Outsourcing your telemarketing or running it in-house – the real costs of hiring your own telemarket

I’m often asked: “why would I pay an outsourced agency when I can just hire my own telemarketer for $25 per hour?”

It’s an interesting question so I thought I’d have a look at the real cost of running an in-house telemarketing person or team. As you will see below, the real cost of doing this yourself is over $60/hour assuming everything goes well and that you are getting the same quality of performance. If not, the true cost could be a lot more!

Here’s why…

The basic hourly rate you will pay the telemarketer will be somewhere between $25 and $30/hour depending on skill level. Can you pay less than this? Yes, but as with all things, you get what you pay for. Do you want someone experienced who will get results, or do you want someone who’s cheap? There’s a great saying in business: “If a professional is too expensive for you, try hiring an amateur”.

An hourly rate of $25/hour, is an annual salary of $49,000. On top of that you have to add:

• Sick leave @ 5 days per year = $937 • Holiday pay @ 4 weeks per year = $3,750 (note: this is added on because with an outsourced resource, there is no holiday time, every single day and hour is worked) • Public Holidays @ 13 per year = $2,438 • Sales commission @ 15% of salary = $7,350 • Superannuation @ 9.5% = $4,900 • Worker’s Compensation @ 5% = $2,450 • Payroll tax @ 5.45% = $2,670

This increases the actual wage costs by $24,495 to $73,495 per year, or $37.69/hour.

However, that’s not the end of it…..

There are other costs that you need to include, such as:

• Recruitment costs @ $5,000 per year (assumes you hire the right person first time) (This includes recruitment advertising, time to shortlist and interview applicants and time to train new recruits. It’s an annual cost because most telemarketers won’t stay in the one role for more than 12 months. They will either want a promotion or they’ll leave in search of a new challenge – either way you have to replace them.) • Telephone call costs @ $30 per week = $1,560 per year • Training, management & supervision (a minimum of 1 hour/day – however this is likely to be more). Assuming that the manager’s salary is $96,993 ($80,000 + Super, Payroll Tax, Worker’s Compensation) = $12,899 per year • Other overheads @ $1,040 per year (again, it’s likely to be more than this) (Software licenses / Computers / telephones, etc)

This adds $20,499 to your costs, taking the total annual cost to $93,994 (or $47.57/hr)

Now let’s look at all of the extra resources that come with one of our lead generation campaigns. In addition to the agent on the phone you also get the following:

• Campaign set up expertise @ $1,500 • Account Management = $8,000 per year • Ongoing Sales Team Management and Development = $6,000 per year • Quality Control = $2,600 per year • Live Online reporting @ $5,200 per year

Total additional resources = $23,300. This is equivalent to $11.95/hour, which can either be added to the cost of running the campaign internally, or deducted from the cost of the outsourced service. Let’s add it to the in-house cost for simplicity.

Total cost is now $117,294 or $59.36 per hour

This assumes that everything goes well. But as we all know in business, things rarely go exactly to plan. You also need to consider what if….

• Your strategy is not working and the leads you’re getting aren’t the right ones. Or your telemarketer is finding it very hard to engage with your target market and generate sales leads. You’ll probably spend 1 month trying to refine and fix this (cost $10,116, which adds $5.19/hour). • You recruit the wrong person and by the time you’ve realised that they can’t do the job you need them to do, you’ve probably wasted at least 2 months (cost $30,347, which adds $15.56/hour) • You have to replace your telemarketer (either because of low performance or because they find another job). It will probably take 3 weeks to recruit and train a new person (the cost of downtime is $7,003, which adds $3.60/hour) • Your telemarketer doesn't work as fast and productively as agents at an outsourced company. A 10% shortfall in productivity is just 1 - 2 fewer calls per hour, but this amounts to almost 3,000 calls over 12 months and potentially 40 – 50 fewer appointments per year (cost of lost activity, $12,100, which adds $6.20/hour)

You only need one of these events to occur, and the cost of running your own in-house telemarketer has risen to $70/hour or more. If two of these events were to happen, your costs will jump to over $80/hour – especially if you have to replace under-performing telemarketers more than once per year.

So, when you look at the cost of an in-house solution compared with an outsourced one, remember to factor in all of the “invisible” costs. When you do this, you’ll see that the costs of outsourced versus keeping it in-house are actually very similar – and with an outsourced solution, all of the headaches disappear, to be replaced by peace of mind that a professional service provider is looking after all of these “headaches” for you.

However the question of outsourcing your telemarketing versus doing it in-house is not a one size fits all answer, and every situation is different. Keeping in mind the real costs, if you still want to run your own in-house lead generation team, don’t hesitate to get in touch with me via LinkedIn or email enquiries@fmgroup.com.au and I’ll send you a copy of my book “The Ultimate Guide to B2B Sales Prospecting” which will help guide you in setting this up and avoiding many of the common pitfalls.