Why Do Companies Choose To Outsource Work

Why do companies choose to outsource work? Does  it sound like it's anti American to hire outside of the country? So, what I'm going to share in  this episode is really just paint that picture.

Like why do companies do it and is it the right  thing or is there a better way? If you're open then by the end of this episode, I think you  might have a paradigm shift around outsourcing. Okay.

So, I've given myself a pretty big  task. I've asked you to be open but I've said that I'm going to cause a paradigm  shift. And that's my hope, I certainly had a paradigm shift when I learned about it as  well because I love the United States of America.

I love being patriotic, right? And you see  companies that say, oh yeah, made in the USA. And you think, ooh, that's cool. 

I want to support our country. So, I'm going to buy these products that say  made in the USA. But I actually want to paint a picture and show how outsourcing  is really really helping our country.

So, let's start by taking a step back and just  look at what it's like to hire an employee. So, let's say I'm a small business owner and there's a lot of hats that I wear. I've got a lot of responsibilities, right? 

From the marketing or the sales to the fulfillment. Whatever type of business  you have, there's a lot of hats. I mean, you have to do the bookkeeping, you have  to lock up, you have to be the janitor.

So, the thought of hiring somebody and really  duplicating yourself. Because if I've got 8 hours a day or more realistically when you're  starting out it might be 12 or 16 hours a day in your business, right? But let's just  say 8.

If you're working 8 hours a day, you can only do so many things, right?  You can only fit so much in a day. And when you hire somebody else and  now they're putting in 8 hours a day, that is amazing.

It's really amazing. There's just  so much that you can do because you can do some of the tasks and have that other person do some of  the tasks. But it seems like a really big step, right?

It seems like a really big step because  to hire somebody, you've got to pay them. And a USA wage, what might that be? It might  be $3,000 a month, 4, 5,000 a month depending.

So, you've got to get to a level of profitability  in your business to where you can afford to do that and still be profitable. And you  have to understand what profit means, okay? Because profit does not mean  you're getting paid, that's an expense.

So, your payroll or your salary to pay you  for your own livelihood out of your business, that's an expense. So, you take all  your business revenue and you take the overhead expense, your expense. And if  you hire another employee, their expense, then whatever's left over that is profit.

So,  you've got to make sure that you've got enough margins that if you hire somebody for that large  amount that you're still going to be profitable. So, just for comparison, let's say that the  amount you're going to pay somebody is $4,000 a month. Okay, imagine now what if you could  hire that same person or that same skill set for only 400 dollars a month.

Like, whoa!  That huge barrier just disappeared. Like, you could probably hire somebody  way sooner for 400 bucks a month.

That question about profit margins  like, can I still be profitable as a business? Can I still succeed? Can I still  exist?

If you're only paying $400 a month, but is that realistic? Well, I'm here  to tell you there are people around this globe that would love to work for you and  they're actually asking for less than that. I've got other episodes where I've  talked about what's the right amount to pay.

somebody that you hire overseas.  So, let's just stick with that number 400 and 4,000. If you're going to hire somebody  in the USA, you pay them $4,000.

Let's say you hire somebody in the Philippines and it's  $400 a month. That's actually pretty realistic. Now, wrap your head around this.

4,000 a month.  You could hire 10 people in the Philippines. So, not only 8 hours is going to be added to  your business when you hire one person but 80 hours.

So, you're going from you putting in your 8 hours. And for $4,000, you can hire 10 people to provide 8 hours  each. So, that's 80 additional hours a day.

Like that's a little daunting to  think about of just going from yourself to what am I going to have  people do for an additional 80 hours a day. But think about it this way.  If you took your day, your 8 hours, maybe you're doing 1 hour on this task, one hour  on this task, one hour on the third task, right?

So, let's say you've got 8 different tasks  that you're doing in the course of a day and now you can allocate 10 hours to that  task and 10 hours to that one, right? So, you can really refine and improve your  business. You're really able to scale what you're offering.

Now, you might have a  vision of where you want to take your company. And let's say you're looking out  into the future and you think. Man, one day I'm going to have 10 people.

I'm going  to hire 10 people. We're going to be able to do a lot of things and you hiring one person.  So, a company of 2 versus a company of 10 or you plus 10.

That's drastically different.  Drstically different in what you can do. The services that you'll be able to provide,  the efficiency.

Imagine you and 10 people all moving forward towards one mission. So,  that's what's possible. So, we're having this conversation about why would companies outsource  their work?

Why not hire people in the USA? Well, for small businesses which is the type  of business I have, I could not exist. Like I hired 23 people full time in the  Philippines and my payroll to them is 15,000 a month.

So, you can do the math and divide that  out. We provide a huge service to our American clients and that service just could not exist at  the price point we are for them. If I had to pay 10 times the amount for my team, I would have  to charge 10 times the amount to my clients.

So, I've been able to create a service that  only big corporations have ever been able to afford. But I've been able to create  that same service for small businesses. So, small businesses are thriving.

Now,  here's another example that you've seen that you've used whether it's your  local grocery store or Walmart or Costco. We benefit so much from outsourced manufacturing,  outsourced goods. Like, this phone.

I'm excited. I'm getting the new iPhone 15 shortly here.  This is the 11.

This phone is amazing, right? And it's not a cheap gizmo. I mean,  I've got the expanded capacity and whatnot.

Maybe I paid $1,500 for this device. But if  this were manufactured 100 percent in the USA and the great blessing that America has of our  financial prosperity and being able to leverage and hire people from other countries, I  mean, I'd probably have to pay 10 times. Can you imagine?

Would I have bought this  phone if I had to pay $10,000 or $15,000 for it? I don't think I would have. And  I don't think you would have it in your pocket either.

So, when I started my  company and I started looking at all the tasks that I was doing and I have  the option, I can bring somebody else. I can get their help in the day. Would  it have been smart for me at all to hire somebody for $4,000 a month.

If  somebody out there was saying, hey, I've got this skill set and I would love to  work for you for $400 a month, it would be a huge blessing for me. Please hire me. How can  I justify that decision?

I would definitely. . .

It totally makes sense. So, think  about it from the USA employees perspective. Let's say they are a  video editor.

And they say, well, you should hire me. I need $4,000 a month. But  what opportunity do they have?

Because they've got the skill set just like somebody in the  Philippines might have that same skill set. But they happen to be in America and they need  to make $4,000 a month to be able to afford their cost of living. But they, that editor has the same  opportunity as I do.

They could hire somebody. in the Philippines. But they could lead them.

They  could manage them. They could probably create a better company than me because they understand  the editing industry far more than I do. The problem comes when the editor says, I'm  entitled and you shouldn't hire somebody else that's a better value because I'm  here and I've got this training and I'm entitled to you to pay me $4,000.

So,  I'm curious. Did I cause a paradigm shift? I'm guessing that some of you will  say yes and some of you will say below.

Let's have that conversation  below. I'm very interested.