, […]

  2. Chuck on October 14, 2009 at 10:25 am

    Wow, $25 for payroll? I’ve been using paychex for almost 4 years and I’ve been paying 3x that to pay myself once per month. I got a quote from ADP and it wasn’t any cheaper. I’d like to know how you swung THAT deal.

  3. Mike Taber on October 14, 2009 at 10:51 am

    You need to call them and ask specifically what you are being charged for and why. For example, I found that I wa being charged an extra $13 per pay period because they were signing my pay stubs for me and then sending them via overnight mail so I’d get them by Friday. Why should I pay them to sign a direct deposit check? If it’s direct deposit, why does it need to be sent overnight? I cancelled those things and guess what. I still get my payroll stubs on Friday, even though they’re not sent via overnight mail!!!

    Another tip is to get a competitive quote at a very reduced service level and have them compete against one another. They know how much it costs to land a new customer so they don’t want to lose you. A final tip is that if you want to self file with the government, you can have them do the bare minimum in terms of your payroll and then file your taxes yourself at the end of each quarter online rather than having the payroll company do it. I hope that helps. I think that my most recent offer was actually $28/ pay period for payroll every other week. So I was just ballparking if, but that is pretty close.

  4. Make Money by Outsourcing - The Blog Planet on October 23, 2009 at 1:30 am

    […] Outsourcing for Entrepreneurs | Mike Taber's Blog […]

  5. Polprav on November 2, 2009 at 9:00 pm

    Hello from Russia!
    Can I quote a post “No teme” in your blog with the link to you?

  6. Mike Taber on November 2, 2009 at 9:33 pm

    Yes, go ahead.

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