The other day I was teaching a Boot Camp workshop and I received a rather negative piece of feedback from a particular audience member on the topic of outsourcing that demonstrates a point about financial ignorance when it comes to starting or operating a new small business.
To be honest, this is not the first piece of criticism that I have received regarding my position on outsourcing, and frankly, I recognize why it hits a nerve, but that will not assuage me from continuing to share my message even if it continues to piss some people off.
The issue is, whether you should buy products and services from local providers only or do whatever it takes to get the best value even if it means buying it from outside your ecosystem.
I consider myself as patriotic as the next guy and as a personal consumer of goods and services I can afford to have high ideals and I do, often, buying local. If I have to pay a little more or perhaps buy a slightly inferior product in order to support a local resource I’m ok with that. However, in business, I do not think these ideals have any value unless of course, it is part of your overall marketing strategy. I know, “Made in America” will drive a segment of your consumer base to buy your product just because it is made in America. I get it.
Let’s say your business requires a webpage. Will your customer make a decision not to buy from you if you chose to hire a web developer in India vs someone in your own hometown? My guess is probably not, and in that case, how would they know? What they might, however, object to is having to pay a higher price for your product or service because your business expenses are higher as a result of shelling out more money to hire a local web designer that charged you $4,000 to build your website vs $400 it might have cost you to hire an offshore designer with a similar level of skill.
The number one reason businesses fail is due to lack of capital. So I ask, is it better to hire a local web designer for $4,000 knowing that the money they receive for the work will be spent locally (or perhaps not since they might be outsourcing some or all of their work to India, you will never know for sure) but, in turn, increases your risk of running out of money before you reach profitability thereby risk business failure? Or is it better to be as conservative with your spending and hire the $400 designer thereby, increasing the likelihood of creating a profitable business and use the $3,600 savings to fund other efforts, reduce your prices or to take it as profit personally for buying your personal items locally?
Of course, outsourcing goes way beyond a simple webpage. I employ an editor who resides in Manchester England. She has a Bachelor’s degree and is a high school writing coach. This being a side hustle to her, she only charges me $7.00 per hour for her services.
I also currently employ a:
- Social Media Campaign Manager in Columbia for $6.88 per hour.
- Virus/PC IT guy in the Philippines for $5.00 per hour.
- Word Press/Website specialist in India for $9.00 per hour.
- Email Marketing Expert in Ukraine for $8.00 per hour.
- Virtual Assistant in the Philippines for $6.67.00 per hour.
The team above is composed of experts in their respective fields and they all have a bill rate that is less than the minimum wage in my home state of Colorado. If I only employed locally and paid for similar skill and experience levels, the costs would have been way too high. Additionally, you would not be reading this post as we already would have been bankrupt a long time ago.
What many nascent entrepreneurs don’t properly weigh in their decision making is, how long it often takes to become profitable. This is especially so for a bootstrapped business where you have to start making money and turn a profit fast lest you run out of funds and be out of business.
The same people who are opposed to outsourcing their resources are likely to buy many consumer goods made offshore without their knowledge. They probably own an Apple product made in China, a cell Phone made in Taiwan, China, or Korea, or a pair of Levi Blue Jeans made in China, the list is endless.
Consumers live on a budget and have the added benefit of safety nets. They have the luxury to buy what they can afford. If they don’t have enough money to survive, somebody or some institution will step in and prevent them from starving to death or dying of exposure.
Businesses have to make money and turn a profit to survive, period. No safety nets exist for a business.
The next time you see a business outsourcing some of their labor offshore, keep in mind that it is you who is often the biggest beneficiary of lower prices enabling you to save more of your hard-earned cash thus spending it as you chose to, locally or not.
Are you letting your personal values and ideals influence what will make you successful in business?