The cost of team expansion is far more than a simple question of salaries and benefits, but outsourcing can be a challenge, too.
As we began to expand our offering of products and solutions for our clients, we were hit with a dilemma that many small businesses face as they grow: do we expand our partnerships with outside contractors, or do we begin hiring a team internally that can handle these needs?
As a company that works in a business to business sales and consultation space, we were concerned about the cost of growing our team to incorporate SEO and content marketing specialists, thereby increasing our overhead; versus the cost of sending more money out of the company to take advantage of outside SEO expertise.
Related Article: Made in the U.S.A: Is Outsourcing Dead?
Did we need to strengthen our muscle, or continue working with hired guns? Below I’ll share a few of our conversation areas, and hopefully, help provide a roadmap for making these kinds of decisions in your organization.
The Tipping Pont: Cost of Outside Help vs. Internal Expansion
While we debated the idea of expanding our team, we discussed a wide-range of issues our company would face if we chose to bring in new hires, or promote people from other parts of our organization. After all, the cost of expansion is far more than a simple question of salaries and benefits.
We would need to coach our team, if we promoted from within, to handle a new area of our service. To train our team properly, we’d need outside help to get up to speed on the latest developments in the SEO industry. We already excelled at gaining customers and retaining them, but we needed to flex our muscle on handling their online marketing.
If we wanted to skip the cost of coaching and retraining, we’d have to hire outside experts onto our team. Experts in the field would come at a premium, so we’d have to raise our salary caps for the new team to compensate them fairly and enable our HR team to effectively recruit the right candidates for the job.
So, comparing the options available to us, we found that the cost of promoting from within and then coaching would be very comparable to hiring an outside expert onto our team. The cost of hiring from within broke down as $62,000 per year for salary and benefits, and $9,000 in retraining and team development costs. To recruit an outside expert, the signing bonus we would want to offer would be around $15,000 and the annual salary / benefits would come to $70,000 per year plus performance bonuses.
We felt that depending on the candidates, we could also offer company stock to sweeten the deal and potentially lower the out of pocket costs for recruiting. The other factor that evened the scales in our mind was the reality that retraining someone from our team wouldn’t guarantee us meaningful results.
Someone that’s good at one thing, even with quality training, won’t necessarily have the skill sets and characteristics that translate to excellent online marketing skills. Still, to be fair, the upside of promoting from within would manifest itself in both office morale and preservation of company culture.
Working with an outside team brings its own unique set of issues and advantages, as this article from iTransition addresses how to work with business partners effectively. We know that there is maximum accountability when the person working on a project relies on you for their job and paycheck. An outside consultant has more flexibility and is able to rely on other contracts for income if yours isn’t handled properly.
However, an outside team would immediately have expertise and the infrastructure required to service our clients, with a proven track-record. Just as we would do due-diligence before hiring an outside expert onto our team, we’d also have to spend time chasing down references and finding out more about the firm’s track-record.
The other major area of debate was cost. When we posted on various sites requesting a bid, we received wildly different proposals in terms of scope and cost. We wanted help supporting our client’s online branding and marketing. Some proposals seemed incredibly cheap and quick to overpromise on potential outcomes. Other proposals seemed incredibly expensive and promised only minimal results without extra charges for “add-on” services.
We knew there had to be something in the middle, so we started working our own network of contacts and reached out to some clients to find out what companies they were using. In the end, we contacted three firms that came highly recommended to us. The best proposal we saw was one that was flexible and offered their competency with a scalable contract that could meet our growing needs.
Related Article: Get on the Same Page: Collaboration Tools for Small Business
If we maxed out our contract, based on the number of clients we currently had and the number we had forecasted would take advantage of our marketing services, the total cost for the contract that we found most favorable would cost us more than $100k in the first 12 months.