Time is a very precious commodity – especially for nonprofits.
There’s a big mistake that nonprofits often make when they compare the cost of outsourcing a task to doing it in-house: they underestimate their in-house costs.
There’s a simple reason why nonprofits fall into this trap: They don’t consider the value of their time.
Especially if you’re at a nonprofit with limited resources, this can be a very expensive mistake to make.
Time trumps money
Outsourcing is a concept that needs no introduction. We are all familiar with the term, and what it means to us. It is something we do in many aspects of our lives, even if we don’t always realise it.
When you go to a restaurant, you basically outsource the labour involved in shopping for food and cooking a meal. When you buy an outfit, you outsource the work of sewing and stitching your new clothes.
Often, the main reason why you’re outsourcing this work isn’t to save you money – it’s to save you time.
You probably wouldn’t consider building your own car from scratch. It takes thousands of people countless hours to create a motor vehicle. It takes a lot of time to design a concept, let alone engineer the bolts, washers, engine block, panels, sound system, air conditioner, and everything else.
This, of course, is an extreme example. But even if you had enough money (and the desire) to build your own car, you probably wouldn’t do all the work yourself. It would take too long. Just ask Elon Musk.
That’s one of the biggest benefits of outsourcing – it saves you time.
And often, time trumps money.
The true cost of wasted time
When you properly factor in the true cost of wasted time, it turns out most outsourcing projects do offer financial savings.
Let’s take a look at a hypothetical example to see just how misleading in-house costs can be.
Imagine you work at a small nonprofit with eight staff (these figures are simplified to illustrate the point).
Here’s what your yearly expenses might look like:
- Wage bill including super $800,000
- Office space and small warehouse space $ 50,000
- General office expenses $ 90,000
- Software, PCI Compliance and security $ 40,000
- Insurance $ 6,500
- Electricity and utilities $ 4,200
- Total costs $990,700
In other words, just to cover your costs, each year your nonprofit would need to raise at least $990,700.
Now let’s do the maths
In this example, suppose three of your staff are fundraisers.
Let’s look at how many hours of fundraising time your nonprofit has each year:
- 7.5 hours per day x 5 days per week = 37.5 hrs per week
- 52 weeks x 37.5 hours per week = 1,950 hours per staff member
- 1,950 hours per staff member x 3 fundraising staff = 5,850 fundraising hours per year
So the maximum number of hours you have available for fundraising each year is 5,850.
But wait – what about leave and public holidays? We need to subtract that time from the total.
Then there’s all the everyday tasks that pull your fundraising team away from working directly on campaigns.
If your fundraisers spend 20% of their working day on these other tasks, that means only 80% of their work hours go towards actually raising funds. We need to subtract that 20% from the total.
So how many hours do you really have left for fundraising each year? Let’s work it out:
- Annual leave = 150 hours (4 weeks)
- Sick Leave = 75 hours (2 weeks)
- Public Holidays 75 hours (2 weeks)
- 150 hours annual leave + 75 hours sick leave + 75 hours of public holidays = 300 hours leave per year
- 1,950 hours – 300 hours leave per year = 1,650 hours per staff member
- 1,650 hours – 20% spent on other tasks = 1,320 hours per staff member
- 1,320 hours x 3 fundraising staff = 3,960 fundraising hours per year
After you take out leave and other tasks, you’re left with only 3,960 hours of fundraising time across your team.
In other words, each year, you have just 3,960 hours to raise $990,700 to cover your costs.
That means you need to raise $250 per hour ($990,700 divided by 3,960 hours = $250.00 per hour) to meet your expenses.
That $250 per hour recovery rate means that each hour of your fundraising staff’s time is incredibly valuable. In effect, freeing up an extra hour of their time is worth an extra $250 to your cause!
The real impact of outsourcing a task
Now, let’s imagine you had an opportunity to outsource a task that is wasting some of that precious fundraising time, such as donation processing.
Let’s go a bit further. Suppose your fundraising staff can process up to 50 donations each hour (including updating records, banking, and reconciliation).
In this example, the time your fundraising staff spends on donation processing works out to $250 per hour or $5 per donation ($250 divided by 50 donations each hour).
At $5 per donation or $250 per hour, doing all the work in-house ends up being incredibly expensive. It’s also a wasteful and inefficient way to spend your limited fundraising time!
Clearly, once you factor in time, that work would be done a lot cheaper by outsourcing. It would also free up more staff time to raise funds and provide a deeper level of donor care.
Are you wasting time?
It’s worth taking a moment to think about your own organisation.
Are you (and your team) using your time at work as effectively as you should? When you factor in the true value of your time, how much does it really cost to do all your tasks in house?
More importantly, are there opportunities to reclaim some of that lost time by outsourcing tasks like donor processing?
Time is a very precious commodity – especially for your nonprofit.
And often, time trumps money.