Should You Hire or Outsource Your First Employee?

One of the light bulb moments in the life of a business is when you, as a sole small business owner, realize you can’t do it all yourself. When it’s time to hire that first person, consider the pros and cons of hiring in-house or outsourcing.

If you don’t have enough work to hire someone for at least half time, it’s usually better to outsource. After all, the amount of paperwork and the legal considerations involved in hiring an employee, such as learning tax reporting requirements, purchasing the necessary insurance, creating benefit plans, and so on, can be overwhelming to a business owner just looking for a little help. And it’s a lot harder to let an employee go than it is to cancel a vendor contract.

Certain tasks are best left to experts. Legal services and information technology, for example, are often outsourced, as are accounting and bookkeeping, especially for business owners who are not numbers savvy. Customer service and administrative tasks, such as mailing, invoicing, and even inventory management, are other frequently outsourced duties.

But before you rush off to find a vendor, consider the following:

• Your outsourced worker may not care as much about the job as an employee. Contractors have other clients and other priorities, so you might have to fight for their attention.
• Any information you provide an outsourced worker can be vulnerable. Screening vendors carefully is a must, especially when it comes to handling sensitive financial data or information security.
• If you’ve ever spent an hour on the phone with a customer service representative who can’t really answer your questions, you know why it’s important to make sure any outsourced customer service is actually helpful to customers. If it’s customer service you need, nothing’s worse for your business than frustrating your clientele, so choose wisely.
• If you’re not a clear communicator, it may be more difficult to work with an outside firm for tasks such as web design or marketing. While you’ll get higher-quality work than if you did it yourself, you may not get exactly what you want. And each time you make a change, it costs you money.

If your business is on the upswing, and you’ve got the wherewithal to set up the necessary systems to hire an employee, an office administrator is a good place to start. An individual who knows basic accounting systems and can take care of some of the smaller, more distracting details of business operations can be an important asset. An in-house bookkeeper can help you keep your cash flow moving by invoicing and collecting bills in a timely manner. Other good positions to fill in-house are customer service and shipping. Those customer relationships are key to building the best marketing tool in your arsenal: word of mouth.

As a fledgling business, take your hiring-vs.-outsourcing decisions seriously. Interview your contractors with the same depth you would potential employees. If you’re hiring a firm, consider such things as turnover, reputation, and response time. If you’re hiring an individual, check references and work history. Sometimes companies end up hiring contractors to work for them full time, so consider that possibility as you interview potential contractors.

Hiring your first employee is a milestone, and at some point all business owners need help to grow. Make sure it’s the right time and for the right job. Before you hire, consider whether outsourcing may be a better option. It could be the difference between growth and stagnation.