America is an entrepreneur’s dream come true. The very fabric of the American economic and political system was designed to encourage people to chase their financial dreams. The American Dream came to dominate the 20th century, as millions of people from around the world came to the United States in search of a better life. The beautiful thing about entrepreneurship is that it is unbiased. Sure, those that start from a higher socio-economic level tend to have significant advantages in terms of education and opportunities, but 20th century American history is rich with stories of men and women who started from nothing and built massive financial and economic empires.
Each year thousands of Americans start businesses, and each year thousands of 1st year entrepreneurs see their businesses fail. Most know the statistics—90% of new business ventures will fail within 3 years. That is quite a staggering statistic. Research tells us that one of the primary reasons new businesses fail is due to a lack of operating capital.
Typically, expenses will outweigh revenue in a new company, and this negative monthly balance often forces new companies out of business before they break through into consistent monthly profitability. Therefore, one of the key challenges for a new company is to keep costs down as much as possible.
The High Cost of Expenses
Running a business is expensive. And one of the most expensive aspects of running a business is employing people. Insurance, benefits, vacation days, etc—these costs can be very significant, and can severely cut into the operating budget of a new company. Therefore, a start-up entrepreneur has to face difficult challenges during the early stages of a business. Let’s break down a real-life example.
Bob the Entrepreneur is a graphic artist by trade. He has decided to open his own boutique design company in order to service the graphical needs of small business owners. Bob does market research and determines that with his existing contacts in the industry and good reputation, he can capture enough market share to build a quality business.
Bob launches his new company, and things take off quite nicely. He is getting a steady flow of work orders, new customers, and his existing customers are organically spreading the word about his new operation. Suddenly, Bob’s workload gets so strong that the American Dream is turning into the American Nightmare quite quickly! Bob has created a monster. At his old job as an employee at XYZ Graphic Design, Bob was working 40 hours a week. In his new company, Bob is now regularly working 12-14 hour days. At his old job, Bob never worked weekends. Now, Bob is working a full day on Saturday, and he is working several hours on Sunday. This is not the ideal situation Bob had envisioned when he first launched out on his own.
The most ironic thing of all is that most of Bob’s time each day is spent talking to customers and juggling basic administrative tasks. He is really only spending about 30 hours a week designing. The rest of his time is spent managing administrative responsibilities. Bob tried to hire an administrative assistant, but the cost of compensation plus insurance and benefits cut too much into Bob’s operating budget. He was stuck in the ultimate trap—he had more work than he could handle, but he wasn’t making enough to pay another employee. What was Bob to do?
This challenge that Bob is facing is common to many soloprenuers and small business owners. The answer to what Bob can do is simple. He can outsource.
Typically, when most people think of outsourcing, they think of large industrial warehouses in 3rd world countries or customer service call centers in India. However, the advance of the internet and communication over the last few years has created an entirely new realm of outsourcing. In today’s business world, solopreneurs can outsource administrative tasks to virtual assistants that live outside the United States, and the rate at which these people can be hired can be a quarter of what it costs to pay a permanent employee.
The advantages of outsourcing administrative work are many. First of all, the price is very cheap. Oftentimes, virtual assistants can be hired for as little as $4 to $5 per hour or even less, depending on th type of work. Second of all, these virtual assistants are often very good at what they do. Third of all, there if things are not working out with a specific virtual assistant it is not costly or difficult to end the relationship.
The only real disadvantage is that your assistant will not be in the same physical location as you. Therefore, the tasks which he or she can perform will be strictly virtual. That can be fine for most tasks, but that means that your assistant will not be able to run errands, meet clients, etc.
Offshore virtual assistants are in high demand for solopreneurs and small businesses. A little internet research will yield an abundant amount of choices and talent.
By Line: Jason Hoerr is a market analyst for Forex Traders, an online resource for the foreign exchange market and fx trading.