Tweet

The False Economy of “In-House”

Written by:

Article Overview: The False Economy of "In-House" - Small businesses need to watch every dollar. Unfortunately, some expenditures seem reasonable but are, in reality, quite costly. These are called "false economies" and they can drive down your revenue even while you think you are saving money! In this article, learn about one classic false economy and discover how you can eliminate the problem and save money in your business with a solution that seems more expensive!

The False Economy of “In-House”

The False Economy of "In-House"

A false economy is where a price seems to be better than it really is. Consider the classic example that most people face at some point in their lives: When the car is leaking oil it can seem like a hassle to bring the car in to the shop and the potentially high cost of a new gasket and oil filter can seem prohibitive. So, the vehicle owner instead just tops up with oil every week.

It seems cheaper: A dollar or two for oil versus quite a bit more for a gasket and filter. And yet, that dollar or two adds up fast. And add in the time it takes to buy oil. This is a classic false economy: the idea that something is cheaper simply because it seems cheaper at first glance.



And yet, as you drill down into the real numbers, the true economic picture becomes clearer. 



The car isn’t the only place this happens. It happens in business all the time. Businesses that still operate under the “old school” notion of having in-house staff to do the work are the ones suffering from the false economy. They hire in-house staff because they might pay them $15/hour (to use a nice round number for an example). They think they’re saving money instead of hiring an outsource service provider at $20/hour (again, to use a nice, round number).



But they don’t consider the other costs: Office equipment. Office overhead (like light, heat, power, etc.). Benefits. Bonuses and incentives.



Or the other costs that aren’t quantified but come with the territory: Coffee breaks, washroom breaks, lunch breaks. Limited productivity for the first hour in the morning and the last hour of the afternoon. Limited productivity for the entire Monday morning and the entire Friday afternoon. Office romances. Use of the telephone for personal calls. Who is stealing all the paper clips? And who answers the phones on the weekend (because it’s so hard to find an employee who wants to work Saturday)? And what happens if there isn’t a lot of work one week? They’re paid to twiddle their thumbs just in case the phone rings.



This is the true cost of doing business with in-house employees. But for the same dollar figure (or just a little more), business owners can get an outsource service provider that actually costs much less: They bill for the time they work and nothing more. There are no office or overhead expenses. They scale with your business needs, so if there’s no work, you don’t pay them (and if they phone rings, they’re “on the clock” for the phone call then off the clock after it’s done).



Many businesses have accepted outsourcing in the past for highly specialized work that couldn’t be done in-house; often work that was a one-off project like a website or the design of a new company logo. But more and more businesses are realizing that many of their activities can be delegated outside of the company at a much lower cost than if they were done in-house.



So, if you’re a business owner, it’s time to consider whether your business philosophy is motivated by a false economy that incorrectly quantifies costs, or by a true economy that appreciates the real costs associated with employees and the lower costs associated with outsourced staff.

Related Articles
  Are You in the Midst of Midlife Career Change?!
  Accepting a New Job Offer – To Take or Not to Take?
  Make Real Money Online, The Real Deal Step by Step
  Sound As A Pound....For Now!
  Increasing Your Profit By Looking At Your Data

Article Tags: false economy, first glance, friday afternoon, gasket, hassle, heat power, house staff, incentives, monday morning, notion, number br, office romances, oil filter, old school, outsource service provider, productivity, real numbers, rsquo, saving money, vehicle owner



Related Forum Posts
Re: Fear of Success - You don't need to fear success. We should embrace it. Fear is define by a man of God as False Evidence Appearing Real. the meaning is what we fear most does'nt come to pass
Re: New member from the USA - [quote="Mal Tindle":rpz5ne6d][quote="Ethical":rpz5ne6d][quote="Mal Tindle":rpz5ne6d]Hi Ethical, Welcome to the forum, it's good to see new people getting involved in any forum and you have picked one of the very best. I haven't been a member too long but am a regular now because of the support and resources available here which are most impressive. I see you work in the recycling of ink cartridges and I wish you well with that and attracting traffic to your site. best wishes, Mal.[/quote:rpz5ne6d] Thanks for your welcome,Mr.Mal,are you located in the USA,or the UK o'GB.or some other locale?,and if may I have your permission to ask,What kinda(kind of) entrepreneurship are you involved with?,as anything in life,education,and correct info...is the key to success,and Profesional forum attendance,is enlighting.Thanks again for your welcome.[/quote:rpz5ne6d] Hi Again Ethical, Thank you for your reply, I live in the UK and don’t have a product as such to sell like you but I am an Internet Marketer and owner of the ‘Work From Home Gems’ site below. I specialise in finding and recommending different ways to make money on the internet as an affiliate. I very much enjoy working in this sector and hope to work full time from home in the future. Don’t forget to set up your signature as recommended by GT above as this is a simple way to ad the URL of your website and this will show on every post you make, best wishes, Mal.[/quote:rpz5ne6d] Howdy (Hi and How do you do,in Texan): I'm currently working from home,and with My lifelong ltd. business experience(which is not as limited ,As I humbly stated ,I hope to utilize (utilise in British English),some knowledge to help me be somewhat successful.('California is a "brand new game" to many outsiders,inc. a West Texan ,like me,but I somehow managed above expectations). My ambition at this stage of my life(being formally retired),isn't like when I was younger,and accomplished a lot,'way beyond my ltd. means', as I met with a lot of small and big successes,as I didn't had the luxarious option of losing or failing,in order to survive,I had to'make it'. In today's USA Economy and it's negative implications on all of retirees(pensioners) and disabled folks, It became vital to be able to function with some amount of success...or face hunger,if not worse,in the USA we have a 'nation' of homeless folks,that are unaided.most of them are either disabled,or 'senior citizens',or both. so failure is not an option,currently I live in Southern California,which is controlled by an inhumane and dishonest Reublican governor,that cut income from both disabled,and the aged disabled(With false excuses) .while cost of subsisting here is skyrocketing without price controls.so any ltd. additional income is a 'blessings'.Our country economy,as the whole world is already aware is continue to fall,(I was extremely surprised,like many others) that our country borrowed huge amounts not only from its allies(like the UK of GB, UAE,Kuwait etc.) but also from the P.R. of China(ain't it amazing,it's the greatest 'accomplishment' of the previous Bush administtration),It was done prior to our current wonderful president Obama times,But Obama administration was really honest and transparent about these facts,and additionally acted in the best interests of our country,and improved our country situation so dramatically,so at least we're hopefull.The Praises that our current administration deserves are long.Folks like me try to cease any opportunity to survive ,I'm not aiming to'make a killing' but just survive the onslought ,and 'so far so good',I already started on my own to reach to local pro.(professional)folks,that I had the pleasure to know,and there are real hopes,I already sold on my own 1st ltd. batch of 'virgin'(only one time used) 'empties' (Empty ink cartridges),and even earn already a minor sum of 'income',and time'll tell.My honest belief is just as long as one could act rationally there 're hopes for positive results.Thanks for support and advice,I may put the website into my signature a little later,meanwhile ,I'm so busy just 'to keep my head above waters'.Thanks again.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

How to develop the best lateral thinking skills

How to choose your executive coach -1

Leading from Authenticity is a Beautiful Thing

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.