As a business owner, you have options when it comes to staffing. However, too many first-time entrepreneurs have come from the corporate world and think that the only way to hire is to hire a full-time employee because that is what they see corporations do. However, such thinking can often lead to problems when it comes to small businesses.
Most registered businesses in the US are simply businesses run by a single person or a couple, working full-time or as a side hustle out of their home. In addition to their billable work, a large part of their working week is consumed by fungible, non-billable activities that can easily be outsourced to a specialist at rates well below those they charge their clients. The commonly-held estimate of billable time lies somewhere between 60-80 percent. Said another way, 20-40 percent or one to two days a week is spent doing non-core tasks. Therefore, hiring specialized fractional freelancers to perform these tasks makes sense so you can focus on your core activities that bring in billable hours.
For example, it makes no sense for a bookkeeper who bills $40 per hour to spend time working on a website or doing marketing when they can hire an offshore freelancer who specializes in website maintenance or a social media marketing expert for less than $10 per hour in India or the Philippines. Moreover, as a result of being highly specialized, most freelancers can do the work in a fraction of the time it takes you and at a rate far lower than your hourly bill rate. So, if you were the bookkeeper in our example, it is better to spend the time you previously allocated to non-core activities on more core, billable work at $40 per hour, and hire freelancers to do your non-core tasks at a fraction of your billing rate.
Unfortunately, many of my self-employed clients with successful businesses try to do everything themselves. They complain that they work an outrageous number of hours per week and whine about how the business owns them and that they no longer have a life outside of work. They tell me they are thinking about hiring a full-time employee to help with the core work and relieve them of some of the workload, but they say that the payroll hit is just too high for the business to support two salaries, so they keep putting it off. They often do not realize that they are the face of the brand and their clients’ technical expert and that what they really need is help with all the other non-core tasks that consume 20-40% of their time.
The problem is that when you make that first full-time hire, you are basically doubling your payroll with one hire. To justify such a financial commitment and the hiring of your first employee, you would need to have 80 billable hours of work per week. Hire too early, and revenue will not support the additional expense, causing cash flow issues. Wait too long and you have no more working hours left to devote the considerable number of additional hours necessary to hire your first employee.
As your business grows, the issue of hiring becomes less acute financially. For example, for a company with 100 employees or more, hiring another employee is a rounding error when it comes to additional payroll expenses.
The first question that a business owner considering hiring their first employee has to ask is whether the employee needs to be local. For example, if you operated a retail business, you would need a local employee. However, if you operate a service-related business such as an SEO or bookkeeping firm, your employee could be located anywhere on the globe.
Since the vast percentage of my clients are knowledge workers operating out of a home office, they are free to hire remote employees, which opens up the hiring options immensely. For these types of businesses, I recommend they hire a part-time freelancer either on an hourly basis or on a fixed price basis. I start by encouraging my clients to examine all their tasks and distinguish those that can be easily outsourced to an offshore expert.Â
Most small businesses can benefit from outsourcing various functions to external providers, allowing them to focus on core activities and reduce costs. Here are the top functions that small businesses can easily outsource:
Accounting and Bookkeeping: Outsourcing financial tasks such as bookkeeping, payroll processing, and tax preparation to accounting firms or professionals can ensure accurate financial records and compliance with tax regulations.
IT Support and Maintenance: Small businesses can outsource IT services such as network management, cybersecurity, and software updates to specialized firms, reducing the burden of maintaining technology infrastructure in-house.
Administrative Support: Tasks like data entry, appointment scheduling, email management, and customer service can be outsourced to virtual assistants or administrative service providers, freeing up time for business owners to focus on strategic activities.
Marketing and Advertising: Small businesses can outsource marketing activities such as social media management, content creation, search engine optimization (SEO), and digital advertising to freelancers with expertise in these areas.
Website Design and Development: Outsourcing website design, development, and maintenance to freelance developers can ensure a professional online presence while saving time and resources.
Customer Support: Outsourcing customer support functions like helpdesk support, live chat, and call center services to third-party providers can ensure round-the-clock availability and enhance customer satisfaction.
Content Creation: Small businesses can outsource content creation tasks such as writing blog posts, articles, and marketing collateral to freelance writers ensuring high-quality content while saving time and effort.
I often recommend platforms like Upwork, Freelancer, Guru, or TopTal for all these functions. The beauty of this solution is that each worker is a fractional employee, leaving you to focus on the billable core work.
Let’s look at our bookkeeper example again. Now that our bookkeeper has found a few freelancers to help with non-core tasks, she has freed up 8 to 16 additional hours per week that she can bill to her clients. And with a better web and social media presence, her business is taking off. Still the face of her brand with her clients, she can now take advantage of labor arbitrage by hiring a freelance bookkeeper for $5 to $10 per hour in Bangladesh, Pakistan, or the Philippines, supervise their work, and bill their effort at $40 per hour to her clients.
In conclusion, the path to sustainable growth for many small businesses does not lie in hiring full-time staff. While the allure of traditional full-time hires may seem appealing, especially for those transitioning from corporate backgrounds, the reality is that embracing a more flexible approach to staffing can yield significant benefits while reducing risks. By initially leveraging specialized fractional freelancers to perform non-core tasks, entrepreneurs can focus on their core activities, maximizing their billable hours and avoiding early-stage cash flow strains. As the business expands, the hiring landscape evolves, with remote employment options offering newfound flexibility with labor arbitrage. Outsourcing key functions to external providers allows for increased efficiency and higher margins and enables businesses to access specialized expertise without the financial burden of full-time hires. Platforms like Upwork, Freelancer, Guru, and TopTal provide access to a global pool of talent, facilitating the recruitment of fractional employees tailored to your business needs. Ultimately, by embracing this model, businesses can achieve scalability, enhance productivity, and drive sustainable growth in today’s dynamic marketplace.
