There is one question that will present itself multiple times while starting or growing a business. That question is: Build or Buy? Whether you’re just starting out or attempting to expand the operation, it might always be difficult deciding when to build an app, website or social media strategy in-house and when to outsource such projects.
The decision isn’t always going to be clear, and various factors can make the decision different under changing circumstances. Sometimes building in-house expertise and resources could be the way to go, while in other cases outsourcing is the smarter decision. Reaching the right decision for the business at the time isn’t like throwing darts. Use some proven analysis tools to help in getting you as close to the bull’s-eye as possible.
Jared Turner, CTO of Boostability, deals with this question on a daily basis, and has distilled what he has learned into four questions that may help you make the right decision:
1. What is Your Business Value Proposition?
Your business value proposition is what your customers pay for, and the main the reason they do business with you. The value your business delivers is what keeps you in business and builds repeat customers. Knowing what this value includes helps you to evaluate hiring, intellectual property creation and other internal processes. You can then compare costs in dollars and other overhead to the amount of value the customer receives.
Will adding personnel, especially those with expensive expertise, create more value as perceived by your customers? Notice, it’s not the value you think you’re giving, but the value they think they’re buying. Sometimes a decision to add overhead in customer service is easy, as you can quantify the faster handling of requests or more efficient delivery of products and services. Start your internal-vs-outsourcing decision process with a clear knowledge of your value proposition.
2. How Important are Your Quality and Reputation?
In today’s online world of social media and sharing, reputation management has become a career for many consultants and social media gurus. When business reviews became as easy as logging into Facebook or LinkedIn, the number of potential customers who could easily read about your company’s products and services exploded.
There may be an opportunity to hire an in-house person with expertise in an area you need, but will there be a training period, and are you even qualified to evaluate the hire for their ultimate value to your business? It could be a better decision to use the awesome volume of online reviews to select the right consultant or independent contractor to meet your needs.
3. How Crucial is the Need and Can You Withstand Turnover?
Along the same quality lines, there is a concern when it comes to maintaining schedules and meeting demand. Hiring expertise may not be the best decision if losing the employee would damage the business. How fast can they be replaced with the right expertise?
How long is the search, interview and hiring cycle? What will the damage be if the position stays empty for weeks to months? One thing we can’t do is build a backup pool of qualified applicants who are willing to jump to our call months later when they’ve found other employment.
We can build a backup pool of consultants or independent contractors, however. Having more than one highly qualified outsourced expert can help us sleep better when the role they fill is crucial to the business. Rotating work among them can also balance workloads and smooth delivery schedules.
4. What are the Budget Considerations?
Often business owners make hiring decisions based on quick research into what outsourced expertise is charging for their services. It can seem like a lot more than the salary required to hire in-house. But think of the costs the contracted expert is absorbing for you. According to the U.S. Department of Labor, overhead and benefits costs average around 30% of employee base compensation.
That isn’t the only comparison that can help in making this decision. Just how engaged and productive will an in-house hire be in your operation? Though you may need some very high-level work from them, will the need be sporadic or constant? Take the time to run a quick workflow and efficiency study, and you might find that a lot of that salary cost is paid for non-productive time or activities below the expert level duties for which they were hired.
Four Steps to the Right Decision
Use these four questions to analyze your next hire or outsource decision. These steps have helped many business owners concentrate on growing their business instead of responding to internal crises and time-consuming management tasks.