Delegation is a thing that many new business owners struggle to do, (or cannot afford to do,) but it is an absolutely crucial skill as you grow and scale your business. To determine what tasks are best delegated and what can be handled personally, you need to learn how to calculate your opportunity cost. Let’s look at this idea of “what should you delegate”?
Calculate total costs:
I find that even when folks are comfortable calculating their total costs in terms of labor hours, materials, administrative, and upkeep costs, they often neglect to take into account their opportunity costs. Simply put, your opportunity cost for any given task is equal to how much you could have been making if you were doing something else. For example, if a photographer makes more money doing a wedding shoot than a sit-down portrait, she should calculate the difference in revenue when allocating the advertising budget between the local newspaper and bridal magazines. In this instance, taking on portrait jobs carry an opportunity cost equal to the difference in revenue. This helps inform what you should delegate.
Calculate opportunity costs:
Let’s say you are a photographer. While calculating your hourly rate, you might take into account your taxes, the cost of any specialized equipment, the unbillable hours that you will spend developing and editing the photos, the rent on your studio, and the labor hours of the assistant that you must pay to help you set up your equipment. That’s your cost of doing business, and your rates must reflect them in order to be profitable. However, you should also calculate how much money you could be making by shooting photos for every hour you spends in your studio sending invoices and answering email. If you could make $100 per hour during a photo session and could hire a good office assistant in your studio for $25, the opportunity cost of managing the office yourself is effectively $75 per hour.
One area I often see people making this mistake by managing their own social media accounts. It costs nothing to post on a blog, operate a Twitter feed or do a Facebook post, but it costs money to hire a social media manager, so business owners often try to do it themselves. Not even taking into account how much money a poorly managed feed or account could be costing them in lost business or a damaged reputation, owners often fail to notice that the time they spend on Twitter carries an opportunity cost loss if they could be spending the same hours following leads or pitching new work.
In house, myself vs. delegate?
Typically, business owners fail to differentiate between “we should do it in house” vs. “I should do it myself so I don’t have to pay for it.” The question they should post to themselves for social media–or any marketing, PR or other non-endemic service is, how much time will it take me to do it vs. someone that does this all the time and what is my time worth vs. what I would need to pay them? For instance, if you are a consultant, or a medical professional, or a professional services person, your hourly rate could be anywhere from $ 150- 1000/hour. Do you really want to be spending 2 hours on that blog post, Facebook post or twitter feed? Aren’t you better off calling current or prospective customers, patients or clients? and hiring someone for less than half that amount? Based on these calculations, has this helped you review what you should really delegate?
Of course, you cannot always capitalize on every single hour of your working day by spending it in the most efficient way possible. But by calculating your opportunity cost, you will be able to make smart decisions about delegation when it’s time to scale up, rather than educated guesses or simply farming out the work you find annoying or tedious.