When to outsource your small business’s data entry

Your business is small. Maybe you have a few employees; maybe it’s just you. It’s your baby, and maybe your life.  You’re doing okay, but not rolling in dough…yet. You have to watch your expenses like a hawk and usually put in extra hours to keep costs down. Maybe you put in a lot of extra hours.

Does this sound familiar? It’s a common theme with small businesses and small business owners: they bill their time as free.  The thing is, your time is not free. There are activities within your business that you are better at doing. There are activities in your business that you enjoy doing and you wish you didn’t have to do those other, necessary things. Maybe it’s administration, billing and payroll, inventory, or data entry. These are all activities that you can pay someone to do for you. Naturally some of these tasks are expensive to outsource, but not all of them. In fact, you may actually save or make money by outsourcing them.

How? Let’s take data entry as our example business task that we want to consider outsourcing. Obviously, outsourcing data entry will not be free, but the end result may be greatly in your favor.

The best way to justify outsourcing data entry is the pure cost of hiring a data entry firm versus the cost of your time (if you’re the one performing the task) or your employee’s time. How much is your time worth? You can calculate it by taking your annual income (or what you’d be making if you were working for someone else and doing the same jobs) and dividing by 2080 (number of work hours in a year assuming 40 hours per week). This is your hourly rate.

Now, the decision to outsource may be as simple as seeing if your hourly rate is greater than the hourly rate of the data entry company. If so, then great! Outsource and spend you extra time on pressing business activities.

If the data entry company doesn’t charge by the hour, but rather by project, you can estimate the cost of you (or your employee) doing the same project by estimating how many hours you would spend doing the same amount of work and then multiplying by your calculated hourly rate.  Again, if the cost of your company entering the data is higher than outsourcing, outsource that project.

But what if your cost is lower if you keep the data entry in-house? It may still be advantageous to outsource the task. How? Opportunity cost. In this case, if you weren’t doing data entry, what would you do? Is the benefit (cost savings or revenue increases) of that alternative task greater than the cost of outsourcing the data entry task? If so, then that’s what you should do.

Data entry is almost always a necessary business task for small businesses. It is also a task that is often easier to outsource and usually makes financial sense to do. Do the calculations above and see if it makes sense for you and your business.

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