Today on Amazing FBA it’s all about outsourcing. We had Aaron O’Sullivan on for Episodes 243 and 244 to cover big-picture outsourcing. Now it’s time to get down to the nuts and bolts of why I’m outsourcing my washing up to expand my Amazon business.
The pain of inaction sometimes needs to be greater than the pain of action for us to get moving. There are only 24 hours in a day. It has become painfully obvious that mundane tasks are consuming my life. It was a beautiful day in London today; if you have ever spent any time here, you know how rare those are. As a result of outsourcing some of my domestic activities, I even got to go for a run. I’ve realized that if I’m going to be working, I should be doing things that provide value to the listeners and readers of Amazing FBA.
Every minute I spend washing up or pushing papers is a minute not spent delivering value to you, the very people who come to Amazing FBA for help, whether that’s help getting an Amazon business through its first private label product or support to scale to 7 figures.
Nurturing Your Relationships While Building a Business
One of the things most people don’t think about when starting a business is the strain entrepreneurship can put on the relationships that matter to them. Even the most supportive husband, wife, close friend or family member can feel forgotten or left behind by the startup entrepreneur.
At first, it can be challenging to build up enough capital and resources to give yourself the time you need to set aside to nourish the relationships you share with the significant people in your life. As time goes on though, it’s vital that we as business people find ways to clear space for our loved ones. Without outside help, for most, fostering relationships with the people who matter to us can be difficult if not impossible.
Outsourcing the Ordinary Tasks to Focus on the Valuable Ones
The idea of building a team, for me, is exciting. No matter who you are or where you live, you can find help. I, for example, was able to record today’s podcast a second time merely because of the support I received in washing up around the house and cleaning my kitchen. Without that help, I wouldn’t have been able to bring the listeners of Amazing FBA the same value. In addition to the value, outsourcing provides me personally, for every task I outsource, I’ve created a job for someone else.
How to Justify Bringing in Paid Outside Assistance
It can be hard to break through that mental barrier and finally decide to hire a virtual assistant or housekeeper. The most straightforward argument or hiring help is the idea of £10 per hour work vs. £100, £500 or even £10,000 per hour work. If you’re washing up, that’s a £10 or £15 an hour job maximum.
Now say instead you spend half an hour negotiating £1 per item off of a 5,000 unit order. That’s a £10,000 per hour job. If you’re too busy to do the negotiating because of some washing up, you’ve thrown £9,985 out the window scrubbing dishes! Most examples won’t be this stark, but you’ll never get to the £10,000 per hour job level if you’re stuck doing the £10 jobs.
The first step in understanding opportunity cost is understanding James Schramko’s Effective Hourly Rate. To find effective hourly rate, you take (revenue – expenses)/hours put into a project.
Let’s look specifically at how to find the effective hourly rate for an Amazon product:
Say you do 10 hours of work a week for 3 months research PLUS sourcing = 130 hours
Then you work 15 hours a week for 3 weeks to launch a few weeks later when you finally receive the product = 45 hours
Now let’s say you spend 2 hours a week on maintenance for 1 year = 100 hours
That’s a total 275 hours. In other words that’s 34 8-hour work days or about 6 weeks’ full-time work.
Revenue: 300 units/mo @£15 each x 12 months = £54,000
Profit margin 20% = £10,800
Effective Hourly Rate = £10,800/275 = £39
If you end up a year behind because you’ve gotten lost doing menial tasks and washing up, it will cost you £39 an hour. If you instead worked those 275 hours on developing and bringing your product to market, you’d have made £10,800. That’s a substantial opportunity cost.
Learning Opportunity Cost
A simple Google search for “Opportunity Cost” can render hundreds if not thousands of results concerning financial opportunity cost. The lesser talked about iteration of opportunity cost is learning opportunity cost. The idea of learning opportunity cost is quite simple; the things you do most often become the things you do best.
The interesting part about learning opportunity cost is that most jobs, especially unskilled labour, have capped ceilings regarding hourly rate. No matter how efficient you become at cleaning house, it’s unlikely you’ll ever reach an hourly rate higher than about £25 per hour.
On the other hand, the top Amazon consultants can bring in quite a healthy percentage of a business’ net revenue. My own rate for this consulting is about $1,000 per month per SKU. So in terms of learning opportunity cost, the time I’ve spent learning the craft of selling on Amazon has provided a much more lucrative ROI than I would be getting spending my time washing up for £15-25 per hour.
Taking this a step further, the pure ability a seller has to develop a business on Amazon can itself have value. Companies are valued based on profit. A business that makes £10,000 per month in profit, or £120,000 per year, can fetch 2x-3x that much on the open market.
There is enormous value in finding and managing outsourcers and learning to scale a business. Your ability to grow a business faster while at the same time not burning yourself out is incredibly valuable. The more time you spend building systems and learning to manage other people the better at it you’ll get.
Looking at Outsourcing as an Investment
Most people don’t have any problem spending £1,000 on courses over a 12 month period but shudder at the idea of an expenditure of £10 per hour on a virtual assistant or housekeeper. On the surface, it seems logical to view the money spent on these courses as an investment in your future and the money spent on outsourcing as a drain on your personal and financial well being. It’s crucial as businesses grow for business owners to view outsourcing as an investment as well.
Sometimes you have to justify the expenditure required to bring in help for the menial tasks that are taking up your time. If you’ve been telling yourself for years, “I’ve been meaning to do that, but I just don’t have the time,” you need help! The courses aren’t going to help if you don’t have the time to implement the things they’re designed to teach you.
A Bird in the Hand is Worth 2 in the Bush
It’s an old adage we’ve all heard a million times. It’s true. Future income is uncertain. Taking unnecessary risks with your money can put you, your livelihood, and your family in danger. But the nature of e-commerce is non-linear. Risking one bird now could net you 10, 20, or even 1,000 birds later on. Jeff Bezos speaks on this topic often.
Say you’ve got a product that your projections say will give you a 20% chance at making £100 per hour. Now suppose you’ve got five, but you don’t have time in between washing up and cleaning house to implement them all. It’s time to outsource. Even a 2% chance of making £1,000 an hour should motivate an excellent entrepreneur to jump. Don’t overspend, but as soon as you find reasonable and reliable help, take it.
It feels good to Command not be Commanded!
This statement isn’t an ego trip. Managing people can be incredibly energizing. It puts a premium on your time. Learning to lead is great for your mood and motivation. If you’re overwhelmed, you need to break that feeling. Building a business is overwhelming, but with the right help, you can find relief.
There are only two ways to increase the profits of your company: Increase income or decrease costs. It can be natural to focus on keeping costs down when you’re first starting out, but if your turnover is at zero there is only one way to grow your profits; create income. If you’ve got no time to increase income, the only way to grow your business is to buy your time back by outsourcing.
When you decide to start outsourcing, start slow. You don’t need to go out and hire full-time live-in help for your domestic tasks or even hire a full-time virtual assistant for your business duties. If you need domestic help, have Tesco bring you deliveries of groceries instead of going there personally. Use healthy ready-meals or takeaway. Get someone in to clean your house or workspace. Go to taskrabbit.co.uk or airtasker.co.uk and hire someone for just a few hours per month or week.
For existing business tasks like shipping, invoicing and credit control, get a VA. Go to FreeeUp.com (affiliate link), Fiverr.com, or UpWork.com and get some of the low-value tasks off your plate so you can focus on the ones that can become £100, £500 or £1,000 per hour tasks six months or a year down the road. You can outsource everything: market research, sourcing, manufacturer liaison, listing creation.
You can even outsource international brand launching through services like Judolaunch from Episodes 247-249 with Chris Rawlings. Speaking of listing creation and optimization, you can now contact me, Michael, at Michael@AmazingFBA.com and include the heading “Listing Optimization” to outsource listing creation and optimization to myself and the professionals at Amazing FBA.
If you need more help getting started with outsourcing, contact your mentor or ask your Mastermind group. The best resources are often the people who have already been through what you’re going through.
Watch Why I’m outsourcing my washing up to expand my Amazon business
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