Many small business owners find themselves strapped for money to spend on new employees. Given the proverbial belt tightening over the last year many business owners have found themselves either discontinuing activities they previously excelled at, or are accomplishing this work themselves.
Hire or do it yourself
While the cost of an employee can be a lot for the business to accept, when comparing the costs of the new employees (including taxes, benefits, pay, training, etc.) and what the business owner earns often small businesses will find that it makes more sense to hire the new employees (especially if they can find well trained employees). For example, would a landscaping/lawn maintenance enterprise pay a new employee what it costs for the owner to dig trenches for a sprinkler system? Probably not, and many small business owners are over tasked trying to keep up with all of the little jobs that they have taken on recently. Compare the costs, you may find that the amount you spend to pay yourself to do it along with the opportunity costs of not drumming up new business may far outweigh the benefits from accomplishing the work yourself.
Calculating gut-check Opportunity Costs
All things equal, compare the costs of labor between these two, then include the opportunity cost from your average contract.
Here’s an example:
Your costs for labor is $10, you pay yourself a salary of $25/hr, the contract lasts for two days for two workers. Working the job yourself with a laborer would cost the company $560. To hire laborers would cost the company $320. The costs would be $240 every couple of days. Include in this the fact that you were not out developing sales leads during this time and the costs could include a contract.