Four criteria for comparison
- Price at your volume. A percentage of revenue against fixed costs plus commission.
- Who ends up with the knowledge. With outsourcing the method stays at the agency.
- Who works the cold enquiries. Outsourcing profits from the warm ones.
- Speed of starting. Outsourcing starts in weeks, an in-house team in months.
Where the crossover sits
Calculate the outsourced commission at your current volume in money and compare it with the full cost of an in-house team: salaries, commission, phone system, records, hiring and the manager's time. The point where the second becomes smaller than the first is your moment to switch.
13% → 6%cost of sales before and after building an in-house team
$30,000first-month revenue of an in-house team of two reps
$200,000over four months of the in-house team working
The main drawback of outsourcing
It is structural rather than bad faith: the agency earns from conversion, so it pays them to work with whoever is closest to buying. Cold enquiries, the base of people who bought before, and winning back the ones who vanished all go unworked. That is usually exactly where the cheapest revenue sits.
On one project a base of two thousand students went completely unworked: it was not profitable for the outsourced team. We put our first reps onto it and in two weeks took almost $10,000 at a selling cost of 6%.
A hybrid
- outsourcing for peak loads and launches
- your own team for steady flow and for the base
- your own manager either way: otherwise there is nobody to hold quality