To outsource or not to outsource

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Recently I had a conversation with two people at two separate times about my decision to outsource my transcription jobs to a contract worker in the Philippines via Elance. My new contractor has been nothing but prompt, professional, and efficient, and if she makes a few mistakes in transcribing, then she’s still a great, great bargain compared to what I would ordinarily pay a transcriber based here in the United States.

The first person I spoke with is actually an editor with whom I’ve worked extensively in the past. She understood completely what I’m doing and why I’m doing it. She’s a small biz person herself, as a publisher of a fledgling glossy magazine that was only launched in the past year. As the publisher and a former writer/editor herself, she wears a number of hats in her organization — co-editor with another person, business manager, advertising representative, distribution manager, etc. — but has yet to pay herself a salary. The magazine — a well-received, much-lauded publication — was launched at what may have been possibly the worst time, with the economy zooming into a downward spiral, magazines and newspapers all over the country shuttering their doors and her biggest advertiser closing up shop just two months after the inaugural issue. In other words, even with the accolades, she’s struggling.

Still, she has a lot going for her. The magazine doesn’t have a central office, just a P.O Box and a staff of half a dozen or so who work from their homes. Since the town in which they operate is rather small, and they’ve all known each other for decades, they’re a smoothly run operation and can get together within minutes from wherever they are. They run a very tight ship, and while they don’t pay writers a lot, they do at least pay separately for photography, so an enterprising scribe with a basic understanding of how a camera works and how to compose a good shot can make more money submitting photos to accompany her article than for the article itself — and for a lot less work! (Yes, I’ve done that several times, and it’s fantastic.)

But even with such efficiency, she’s still a small business owner struggling in an economic climate, and she completely sympathizes with my need to outsource this tedious job to a relatively low-wage worker overseas. I don’t pay quarterly taxes — yet! — because I file a Schedule C along with my husband’s full-time salary, and it always comes out to a hefty refund for us. However, my accounting software does let me know in no uncertain terms what my estimated quarterly taxes would be, based solely on my business’ revenue and if I weren’t combining it with B.’s salary. And as someone who almost made it to five-figures last year, I can tell you that it wasn’t a pretty number. If I remember correctly, I was looking at an almost 40% tax bite.

Woof.

I have no problems paying taxes at all. I understand that it’s patriotic to do so, that we wouldn’t have all these great services and privileges we Americans enjoy if the federal and state governments didn’t have the ability to pay for it. On the other hand, it’s also discouraging to have the government pay lip-service to small businesses — supposedly the “engine” of our economy and the last great hope we have of pulling ourselves out of this recession — while at the same time extracting huge chunks of our already tiny revenue.

Now do you see why I seek every means possible of lowering my expenses, even at the cost of outsourcing to a deserving, but more expensive fellow American? If I were to do that, considering the relatively low pay many publications are now offering, I wouldn’t even break even, let alone make even the tiniest profit.

You see, the second — albeit brief — conversation I had regarding my outsourcing was with, you guessed it, a professional transcriptionist based right here in the good ol’ USA. Now, granted, I actually don’t know how much she charges. Based on what I’ve been quoted in the past, though, I’m probably looking at at least $40-$45 per recorded hour, and possibly even more. I’ve seen rates upwards of $80-100 per recorded hour. A couple of virtual assistants have asked for $45 per hour of transcribing, so if she took two hours or more to transcribe a one-hour audio file, I could be looking at $90+.

Yikes. Some of my assigned articles that require interviews are for under $100. A few are $50-75. At that rate, I might as well save myself the money and do the transcribing myself. Otherwise, I would have just spent 50-100% of my income just on the transcription.

I would love to give the job to a fellow American worker. But considering the tax rates and the relatively low pay many publications offer their writers, it’s just not feasible. Perhaps in the future, when I can command $4/word assignments from Vogue and Harper’s Bazaar. Right now, though, I’m on a very thin shoestring budget. The bottom line is that I have to think about my own business before I can think about anyone else’s. It’s just the nature of the beast. And for now, Elance it is.

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