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How To Predict Project Costs For Outsourcing A Home Based Internet Business

Oct 5, 2007
One of the first "outsourcing questions" any home Internet business owner asks is -- what will it cost?

Naturally, when you're first building your Internet business, watching that cash flow is absolutely critical. This is why most Internet entrepreneurs start down the path of doing all the work themselves: it's more cash-flow friendly.

Unfortunately, doing the work yourself without a solid plan for offloading it to someone else is a recipe for disaster. It won't be long before you are solidly the bottleneck in your business and any growth plans you might have had for your fledgling start-up get choked off before they begin.

No, it's just as critical to have a plan for outsourcing the work in your business as it is to watch that cash flow. That's why having a reliable way to predict the costs of any project is vital to making sure you stay in strong financial shape.

What you need to do is lay out a map of all the tasks that lie between where you are now and where you need to be for revenue to be rolling in from your project.

Once you understand what the roadmap looks like, you can then begin to fill in the blanks with cost figures and revenue projections in order to find out (a) how much profit you will earn, and (b) when you will earn it.

One of the easiest ways to find out these cost figures is to use a freelance contracting site like Elance.

First, make a list of all the general tasks you need to accomplish. If you have no idea where to begin, then purchase any "how to start an internet business" type of guide and use it to derive your task list.

Then take each of these general tasks and see if you can subdivide them into reasonable "chunks" of work. For instance, one of your tasks might be to "create a website". This consists of a number of sub-tasks, such as:

- Register a domain and sign up for web hosting
- Create a website framework of pages
- Write a sales letter for the sales page
- Plug the sales page into a payment processing service

From this list of sub-tasks, identify the items that "only you" can do. These should make it to your "to do" list and everything else should be on your "to outsource" list.

Then visit Elance and browse through the existing project postings for each sub-task on your list. There you will see numerous bids on similar projects. Browse through the various bidders to get a feel for the level of quality these contractors can provide.

Then look at the bid amounts for each project. This will give you a solid idea of how much you can expect to pay for each sub-task on your list. Also pay attention for how rapidly each bidder believes they can deliver the finished product. These pieces of information will help you fill in the blanks for your own cost projections.

Once you have all the information for your various sub-tasks from Elance, you need to do two more things.

First, look through your list of sub-tasks to see which ones can be done in parallel (at the same time) and which ones have to be done in a certain order. This will help you to lay out the fastest way to get your work done.

Second, make sure you understand what the various "glue" tasks are. That is, all the work required to (a) post and manage the projects on Elance, and (b) use the results.

For instance, simply having a contractor write a killer sales letter for you is not enough. You have to arrange to take that sales letter, and load it into a web page to appear on your website. This might not represent a lot of work, but it has to be done, and therefore it should be on your roadmap, along with whatever time estimate you can come up with to get it done.

Some of these "glue" tasks are probably going to have to get done by you initially, because they're just too tiny to easily outsource. But it's important to know what they are and to account for them when preparing your schedule.

Go through your task list roadmap and add up all the outsource costs, as well as all the effort estimates that impact your time. This will give you a solid idea of cost outlay as well as how much of your time you need to budget to the project.

Add to your roadmap your best-guess projections of when you will start to see revenue from your efforts, and how much that revenue will be. This is the key information you need in order to effectively manage your cash flow and keep your finger on the pulse of your home Internet business.

Many home-based Internet entrepreneurs bypass the benefits of outsourcing their work early on in their businesses and suffer because of it. They have the idea that because the business is new and cash flow is tight, they have to do it all themselves.

This is a dangerous assumption because it allows their business to "falsely" survive even when the economics of their business model are weak. To use an analogy: treading water is not the same thing as swimming. You're staying alive but not getting anywhere. Eventually you'll get tired and sink.

If your business cannot generate sufficient revenue to pay for the costs of producing and marketing a product (and this means paying somebody to do these tasks -- not you doing them for free) and still generate a profit, then you do not have a viable business. The sooner you realize it, the sooner you can find a different business model that will make a profit.

Outsourcing is the ideal way to "vet" your budding Internet business and keep you focused on the shortest path to profitability.
About the Author
Jason Jantzi has used outsourcing to drive his Internet business for years. Download his free Hiring Out 101 outsourcing guide and learn how to use this powerful tool to help your home Internet business succeed.
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