Are You Outsourcing Too Much? 4 Ways to Tell
Sometimes your best course of action is to stop outsourcing. The reality is that outsourcing too much is a thing and it can easily lead to profit leaks. The good news is it can also easily be avoiding.
Now, this may sound counterintuitive. After all, as a business owner, you can’t do everything by yourself and expect to make money. Outsourcing can also help you scale. That’s why I’m not focusing on getting rid of outsourcing altogether, but rather determining where you’re outsourcing too much. From there, you can cut out unnecessary expenses.
Here are four questions to ask yourself to see if you are outsourcing too much.
Are your profits being eaten away?
The first factor to look at when determining whether or not you’re outsourcing too much is your profit and loss reports. If you find that most of your profits are being eaten away, it could be an outsourcing issue. The truth is that labor is the easiest thing to cut because it will yield the fastest results. So if you find that all of your revenue is going to paying other people, it may be time to make some cuts.
Do you really need to be paying someone else to do a certain task?
The second factor to look at when determining if you’re outsourcing too much is if you really need it. For example, I no longer need to be paying for so much administrative work.
Most of my marketing is automated so I have the time to do more things myself. Additionally, I make more money and close more deals when I take the time to write emails myself. My business is also far more niched down than it used to be, which means paying a general administrative assistant isn’t going to cut it anyway.
Can automation help you reduce outsourcing costs?
Doing your taxes now can help you realize where you may be outsourcing too much. By looking at my reports, I can see that I already pay for software that covers a lot of my needs. This software is cheaper than outsourcing and gets more done faster. As such, I cut out outsourcing expenses because most of my needs are already covered through systems.
Are you getting a return on your investment?
As with all things money and business, you need to see whether or not you’re getting a return on your investments. For example, I can get in the bad habit of outsourcing too much design work. By paying attention to my Instagram engagement, I see that graphics don’t perform well anyway. This means I am cutting out the graphic design expense because I’m wasiting money.
On the other hand, I do get a return on my investment by outsourcing media relations. I do not have time to be looking for media like I used to, but I know it directly leads to money in my bank account, therefore I continue outsourcing it.
Your job is to consistently look at your accounting reports to see where the money is coming from and where it’s going. You need to be able to connect the dots between investments and the return they are giving you in order to determine whether or not you are outsourcing too much.
Outsourcing too much can be a problem if you don’t keep an eye on it. You can refer to these questions every time you are looking through your profit and loss statements to determine what stays and what goes.