This note is part of a series that will discuss Outsourcing. It is intended to be of use when recruiting, assessing and managing freelancers, virtual assistants (VAs), outsourced staff and contractors, and is also applicable to larger vendor organisations.
This note is intended as an initial overview, collation and introduction with our detailed view and hard fought cautions to be covered in Part II.
Summary
Introduction
Pre-requisites and Recommendations
The Decision to Outsource
Definitions
Outsourcing a task that you know well
Outsourcing a task that you can't do well or at all
Introduction
Many of the core principles discussed here are also in available in Chapter 8 "Outsourcing Life" of Tim Ferris' "The Four-Hour Work Week” (also featured in a certain reading list). BowTied Opossum has also discussed this subject with a focus on hiring virtual assistants
As has BowTied Mara with a LatAm focus.
Astute readers of BowTied Bull or followers of WiFi Money Guy (formerly Harambe Money; the likely casualty of an A | B test rather than a Zoo-Keeper's .375 H&H (May He Rest In Peace.)) will note that his guest post on the BowTied Bull Substack outlines how to start an online services business, efficiently by partly outsourcing delivery to freelancers. Wi-Fi money guy specifically states (emphasis added):
This will be extremely painful at first, and probably hell on earth because it’s a dangerous balancing act, but possible nonetheless.
This is that hell.
WiFi Money' Guy’s full post is a bit more optimistic, and in our view definitely belongs to the “just say yes” / “build your plane on the way down” school. You should definitely read his full article . We personally tend to be a bit more conservative which has other challenges (perhaps more).
Pre-requisites and Recommendations
Our own view is that unless you already have some exposure and experience here we probably wouldn't recommend a service business immediately. The principles outlined in the second part of this note can reduce some of that pain but we’re of the view that service businesses are not for beginners.
In our view pre-requisite experience would be
Business Development
Sales Calls and Sales Meetings
Account Management
The Service You Intend to Provide (i.e. the business itself)
Managing Teams
Managing Virtual Teams (partly addressed here)
Managing Outsourced Staff or Vendors (the subject of this note)
Service Delivery / Project Management
In our view the absolute minimum would be exposure to one of the areas above preferably learned on a W2 job at their (or their client's expense, sorry Andrew Grove).
If you are planning on creating a service business as your side business while continuing to work we would recommend that you pay very, very careful attention to timing and tempo factors.
Unlike other forms of Wi-Fi, money a service business will require more calls and meetings to secure sales, brief (and re-brief) freelancers, manage delivery and manage clients. We would there recommend stronger time management and a more flexible schedule to be more reactive and allow you to fight fires.
There's also a degree of overlap here with a consulting business as well. Readers may benefit from reviewing this note. In our view the distinction between a consulting business and a service business is that a service business is focused on providing a discrete or well understood "service" (well, yes, the tautological cartoon Hippo is tautologic) where as a consulting business provides advisory and more bespoke solutions.
Yes, ultimately consulting can be offered as a service at scale (ie. the “classical” Big 4 / MBB workhouses) but for the likely starting scale of your own business we would be really hesitant to outsource / offer it as a service.
Not to overload this articles PaaS quota (Pedanticism as a Service) but we would also view that as distinct from a lead generation exercise for an existing consulting business that offers consulting as a service in which case the lead generation would be a service business for you.
PaaS increases after noon for some reason.
Note that this publication often takes a cautionary and risk adverse tone. Many individuals have started, ("just start") and made successful service delivery businesses work and would find little to no value in this note or our many others. If this describes you then please do not think that our view is that service delivery business should not be attempted, rather we advise caution and prudence particularly where experience and exposure is lacking.
The Decision to Outsource
Definitions
A brief note on definitions.
We will use the terms VAs and freelancers largely interchangeably. Essentially these are people that you hire on a full time, part time or contract basis to perform work for you. Vendors we will broadly consider as a company offering a service - here we'll focus on smaller vendors as discussion of enterprise scale vendor selection and management is beyond our current scope however the foundational principles discussed here still apply.
Broadly, there are two schools of thought behind the decision to outsource.
Outsource an existing task that you know well
Outsource a task that you can't do well or at all
Outsourcing a task that you know well
The general aim here is to free yourself up to focus on other tasks with a "higher value", be they strategic, more focused on revenue or best case scenario
Things That Only You Can Do.
A useful indicator can be the value of money that you have assigned to your time - strongly consider outsourcing anything that costs less than this value.
If you are in sales or the recruitment industry this will either be merely familiar or invoke past trauma. Take your annual revenue *target* then break it down by quarters, months, weeks until you reach hours. Here, your time must be spent on activities that at least generate the equivalent hourly rate. There’s problems with this particular approach but it’s a useful illustration here.
For those unfamiliar with the exercise in question:
You are a salesman.
Your revenue target of 1 200 000 USTT has appeared to you in a dream.
This is 100 000 USTT per month
This is 25 000 USTT per week*
Your revenue item per sale is 5000 USTT
You therefore need 5 sales a week
As an absolute chad sales guy You will close 1 lead in 10
You need 50 leads per week to make 5 sales a week
You need at an absolute minimum to be covering 10 leads per day
If you cover 15 leads per day, to secure 10 leads per day for 50 leads per week, you will close 5 sales per week for 25k USTT weekly revenue. If you do this consistently for 4 weeks in a month you will etc.
In this example if we add in an hourly rate (say, a simplistic 50 hours / week) your salesman should be ensuring that every hour of their time is spent engaged in activities (prospecting) that are going to be worth at least 500 USTT. If you is not - you are at risk of falling behind on target.
(*we usually actually use 4.3 weeks to the month or work off 52 weeks to the year instead however
the figures aren't as nice
it tends to confuse and anger many people
The above methodology is generally quite well known in the bsnss world (particularly sales, however see here also for a generalisable discussion) however it's lesser known sibling is opportunity cost.
Many people will baulk at the cost of outsourcing (or, even the effort required to delegate properly) but will merrily ignore the opportunity cost of being bogged down in low value activities when their time, attention and focus could be much better deployed.
For an excellent explainer with a focus on real estate see this thread here.
To outsource a task that you know well, your requirements are that you must be able to
Discretely define the task
Define and document the process
Teach the process to someone else
Or at the very least be able to give coherent, critical and constructive feedback
At this stage you may run into difficulty as when you are forced to articulate your knowledge on a subject, any gaps become immediately apparent (case in point). You may also be underestimating how much you know about the task (unconscious competence and invisible knowledge) and someone who doesn't have your experience or talent will struggle with "obvious" next steps.
Outsourcing a task that you can't do well or at all
The second school of thought here is to outsource or seek a specialist for something that you can't do yourself or can't do well.
Before outsourcing, here we would recommend some time considering if the decision to outsource is the right one for you at this time.
Broadly your criteria should be
There is a genuine business need for the service
While you could do it yourself – it wouldn't be great, or for you it would take too long to learn
This is generally where things like graphic design and video creation or editing sit
You've been unable to fix it yourself
Or you've already tried or your solution just isn't sustainable
Process changes and new technology won't address it
It's important enough that it needs to get done, but not so important that you are handing off control of vital piece of your business or creating a later dependency outside of your control. If it’s that critical, it should generally be inhouse.
You'll likely need to use a bit of trial and error here. There is also an argument to be made that a service business, like the one discussed above by in Wi-Fi Money Guy’s article , itself is entirely dependent on outsourcing if you're not doing the bulk of the work.
We wouldn't necessarily recommend this if you you don't possess an information or experience edge. In our view you would be able to make a small fortunate, but only if you started with a large fortune.
Part II of this note covers aspects of outsourcing in detail.