Suppose you are starting a business, building a product that one day, you will sell.
At first, you will have $0 income. So if you pay yourself $0, nobody else can do it cheaper than you. So what do you gain by outsourcing? As it turns out, a lot!
Some entrepreneur articles and books talk about outsourcing tasks to a $5 virtual assistant, or a $15 programmer. They also mentions on how to value your time when deciding to outsource or not. But this seems quite fuzzy and not logical to me, especially when your product isn’t on sale yet.
So let’s dig a little deeper. Suppose it takes you 6 months to complete your product and start selling. Those first months you will have no income. Only at month 7 you will receive your first customers (hopefully).
Now suppose 1 month of building your product consists of repetitive tasks, that you could easily outsource to a virtual assistant. She costs $5/hour, so a total cost of about $800 for that 1 month. This is an extra cost on building your product! So why? Your time costs $0!
Well, as you might have guessed, there is a benefit. You are able to release 1 month sooner. This means you will start earning money at month 6 instead of 7. You gain the extra month.
If you make an average of more than $800/month on your product, gaining the extra month by outsourcing will have a positive return on investment.
On the other hand if you make less than $800/month, you won’t recoup your outsourcing investment.
So when deciding to outsource or not when building your first product, it doesn’t matter how you value your time. What matters is how much income you can win by releasing sooner. And then see what the outsourcing costs and how much you gain on your time to go to market.
So how much will your product make when you start selling? I have no clue!