Insourcing – save money and frustration

Hey, I’m Michael Eckstein, and this is ‘Ordinary & Necessary’, a weekly newsletter about less-than-sexy business topics that will help you manage and grow your business. You signed up on my website. If you’d like to unsubscribe, just click here. No harm, no foul, I’d love to have you back sometime.

Outsourcing is easier said than done. Yet, “gurus”, unoriginal blogs, and business books advocate outsourcing your boring work as a quick fix for your business. They say the problem with your business is that you do everything inhouse and you should outsource your low-value work or the tasks you aren’t very good at.

But, they never fully discuss the cons of outsourcing. When you outsource, you

1. lose control over that work – your contractors have much more free reign over how, how well, and when that work gets done
2. pay a premium over doing it inhouse – your contractors are also running a business and, just like your business, they’re in it to make a profit
3. need to pay – you need to pay your contractors, even if your client pulls out of the project

These cons are okay when business is good. You’re willing to lose control of low-value work so you can take on more client projects. You’re okay paying a premium because clients are agreeing to high-price proposals. And, you’re willing to take on the liability (of paying the contractor) because client projects rarely go south after the contracts are signed and deposits paid.

But, when business is bad, none of that is true anymore. Clients slash their budgets and there are fewer projects available. The premium is suddenly a much bigger expense because the remaining jobs are at lower prices. And, the liability is much scarier because a client could pull out or go insolvent at any time.

During a crisis like COVID-19, you should bring some of your outsourced work back inhouse. Bring those low-value, boring, or menial tasks back in house. Insourcing your work will increase your profit margins and reduce your project stress in a time when we have enough stress to deal with.

But, that doesn’t mean you should bring everything back inhouse. Some tasks need to be outsourced because you can’t do them yourself. Some more obvious examples include accounting/taxes, legal advice, and managed IT. But, that also includes project tasks that you aren’t very good at. For example, a webdev that is bad at writing content/copywriting should still outsource those tasks so they can deliver high-quality work.

ACTION ITEM: The economic downturn and social distancing is driving everyone a little crazy. Call one friend and check in on them.

(I’ll be including action items every week because I hate a newsletter that doesn’t have a takeaway.)

Have a good weekend and stay safe!

Michael Eckstein