The benefits and costs of using skilled freelancers to expand your team.

Starting a business might be even more fun and exciting with a large team helping to fulfill your vision. But since 75% of all U.S. private-sector employers are microbusinesses1–firms with fewer than 10 employees–you may not be building the buzzing hive of innovation you’ve dreamed of right away if your new business is a microbusiness.

However, small businesses that can’t (or simply don’t want to) deal with the expense of a full-time employee can still create buzz in sales, marketing, human resources management, and finance. The increasingly common solution? Skilled independent contractors.

The benefits of bringing in fresh talent.

Firms who succeed with independent contractors are seldom bringing in people randomly. Rather, they nurture these relationships as part of a concerted team-building strategy. Key tactics include:

  • Shoring up managerial weaknesses. Who would be your ideal business partner–the person who has something you don’t? Case in point: Many leaders are energized by product development, but completely flustered when trying to understand business development
  • Seeking fresh perspectives. A small shop can sink into familiar patterns. New ideas can spark innovation and get your team “unstuck” and out of its rut
  • Responding to seasonal needs. If you do a big holiday business, you’re ramping up marketing and publicity support in Q3/Q4. You could even use the same pros year to year–many free agents love repeat gigs

What’s the true cost of hiring an employee?

For many entrepreneurs, saving money is the only reason they need to “go freelance.” Add up these costs:

  • Recruitment. How much did it cost to solicit talent? Not just the recruiter’s fee, but the hours spent developing your must-haves, interviewing candidates, and training the new hire
  • Total financial compensation. Add in commissions and estimated bonuses, if applicable
  • Employment taxes. Include Social Security, unemployment, Medicare, and workers’ compensation
  • Benefits. Include health, life, and disability insurance, tuition assistance, retirement plan contributions, etc.
  • Space. How many square feet will an onsite hire occupy?
  • Technology and communications access. Includes computers, smartphone leases, data costs, and software applications purchased on a per-seat basis

Many business leaders may tally these costs for each job, or you can apply a rule-of-thumb formula that multiplies compensation by 1.25 to 1.5, depending upon the extent of benefits, telecommuting conditions, and other costs.2 For a $50,000 salary, that means $62,500 to $75,000.

Where can you benefit most?

When it comes to skilled professional contracting, businesses can get a great bang for the buck in:

  • Sales consulting and support. Whether it’s an external sales team or a sales consultant who takes a “teach a man to fish” approach, this is the most measurable of contractor investments. You’ll see returns based on the number of new customers
  • Marketing consultants. This investment can also reap clear rewards. Is the contractor’s strategy and execution turning prospects into loyal customers? The best marketing consultants set key performance indicators (KPIs) to measure their attainment
  • HR and Finance. Unlike sales and marketing, these traditional “cost centers” don’t increase revenue or brand recognition. But they do protect your brand’s well-being by maintaining best practices in legal and compliance processes, tax issues, and other sensitive areas. One avoided lawsuit covers their costs.

Once you set goals for what you want out of your relationship with an independent contractor, you’re much more likely to be satisfied with the results of this potential ongoing alliance.

Want more information?

Visit a branch to talk with an M&T Business Banking relationship manager to discuss the many ways you can grow your business or call us at 1-800-724-6070.





This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.


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