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Posted on Admin Army

The Opportunity Cost Of Not Outsourcing

The number one reason businesses don’t outsource is that they think they can’t afford it.

While affordability is always a valid concern, quite often business owners make this assumption without taking into account the opportunity cost of all the time, money and resources they are spending on that task.

A tale of outsourcing

We’re going to tell you a story about a business owner called Sally and her grocery shopping. Yes, it’s personal, not business-related. So, it’s not even tax-deductible. But it illustrates the point perfectly.

When Sally first looked into online grocery shopping her initial reaction was “I’m not paying $13 to get my groceries delivered when I can go and do it myself for free” (remember this bit later).

But when Sally looked at what tasks she could delegate, her grocery shopping fitted into multiple categories:

  • She doesn’t like doing it
  • It doesn’t make her money (although a necessary evil as it puts food on her table so she can make money)
  • It takes her forever. Even though she hates doing it, once she’s in the grocery store browsing the aisles, she’s stuck in the vortex possibly never to return.

Sally’s first foray into online grocery shopping was using click and collect. She could reconcile herself with a $5 charge (as it was in those days – now it’s free for those of you interested in dipping your toes in for minimal risk) for not having to do a task she hated.

Then, her grocery store hit her with the upsell – 50% off a 3-month delivery saver ($69 down to $30). If Sally did groceries every week in that 3-month period, it was going to cost her $2.50 per shop – less than what she was paying with click and collect. She couldn’t refuse!

Now, Sally online shops every week and always buys a 6-month delivery saver.

$118 for 6-months = $4.54 per shop.

It also now only takes Sally about 10-minutes every week to do her grocery shop, scrolling down her list of favourites, ordering her regular items and quickly searching for anything additional that she needs.

The opportunity cost

What would it cost Sally now if she was going to do that shop herself in-store?

  • Vehicle costs to get her to the grocery store and back – 12.6km @ IRD rate $0.76 per km = $9.58
  • Her time – let’s conservatively estimate one hour @ her lowest hourly rate of $50ph = $50.00
  • TOTAL: $59.58 just to go and do the groceries, before she even buys anything
  • PLUS, she’ll probably get sucked in and spend at least $20 extra on groceries than what she should while she’s browsing those tempting aisles

OPPORTUNITY COST IN MONETARY FIGURES = $59.58 – $4.54 = $55.04 every week

Multiply that out to an annual figure >>>> $2,862.08

So, it’s not ‘free’ for Sally to do it herself and now she can actually spend that time making money by outsourcing her grocery shopping and doing it online.

How does it look in your business?

The same goes for things that you probably should be outsourcing in your business but you don’t want to spend money on.

Think about all those tasks that a) you don’t like doing, b) don’t generate income, or c) take you a long time to complete. It could be the GST return, managing your email inbox or posting on social media.

How much could you earn in the time it takes you to complete that task every day, week or month?

What else could you be doing with that time that would make a real difference to your bottom line?

And how good would it feel to have the completed task land back on your desk, beautifully finished to a professional standard, and in less time than you could have done it yourself?

You can find out just how good that feels by clicking here to book a complimentary call to discuss how Admin Army can take some of your tasks off your hands.

Know you need to outsource, but not sure which tasks to start with?