Close button
How much money could your business be saving?
Create your Fundera account to find out.
Continue

This Entrepreneur’s Secret to Growth Has Him Undercutting the Competition by 30%

Eric Goldschein

Eric Goldschein

Eric Goldschein is a freelance journalist who covers entrepreneurship, small business trends, emerging technologies, culture and sports. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, Trep Life, the Huffington Post and more.

You can contact him at ericgoldschein.com, or on Twitter at @ericgoldschein.
Eric Goldschein

Over the past few years, it’s become increasingly popular for businesses large and small to farm out tasks to freelancers, contractors, and third-party platforms powered by the “gig economy.” The numbers bear this out: The Bureau of Labor Statistics reports that there was an increase of over 1 million self-employed people from May 2014 to May 2015.

Companies across many fields are happy to oblige this growing niche by trading in new full-time hires for contract workers. In all, we spend $300 billion worldwide on contingent labor, with 60% of it completely unaccounted for in financial planning, forecasting, and budgeting within the average company. We’re most likely throwing money blindly at freelancers without really thinking about how effective that spending is.

So while the cost of hiring a freelancer for a targeted task pales on paper when compared to bringing on a new employee for just one purpose, there is a third option—which is easier to track and less costly—that’s rarely considered: learning how to complete that targeted task in-house.  

That’s one of the core principles of Jtwo Films, a Philadelphia-based video production company and creative agency that focuses on “cross-platform storytelling.” They also work with advertising, marketing, and PR firms as a vendor. Creative director and co-founder Justin Jarrett realized within the first 6 months of forming the company that, in order to compete with larger advertising firms, they’d have to do everything they could themselves—even the things they didn’t know how to do yet.

“At the time, my partner and I couldn’t afford other employees—a producer, editors, writers,” says Jarrett. “Also, because of our previous experience working for other video production companies, we knew early on how much overhead they carried by having large staffs. If there was a slow period of business, they went under—and this was in 2009, so we watched all these companies fold in front of us as we were beginning to build. That was eye-opening for us.”

Do everything under one roof

Jtwo’s practice of learning everything that they didn’t know—which still related to the process of creative storytelling—is a natural extension of the rest of their business model.

“We do both what an advertising and marketing firm will do, combined with a video production firm. We will not only pitch the creative concepts, plan everything, do all the writing, and come up with campaigns, but also have the ability to bring it all to life,” says Jarrett. “We do all the content creation—most ad agencies come up with a campaign and then hire a vendor like us to actually do the creative content. We’re a vendor for ad agencies too, but we can be involved with every point along the way.”

The creative process of building an advertising campaign involves many steps, and for the large firms that Jtwo competes with, those steps usually get marked up to include the price of vendoring out certain tasks—like shooting, editing, or other post-production work—to third-party companies or individual freelancers. From the start, Jtwo wanted to eliminate this “middleman” in the workflow, out of financial necessity—and because Jarrett and his partner, Travis Capacete, felt that relying on freelancers too often led to problems out of their control.

“When you’re working on 15 different projects and need to hire freelancers for them, that adds up… And you’ll end up losing money over time,” says Jarrett. “Quality control can drop a bit, too, and you’re wasting time constantly training them and getting them up to speed on the project. Then, if you’re hiring the same freelancers all the time to guarantee that they can keep up, you’ll end up saving money by just hiring them full-time instead of paying their freelance rates.

“We felt that by doing this, we would be faster and more adaptable to any project that came our way.”

Learn the skills you might outsource instead

In a perfect world, any business would be able to absorb the skills needed to complete any and all jobs that come their way. Jtwo’s method for adding new capabilities is only surprising for those who aren’t familiar with the wealth of information available online.

“Google—one of the greatest inventions of our time,” Jarrett says when asked about resources Jtwo uses. “You can find tutorials and inspiration all over the internet. We also have great relationships with friends in our industry or mentors we can call on at any time.” Recently, Jtwo learned how to incorporate search engine optimization tactics into an “aesthetic” website they’d built for a client by studying the field on their own time.

“There are whole companies that specialize in search engine optimization. We’re not one of those companies,” says Jarrett. “But we had a client call us and ask us if we could do it—they weren’t happy with the quotes they were getting from SEO companies and they had worked with us before. I said, “Hey, this isn’t our specialty, but I’m sure we can do it.” We spent a week and a half learning everything there is to know about SEO on YouTube and everywhere else, and now they’re on the front page of Google.”

Jarrett says that the company doesn’t charge clients for the time it takes to learn a new skill—only when they feel comfortable doing it in a professional manner for the client do the billable hours start. In the above case of learning and providing SEO for a client, Jtwo still came in “substantially under” (about 50%, according to Jarrett) what full-time SEO companies were charging, at the rate they felt was honest.

When asked whether he considers charging half of what the SEO company would have charged worth his company’s time and effort—especially considering some of that time was spent off the clock—Jarrett affirmed it by saying his team now has even more skills they can market in the future.

On my next project, we know how to do SEO and can charge it at a competitive rate, or we can rope it into a package of costs—we’ll not only develop your campaign, but we’ll build your site, do your SEO. Everything will be creatively on brand, and the timetable and the quality will be consistent, unlike what can happen when companies vendor out,” he says.

There are times when Jtwo doesn’t take on learning a new task for a client—and Jarrett says that, even then, their model ends up working for them in the long run.

For instance, we don’t specialize in Visual Effects, so we would never take on that job,” says Jarrett. “We’re honest with clients about that, and if that happens we give them a recommendation on who to talk to next. Clients appreciate that, and 9 times out of 10, they call us on the next project that is our forte because of our honesty the first time around.”

Recover more than just financial savings

Every freelancer in every industry has a different rate for a different job, so it’s difficult to say what kind of savings a business could make by forgoing the practice of constantly taking on freelancers. But Jarrett says his model has affected not just the bottom line but other harder-to-quantify aspects of the business, too, which result in a leaner, more adaptable company that can take on more projects—without sacrificing quality.

“If I hire an outside graphics company or a writer, they’re always at least 30% more expensive than if we keep it in-house,” says Jarrett. “In addition, we can also complete the job much quicker because we don’t have to brief anyone on the project and bring them up to speed. They already know what’s going on, because they’ve been on the project since day one. I don’t have to check their availability, book them a flight, or work around their schedule.”

Jarrett says his company’s process helped them win bids against their larger East Coast competitors, who often mark up their price by 20-40% to account for vendoring out.

“In a lot of cases, if the work is the same, the company goes with the less expensive bid, which was a driving force behind us keeping everything in-house. We can drive costs down while creating a collaborative environment that sometimes gets lost when you outsource. I come from the old school of thought that being able to turn and talk to the person next to you is still more effective than phone calls or video conferencing,” says Jarrett.  

Jarrett says that business has grown year over year by 100% since they’ve been in business, and credits their success not just to their business model, but to their overall philosophy.

We treat every job, big or small, like it’s the last job we’ll ever get—and I think that mentality is ingrained in everyone that works here. We simply feel that we can outwork anyone, and that’ll beat talent every time,” he says.

Jtwo doesn’t plan to grow beyond 10-15 full-time employees: they only want those who are comfortable with being pulled off editing one project to go shoot another, and those who are always hungry to learn about what’s next in an industry where the technology is constantly changing. Having the classic start-up mentality—where massive overheads often maintained by large businesses can lead to a swift downfall if left unchecked—has been a boon to them since 2009, and they’ve got no sign of slowing down.

***

Of course, there are times when using freelancers is necessary, and even Jarrett says that some of his employees are 1099ers—although they also receive paid vacation time, a rare perk that the company feels necessary as a cost of doing business the right way. It’s all about balancing contractors, and not throwing money at problems that can instead be fixed with elbow grease and ingenuity. If more businesses had this mindset, we might see longer lifespans for small businesses who have the adaptability and flexibility to compete with their larger, red tape-restrained brethren.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Eric Goldschein

Eric Goldschein

Eric Goldschein is a freelance journalist who covers entrepreneurship, small business trends, emerging technologies, culture and sports. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, Trep Life, the Huffington Post and more.

You can contact him at ericgoldschein.com, or on Twitter at @ericgoldschein.
Eric Goldschein

Our Picks