Outsourcing: How to Read the Price Tag
Written by Christine Buske
on October 26th, 2008 / 7 Comments / Print this
Small business owners wear many hats: manager, buyer, accountant, you name it. It is impossible for one person to take care of everything, and the most commonly outsourced tasks revolve around marketing, branding and design. When first deciding to work with a professional, you are going to be looking at the price tag attached to the promised services. It may be shocking to some small business owners how much certain freelance or consulting services can cost, but there are ways to save.
Reading the Price Tag
Next time a consultant charges you $1000 a day, don’t fall over backwards. First consider the following: if you would hire a professional on a one year contract, the salary, taxes and benefits packages would amount to about $200.000 on average. Take into account the consultant only has a certain number of billable days a week, you are paying a premium for the flexibility of not hiring him on a full time basis. You end up saving on benefits, and you probably don’t have enough work to keep someone busy all year so hiring simply doesn’t make sense for your business.
Pricing is, or should be, based on what your best alternative is. In this case, your alternative is to hire someone for a longer term. Considering there are maybe about 236 billable days a year, you need to look at how much an employee costs you a day if you would hire him or her. Don’t just think salary; consider all other costs and expenses associated with an additional hire. You’ll see you still end up saving by hiring a professional for a short term.
How to Save on Freelancers
There are many freelancers who have ‘virtual networks.’ If you need copy writing services, design services, and printing, you could get all your services from the ‘same’ provider. Basically, a virtual network entails a connection between different freelancers who work together on multi-disciplinary projects. This way, they resemble a fully staffed advertising agency, but at a more attractive total price.
Like with anything, you could shop around for the best possible deal. What is important is to look beyond the price tag and see what a freelancer is made of: not everyone will be right for your project, and although price does play a role it isn’t everything.
What has your experience been with outsourcing? Have you looked for a freelancer only based on cost, or based on expertise?
Otherwise, good post ~ Not something...
7 Comments to “Outsourcing: How to Read the Price Tag”
October 27th, 2008
4:17 am
Hi Christine Buske , you have written a good article.You have given some good tips for small business.Thanks for the post.
October 27th, 2008
9:26 am
Great advice.
I have looked for freelancers both ways. Price and experience. I think that depends on what kind of service you are looking for.
October 27th, 2008
7:15 pm
When I deal with freelancers - paramount for me is professionalism. Their understanding of who their client is. Respecting deadlines, confidentiality and a keen understanding of business practices.
I typically don’t allow freelancers to deal direct with clients nor do I allow their work to be included in their portfolios or resumes without my approval.
With the freelancers that I choose to build a relationship with, I take great pride in recommending them for additional business with my contacts. As a business, freelancers can also save with regard to productivity. With any employee, you must invest in them to get them up to speed, with a free agent (freelancer), they must fit in a predetermined budget and time frame. If they don’t work out, they’re gone - period. Employees are harder to lose.
When I am hired on a consultancy basis, quite often the value proposition coming back at me is the expediency of the solution as opposed to trying to develop internally. It reminds me of an old adage told to me by a co-laborer in a summer construction job while in college - “Look busy, carry a hammer.” Many times employees don’t have your best interest in mind. With free agents you are totally in control. They are keenly aware of the project and deliverables expected - there are no distractions.
On the other side of that coin, you have to be good to your freelancer. Pay them on time, respect their schedules and personal lives. Treat them as you would any professional business owner. Over all remember - it’s more than business, it’s your brand.
October 27th, 2008
10:52 pm
Not only is the price tag related to what an employee would cost, it also covers the fact you can choose an expert for each project (one employee is more limited than 3 freelancers for instance) and it is usually better than doing it yourself (the other option for many small businesses.) If you outsource at $1000 a day and an expert works for 2 days, it is often cheaper than you working for 4 or 5 days to do the task yourself with a lower quality result.
And never dismiss small and home based businesses - you get to deal with the expert rather than an account manager and usually pay less, too.
Ed raises a very good point - treat freelancers well and they’ll work for you again - including doing last minute projects.
October 28th, 2008
8:06 am
Hey, thanks for the information. I’m still a little unsure on how to go about outsourcing and your post has allowed me to understand more on it! Thanks again!
November 1st, 2008
11:38 am
One thing you can save the cost cutting is by negotiating,giving freelancer promises that if he provides you good service at low rate, he can expect more work from you.
I always do like this and it works for me.
November 2nd, 2008
8:14 am
Are you saying hourly rate frank, or project rate?
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