Resources & Tools Outsourcing is HARD

Discussion in 'Starting & Running a Business' started by hammer, 11th Oct, 2019.

Join Australia's most dynamic and respected property investment community
  1. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    2,604
    Location:
    Darwin
    I'm trying to outsource a large part of my side-hustle. I do media production and I'm very good at it.

    I have been expecting to find other people at the same level as I am but am unable to find anyone competent who charges less than I do!

    Going to try a few more strategies (not giving up easily)...but I was wondering..

    Has anyone on here had success?

    If so, how did you deal with the communication issues and getting the right Quality/cost balance?
     
  2. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,409
    Location:
    Melbourne
    Generally, you can only outsource the bits you are not good at..... or is mundane, repetitive and boring....

    The Y-man
     
    Archaon likes this.
  3. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    18,485
    Location:
    Sydney
    The key issue with outsourcing and contracting is pricing.

    If the price you sell is low it leaves zero margin for inputs. You can go broke doing work. Holidays, non-chargeable time, quoting, travel etc may eat into any rate. Good rule of thumb is never charge your outputs out at an hourly rate unless its a multiple of the inputs expected to produce it.
     
  4. kierank

    kierank Well-Known Member

    Joined:
    20th Jan, 2016
    Posts:
    8,410
    Location:
    Gold Coast
    When I owned a professional services business, my Rule of Thumb was 3 x the labour cost.

    The first one covered the labour cost, the second one covered the operating expenses (rent, insurance, overheads, ...) and the third one was for me :D.

    So, if the labour cost was $100 per hour, then our charge-out rate would be $300
     
    NHG, Peter_Tersteeg and hammer like this.
  5. Archaon

    Archaon Well-Known Member

    Joined:
    20th Mar, 2017
    Posts:
    1,896
    Location:
    Newcastle
    I've heard the same rule of thumb in the IT industry
     
    kierank likes this.
  6. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    2,604
    Location:
    Darwin
    How did you find good people?
     
  7. kierank

    kierank Well-Known Member

    Joined:
    20th Jan, 2016
    Posts:
    8,410
    Location:
    Gold Coast
    Our business was in IT
     
    Archaon likes this.
  8. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    18,485
    Location:
    Sydney
    Good people will make you money rather than cost you money.

    LinkedIn and other social media platforms can be a good way to identify someone with potential. Dont assume that the career bank IT staff member wants to stay. They may have drivers that arent financial that you cant imagine.

    eg A former client sourced an ex Macquarie Bank director who didnt even want to get paid to develop products in financial services. He didnt need income or money. He wanted to stay busy and active and at his age couldnt find a job anyway and he wanted to do something for fun. Lived a few blocks from the business. He gave him a small share of the company and three years later listed it based on the good work they did as a team.
     
  9. kierank

    kierank Well-Known Member

    Joined:
    20th Jan, 2016
    Posts:
    8,410
    Location:
    Gold Coast
    I loved them :D!!!!

    In all seriousness, finding good people (especially in small businesses) I found really hard.

    I used to think it was me.

    Then I found out that it wasn’t when I joined a business owners’ mentoring group (TEC). There was up to 16 of us in the group and we would meet for a full day once a month (under the cone of silence) to review/discuss our businesses.

    We would review last month’s and YTD performance (P&L, Balance Sheet, Aged Accounts Receivables, ...), progress against strategy, business issues, ...

    Every month, about half the businesses had people issues (poor performance, good staff turning bad, theft, incompetence, breaches of confidentiality, sexual harassment, ...).

    Initially, this didn’t solve my people issues but it did make me feel better about my management abilities ;).

    Over time, I started to trust the suggestions, opinions and recommendations I was receiving and the people issues were reduced in number/seriousness BUT they never disappeared.

    It is all part of a being a business owner. Without a team of people, your business is just a job (for you).
     
    NHG likes this.
  10. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    2,604
    Location:
    Darwin
    This is GOLD advice. Thank you.

    Just revisiting this thread after yet another potential helping hand epicly failed my "test" job.

    I shall not give up!!!

    One day I will find that perfect person...
     
    kierank and Diesel1990 like this.
  11. kierank

    kierank Well-Known Member

    Joined:
    20th Jan, 2016
    Posts:
    8,410
    Location:
    Gold Coast
    +1

    Always remember there are good people out there and some of them really, really want to work for small business.

    They can be difficult to find but don’t give it.

    Sometimes, one might be looking in the wrong place.

    As a example, in the early years of growing one business (a risky time), I was looking for a really good salesperson. A couple of people applied who looked really good on paper but wanted really big money (more than I could afford).

    But one applicant didn’t look that great, wanted reasonable money for their situation but had a real “can-do” attitude plus two good references from common acquaintances (one was a family member).

    There was something I really liked about this person but their CV wasn’t perfect. In the end, I took a risk and hired them. They turned out to be my most loyal employee ever (both of us are forever grateful I gave them a chance), became my longest serving employee ever (11 years until I sold that business), had a huge impact on the business in that time, we became good friends, ...

    Even today, 9+ years after selling that business, we are still good friends. They have since started their own business.

    Sometimes, one has to listen carefully to “gut feel”. It may not always be right but, when it is, spectacular things can occur.
     
    hammer and Gockie like this.
  12. Gockie

    Gockie Double boosted!! And still covid free. Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    13,709
    Location:
    Sydney
    Need the "can-do" attitude. We have a tester. She is the opposite of "can-do" attitude.... how can we get rid of her?
     
  13. kierank

    kierank Well-Known Member

    Joined:
    20th Jan, 2016
    Posts:
    8,410
    Location:
    Gold Coast
    One of the hardest tasks I had to do as a business owner was to “sack” people. I absolutely hated it and would lose sleep at night (for days) until the deed was done. I only ever “sacked” a handful of people and each time it was so stressful (but had to be done for the good of the business).

    The funny thing was that, once done, most employees would come and see me to lend their support, to provide me with anecdotes of why I made the right decision, to advise me that they had more respect for my management abilities, to say that the business is now better that that person is gone, ...

    Good employees know who the bad ones are and one risks losing them (and potentially the business) if the bad ones stay.

    So I would “sack” them. I believe the politically-correct term is “performance manage them out”.
     
    geoffw and Gockie like this.
  14. geoffw

    geoffw Moderator Staff Member

    Joined:
    15th Jun, 2015
    Posts:
    10,807
    Location:
    Canberra
    Agree about sacking people.

    I once had to sack somebody, it was done by the book - three written warnings. Several weeks later, the person I sacked was at a social event. I dreaded crossing paths with them. But they told me that I'd done the right thing.
     
    Gockie and kierank like this.
  15. NHG

    NHG Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    535
    Location:
    Sydney NSW
    Experiencing this now.

    Things I've picked up:

    1. Off-load the stuff that takes time and earns little.

    I'm in accommodation, so first to go was cleaning and gardening.
    Then inspections which is essentially a sales role.
    Now, hiring people to do the things I can't do.

    2. Be super clear with roles and responsibilities.

    I use to hire and be like. "Do this". Thinking people were competent.

    My background is civil engineering management.
    I forget not everyone spent 5 years + 5 years experience developing critical thinking skills.

    It doesn't come naturally to all.

    3. Create a process. Document it. Refine it.

    Continuation of above.
    Draw system maps. Walk them through the process. Define the boundaries. Provide a what to do when things go wrong. Call me, call them, book one-way ticket to Cuba.

    4. Reduce, re-use, re-cycle.

    This isn't mans first step on Mars.
    Someone's already created processes that work.
    No need to create it from scratch.
    Network with like minded people and rehash what exists.

    Reduce redundant processes.
    Re-use what works.
    Re-cycle... because the world is dying (couldn't think of anything for recycle).

    5. It's not you, it's me.

    First assumption is my instructions aren't clear enough. If the last 3 people didn't work out. I'm not being an effective leader.

    Reflect on result. Take on feedback. Implement. Repeat. How can you improve your ability to communicate and get your result.

    This is the key. If you can't figure this out. Or it takes time, you will limit your ability to scale.

    6. Learn to hire. More important, learn to fire.

    You know what, it is them.
    People focus a lot on hiring.
    Be supportive, provide feedback. Discipline.
    But be quick to fire if you need to.

    Not everyone's goals align
    Not everyone has the required competency.
     
    Last edited: 11th Jan, 2020
  16. Rentvester

    Rentvester Well-Known Member

    Joined:
    9th Aug, 2017
    Posts:
    121
    Location:
    Earth
    Great stuff NHG, number 5 resonates the most with me.

    I remember having a chat with you ages ago regarding just general investing.
    Have moved away from trying to increase my salary and took the plunge starting a business, and man its hard!
    I have doubled my income over the past 6 months(expenses goes up too) however trying to keep the overhead low have been a bookkeeper, digital marketer, cleaner, and a manager on top of my work.
    Now it comes to outsourcing my work, and I realise as an employer, no one does things as well as you would like to now that you own the business.
    Getting rid of an "experienced" staff in favour of a go-getter has been a nightmare these few months :(