Episode 8: Should I Hire Freelancers Or Employees?
7 tips for how to decide and succeed
When it comes to growing a business, you can’t do all the work yourself… you need people to help and contribute. But the question is, do you get permanent employees, or can you get by with freelancers?
There are pros and cons to both. In episode 8 of the Elite Entrepreneur show, Niel Malan takes a look at whether you should “insource” or “outsource” your staff, and gives you seven tips for how to decide and succeed.
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Welcome back to episode number eight of the Elite Entrepreneur Show. Today we are going to be talking about should I hire freelancers or employees. If you are brand new to this show, the Elite Entrepreneur Show is all about helping high growth, aggressive, ambitious entrepreneurs to become elite entrepreneurs by making unique distinctions that can help us to grow our empires faster than ever before. Thanks so much for tuning in. I look forward to spending the time with you today. I’m going to talk about a really important subject today, which is should I insource or should I outsource?
In case you haven’t tuned in yet, in episode number six, I spoke about whether you should go solo or whether you should build a team, because I think a lot of people don’t really have clarity. Should I stay a one man band, so to speak, or should I really grow a company? A lot of people don’t really know how to make that decision. In case you haven’t tuned into that episode, just go to www.eliteinc.com/6. I do recommend you go to that before you go to this episode. On episode number seven, we build on episode number six where we spoke about if you are going to build a team, what are the building blocks? What are the keys to success? I believe this information is absolutely crucial because so many of us have tried to succeed with recruitment and we failed and we started believing, listen, I can’t do it. It’s too risky.
If I speak for myself, I remember there have been periods of my life where I just wanted to not have any employees. I remember in 2007, I went through a divorce back then and I did a cleanup of everything in my life. I thought about, what all the things that irritate and frustrate me? I actually read the Richard Koch book, Living The 80/20 Way and I made this list of all irritants in my life and decided to get rid of it. Back then, it was employees. I was sick and tired of employees and I decided to just go on my own and to build my consultancy. I did it for a while and it was insanely profitable because it was just me. I got burnt out because it was so hard doing everything on my own. Eventually, I decided, listen, something has got to give.
I started going back into building a team again, but I realized that there were skills that I lacked in terms of building a team successfully and I spent a lot of time developing those skills. In episode seven, I gave you some building blocks on how to succeed in building a team. So I highly recommend that you through that. If you haven’t yet, just go to www.eliteinc.com/7. Today I’m going to build on those previous two episodes which talks about should I insource, meaning should I employ people, or should I outsource, meaning should I go with freelancers and contractors?
First of all, a bit of history. In 2006 Tim Ferriss wrote a book called The 4-Hour Workweek, which really changed the way we think about work. His premise was that we spend our lives working and never enjoying our lives and we are hoping for a comfortable retirement one day so that then we can go walk the golden beaches of the world. The problem with that is that if you die of a heart attack or get a stroke before the time, you never get there.
Most of us will not have enough money to retire because we don’t have a proper retirement savings plan. So many, many people that thought they would have a comfortable retirement, can’t retire. The third is often we are old, grumpy and we don’t actually feel like walking the golden beaches in the world anymore. But the biggest problem is, why delay quality of life?
He spoke about the new rich. The new rich really talks about when you have your autonomy, have your time. You’ve got the ability; you’ve got flexibility and the ability to do things while you are working and to work in spurts of projects instead of doing the 9 to 5. He puts forth a really good argument. To overcome the challenge of building a business, he proposed that you build a freelance army of people. A virtual assistant can answer the telephone, can do client service inquiries, can ship products if you are in a physical shipping product business, can do website updates, search engine optimization, all that kind of stuff. He is 100% accurate with it, 100% accurate.
Tim Ferriss really introduced us to this idea of freelancers. Back then there was a freelance portal called Elance and then later on oDesk where you could source all these freelancers in the Philippines and India and all over the place, really cheap labour, high skilled, high quality. Subsequently, both of those companies merged to become a company called Upwork. So you’ve got all these freelance portals. You’ve got Upwork, you’ve got Fiverr (with two R’s), 99designs for getting quality designs art. There is a litany out there. There are freelance portals for copywriters, for software coders, for legal… There is a crowd called UpCounsel where you can go and get, based on the scope of work, you can get legal work done.
There is a really strong business case for utilizing freelancers to grow your business, but it’s also not without downsides. Everything has upsides and downsides. In this episode, I’m going to talk to you guys a little bit about the upsides and downsides of hiring freelancers and I’m going to talk to you about the upsides and downsides of employees. With that in mind, I’m going to give you guys seven tips for how to decide, should I insource or should I outsource and just seven tips on how to succeed. Let’s dive in.
The first question is freelancers, what is the upside to hiring freelancers? Well, first of all, it’s much cheaper. If I look in South Africa where a lot of our employees are, if I look at a design resource, for example, if I looked at a graphic designer, if I had to get 160 hours a month out of a graphic designer, the costs per hour compared to if I had to hire a graphic designer in Pakistan for example, it’s about a third cheaper. In the US it’s probably about a sixth cheaper to hire someone in Pakistan or in India or one of these countries where the base salary rate is very, very low. So it is much cheaper for items of work. There is a large supply. If you are looking at something like graphic design, SEO writing, that kind of thing, you can find literally hundreds of thousands of people globally. Sites like Upwork make it really easy to go and post a project and to just get dozens and dozens and dozens of people submitting bids for your work.
One of the things I love about freelance portals is you can access other people’s previous body of work. You can see the last 20 or 30 or 50 projects that someone does and how well they were rated, what kind of work that did, the people that left comments, what kinds of comments did they leave, was there a language barrier or was this person well proficient in English.
I find it a little bit more scientific for me to do research on a candidate as opposed to employment because there I really have to do reference checks, I can get a hold of three people, and you don’t always quite get the truth.
A very large catchment area, the globe, the world is your oyster. You can hire all over the world.
It’s really low risk because you give someone a little bit of work, they don’t do it well, you simply get someone else. It’s a bit of a schlep to go through having to get rid of one person and get the next one, but listen, the same applies to employees.
There is a really quick turnaround time. You don’t have to go through extensive interview process. If you need someone today, you can run a project today and tomorrow you can have someone start with the work. So there is tremendous upside in hiring freelancers. For those of you guys just starting out that don’t really have the money for salary and don’t really have the appetite for risk and this may be the first time you are going to be employing people, it’s definitely something worth considering right.
Some of the downsides to freelancers that I’ve experienced as well as some of my graduates and students have experienced is sometimes you get lower quality work compared to an employee. The reason for that is because an employee is going to work only in your company and they become really good at what they are doing, whereas a freelancer has 20 or 30 or 50 jobs on the go at any given time.
That’s not always the case. Sometimes you do get incredible quality work, but if you are going to hire 10 freelancers compared to two employees for the same work, you often find slightly higher quality work in employees. So that is something to be aware of it. It will often take you a few freelancers before you find the right one. I think a lot of people find this very frustrating. I often get people coming to say, “Niel, I hired this person in India, they looked great and they didn’t work out, freelance is a load of rubbish”.
Guys, come on, if you had one failure with it, it doesn’t mean freelancers don’t work. It means that freelancer didn’t work. To be realistic, I would encourage you to expect to go through two to three freelancers to find the right one for a particular kind of work. If you could embrace it up front, it’s not an issue. You really just see it as almost like a vetting process. I’m going to give you a little bit more information about that in the seven tips.
Many of the people are non-English speaking as a native language. So there are sometimes language barriers. We find, for example, if you are looking for someone to design websites, build apps, software coding, you often get people in the Eastern Bloc, you know, companies in like Ukraine or Russia or India. There is sometimes a little bit of a language barrier, which can be a little bit frustrating.
I generally try to find people that are either native or they are very fluent in English. I really look, if I’m going to hire a freelancer in a different part of the world, I’m going to look at all the comments, what people said, if there were language barrier issues. I’m going to interview that person telephonically or on Zoom to make sure that you don’t have that challenge.
But the biggest challenge is you are not really building your brand or a culture or a business that can work without you there, because the freelancers are freelancers. They can’t really contribute towards your culture. They can’t really contribute towards building your brand and to building a company.
You guys will know from episodes six and seven that I am a bit of an advocate of building an employee base, because it just makes life easier. In certain ways it makes it harder, but in many ways it makes it easier. I think all things considered, it is worthwhile at some point to start building an employee base. You may not start with it. You may start off with 6 months or 12 months and your first year only doing freelancers or only yourself, but I wouldn’t keep that up. It’s a recipe for burnout.
Let’s look at employees. What are the upsides? Well, first of all, there is dedicated focus. All the people are doing is they are focused on your business and if you become good at setting energizing goals for people and challenging them and hiring great people, generally you are going to get much higher quality of work, especially on really strategically significant areas in your business, for example, your product development or design. That kind of thing you want to insource. You have more control over the outcomes because you’ve got greater resource availability. Someone is working with you night and day, so you’ve got a lot more influence in terms of quality. You can tweak it. You can build closer relationships with folks. The turnaround time can be a little bit quicker with employees and it builds a culture. It builds a culture. You guys will find out as I go through the Elite Entrepreneur show that I’m huge on culture. Everything is about culture. What you want to do is you want to hire the right people that are similar and appropriate for your culture. I’ll give you lots of advice on how to do that as we go on with this series.
Ultimately, the goal is that you can build a business that will work without you there. Let me talk to you about why you should aspire to doing that. A lot of people say to me, “But Niel, I love my job. I love my trade. I’m a graphic designer. I love graphic design. Why on earth do I want to build a business that will work without me there?”
Well, let me tell you that life happens. You don’t know what’s in store for you. You don’t know if there is a death or divorce or disability, a necessity to relocate, extended illness that will necessitate you to have a business that can work without you there. I’m going to give you an example. My late sister, Shakti, she was the most healthy person that I knew. She was organic. She was vegan. She did everything right. I don’t think she smoked a cigarette in her life and I think she probably had five glasses of wine in her entire life.
She had a roaring successful training business. She trained in 36, 37 different countries, and she was really on a great wicket. And she developed breast cancer. Breast cancer is in my family and unfortunately, she also got breast cancer. Initially, she tried to remedy it on her own, being from the alternative health cloth, cut from that cloth. Unfortunately, it spread and she got metastasis in the bones. My sister had an extended period where she couldn’t work. She had about a year or a year and a half where she had no income because she couldn’t work. She couldn’t show up to work. Unfortunately, she passed away. It was quite a sad event at the age of 49, she was still very young. We are all going to die. I was okay with the fact that she passed on because she had led a very full life.
For me, the sad part about the entire thing is how much she suffered during that one, one and a half years when she had no income because she had to rely on family. Obviously, we loving and willing to supported her to a degree, but I don’t think anybody wants to do that. There is embarrassment having to rely on other people. So there are income continuity issues.
Also, at some point you may get tired of it. The things you are passionate about now, you may not be passionate about five or seven years from now. I often find this. People say, “I’m just looking for the next challenge. I’ve been doing this thing for 17 years. I’m tired of it. I want to do something else”.
Guys, you don’t have to close your business and then start another one. You want to sell it. You want to have an asset. If you want to be able to take holidays, go travel for a month, you don’t want your income to stop and then to have no business. Do you know what I mean?
I do recommend that part of your entrepreneurial journey you do build a business that can work without you there.
Why the “without you there” part is because it’s a health check to see if you build a business successfully where your leadership team can run the business and ultimately you may have to put in a COO or a general manager of some sort. But that’s an acid test to whether you’ve built a viable business that can ultimately be sellable, because no investor is going to buy your business or no person that wants to acquire a company is going to buy it if you are integral to the success of that business beyond the initial one or two years handover.
I just wanted to quantify why I say you should aspire to building a business that can work without you there. Guys, don’t try and do it in the first year from startup. That’s ridiculous. That’s never going to happen. It will take you three to seven years to build to that space. Your first year or two is hustling, getting clients, getting product market fit right. Then it’s getting your first little base of employees, getting that right, then getting some traction, growth and putting a layer of people in place. So it’s not a quick process to build a business that can work without you there. But I would say most entrepreneurs can achieve that a in a three- to seven-year timeframe, depending on how skilled you are.
Anyway, that aside, there are downsides to insourcing. There are big downsides to hiring people. First of all, fixed expenses. If your income fluctuates a lot, if you don’t have proper marketing funnels, your salary bill will stay the same. So you must have income predictability before you go and put people, fixed expenses on the payroll. That is absolutely vital because it increases your risk profile. For example, the people who graduate from our Agency FastTrack program, that by the way, they are wildly successful. We’ve got a 95% graduation rate and I think we are now pushing 100%. Every single one of these people who graduated already have retainers and they onboard two or three more clients.
What I love about that business model is that my advice to them, and those of you guys who are going through the programme or graduates, I want to remind you, build up your agency until you’ve got 7 to 10 clients. You can build up to comfortably about $10 000 to $15 000 even $20 000 a month retainer base with only one or two freelancers. But you will hit a bottleneck where you just don’t have enough time and the freelancers just don’t work anymore. At that point you need to employ, but by then you’ve secured the revenue. You see you’ve got that stable retainer revenue.
So if we are bringing in employee for $2 000, $3 000 or $4 000 a month, you have the $15 000 or $20 000 secured. So it’s a very low risk way to then employ.
What you don’t want to do is start a brand new business. You don’t yet know how you are going to get predictability over your income and now you’ve got all those big expenses. So be sensible about when you employ.
It requires more leadership and management in the beginning. It will require more of you in the beginning to train and onboard your team. If I take myself as an example, we’ve just employed… A couple of months ago, we got a brilliant guy, our head of talent, Ruaan. I need to spend time with Ruaan, two sessions a week to help him understand our culture and our vision for the business, what types of people we want to employ and who to go after and writing the scorecards for people that we want to hire, because without me providing that guidance to Ruaan, I will put him at a disadvantage. So it takes some of my time to do that.
With our COO, Emma, I’m spending time with her on our fundraising round and the vision for the new product, because without the time with her, she can’t really excel. We just got a new Head of Brand and Content, Francois, and he is the guy, really, you know making sure him and his team is getting this marketing episode right. The same principle applies. I’ve got new people starting all the time. What I’m currently doing is I’m capacitating my leadership team so that they can capacitate their teams. Initially, you are not going to have a leadership team. Initially, you are going to have two or three employees, but you must provide leadership and you must spend time with them. That’s the only way you can build a company, so you’ve got to be aware of that and you can’t resist it. So there are different downsides to hiring employees as well. It’s not all moonshine and roses.
Now, what should I do Niel? You’ve given me pros and cons, what now? Well, guys, it really depends where you are in your business, what your vision is for your business, but I’m going to give you guys seven tips to succeed.
First of all, it’s never either or. It’s always both. In our company right now we have 30 full-time employees. We probably have about 60 or 70 contractors that are doing amazing work for us. So I encourage you to not think either or. I want you to think both. There are just different reasons why you sometimes have a freelancer and why you go the employment route. I’m going to get into those in a second.
Before I go into the practical tips, I want to talk to you about your own psychology. Don’t resist either. Don’t resist either. Have great mindsets about it. If you failed with employees in the past, accept the fact that you didn’t have the skills to do it. Skills can be learned, right? If you’ve had frustrations with contractors in the past, accept the fact that maybe you were new at it and you weren’t doing it correctly and you can do it better. I don’t want you to resist either. I don’t want you to resist, “Goodness, I don’t like managing people, the cost involved”, all stuff like that. Guys, if you want your time back and if you want any semblance of a life, you want to build a rock star team. Let me tell you something, there are incredible people out there that can help make life easier for you. I’m here to attest to it. Because since the moment I realized how to build a great team, my life is honest to God, easier.
Certain aspects of it are hard, is much harder. I’ve got a much bigger payroll. My responsibility is much bigger; there is no doubt about it. I have to spend time building quite a few different departments. But in many ways, it’s much easier because I’m not doing a lot of the nitty-gritty work that I’m really just not good at and rising to my own areas of competence. So embrace it. Embrace it. Have a wonderful mindset about building a team. What you do is start with the highest volume, low-risk work and start on outsourcing that.
Let me give you some examples. Things like responding to inbound phone calls or responding to emails. Yes, you will have to teach a freelancer how to do that and to do it well, but that person can free up a couple of hours a week from you. Doing your own accounting and bookkeeping; guys, that you can outsource you. You shouldn’t have to do it yourself. Again, you are going to have to spend time with the freelancer to do it, but you shouldn’t have to do that kind of work. Doing your own diary management and scheduling and buying your own stuff online and so forth, you can hire a virtual assistant, a personal assistant. That can take massive amounts of time off of you. I would suggest making a list of all the tasks that you do currently that you think can be outsourced to someone, but they are not massive risks. So if someone screws up a particular thing, it’s not going to bring down the house. Start with that.
Then what I want you to do, I want you to go and post jobs on Upwork, Fiverr, wherever you are going to go and source people. I want you to expect to go through two or three people before you find a good one. The way you do it, you do your best obviously to look at ratings, to look at the skills required, the language, et cetera, et cetera. But then what you do is you create a small project for two or three different freelancers. You take your top three people, you give them a small project and you see how each one does. Because that way you can take the cherry and you can make that person a more semi-permanent part of your team. Trust me, reviews only give you one view. They may be working fantastic with other people, but not with you, for some reason there is no chemistry or the type of work you require is different from where they excel. So rather put two or three people to the test on small projects, see how well they do and from there you can make a decision who to really go with.
What you now do as far as insourcing, as far as employing a team is concerned, what I want you to do is I want you to identify your highest leverage area. Where can you have the biggest impact on your business? For many people, it’s a full-time executive assistant. After you’ve got that, you might want to get the marketer or the salesperson. At some point, I realized I’m doing too many operations things. I need a COO, I first had an operations manager, then a COO. And now list continues. Then I decided, goodness, I was spending so much time interviewing and training people, I need to get a new head of talent. Depending where you are, there will always be a next highest leverage position that you can place and that you want to insource.
What I recommend you do is you create an employment roadmap for the next 24 months and don’t expect it to stay static. I mean, you are going to learn things about your business. It will change by the month. But have an employment roadmap, because if you need someone to start at a particular date and time, you want to start searching for that person three months prior because it gives you enough time to not hire reactively. The biggest mistake you can make when hiring people is to hire reactively and to hire on gut feeling. I was guilty of this for many years. You need someone now, you put out the word, you get one applicant and you hire that person. They don’t work out and you are like, “Ah, there aren’t good people out there”. No, that’s rubbish. The problem isn’t the people. The problem is the recruiter. So don’t do that to yourself.
Read the book, Who by Geoff Smart. I recommended it to you guys in previous episodes. Learn how to become a great recruiter. Give yourself enough time, and then hire one high leverage employee at a time. Initially, you are going to hire doers. For your first 10 employees, you are going to hire doers. You are going to hire the executive assistants. You are going to hire a sales guy. You are going to hire a marketing guy. When you’ve done that, you are now going to start building a leadership team that can build departments. So you are going to look for a Head of Client Success. You are going to look for a Head of Marketing, a Head of Sales. Now you are going to start developing your own leadership skills because you’ve got to capacitate them so that they can lead the team. But that’s what your roadmap looks like. So you must have an employee roadmap.
Next one: treat building a team and hiring people as a skill. If you really internalize that it’s a skill, you will realize you can become good at something. I’ve never seen someone that starts off great behind the piano. I’ve never seen someone that starts off great as a copywriter. You start off being awful and you become good. Let me tell you, recruitment is no different. You shouldn’t expect, I hope you do, but you shouldn’t expect to be brilliant at it the first time around. You’ve got to learn. You’ve got to put study into it. You have to make it a skillset and embrace it. Do not resist it because as soon as you realize it’s a skillset, then you can move forward and you can build your highly successful company.
Guys, I want to know what you think. I’ve got two questions for you. The first is, what high volume work can you outsource to freelancers right now? The second question is, what is the highest leverage next placement that you can make next? I want you to go to the comment box, I want you to answer those two questions because I would love to know what you think and where you are in your journey. First question, what high volume work can you outsource to a freelancer right now? The second one is, what high leverage placement can you make next? I would love to know where you are on this. Go to the comment box, tell me where you are at with your recruitment and ask me any questions. I will be happy to answer them.
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