Per hour, what is your time worth? Unless you’re in a business that charges by the hour, the answer might not be very clear, or relevant. But even if you do charge an hourly rate, chances are that not all your hours are billable.
If you focus on using more of your time to earning a higher rate per hour, your business will be more profitable – or you’ll be able to work less hours – whichever is more important to you.
Calculate your hourly rate
Income = hourly rate x billed hours
Most business owners are busy running the business and don’t bill per hour, and don’t consider how much their time is worth per hour. You should! If you like being the person who opens the mail, just be aware that you’re doing a job that should probably pay minimum wage and you’re reducing your profits by doing that.
So what kind of things could you do that are most valuable? If you went looking for and found a new top-ten customer, how much will they be worth over the next few years? How many hours of work would that take and how much per hour does that work out to be? You could also look at the value of time recruiting a new member of staff, training staff to be as good (and valuable) as you, working on better marketing, and so on. Most business owners I encounter agree that these are all incredibly high-value activities… but then tell me they don’t have time to do them!
It takes a while to really get the connection – the higher the value of the work that the business owner does, the more profitable the company. I know it can appear difficult to find time for high-value activities – especially if there isn’t someone pressuring you to do them. Take a look at this approach I’ve found particularly successful; Review what you regularly spend time on each week or month, and make a list, such as:
- Answering the phone
- Doing quotes
- Making sales calls
- Staff issues
- Customer support…etc
Next to each activity, write what you think would be the hourly rate of pay for someone who could do that work. Now here’s the interesting part: If the hourly rate is less than you can be worth when doing your most valuable work… employ someone to do the lower-paid work. “But I can’t afford to employ someone” I hear you saying. This is the point, and this is what keeps most business owners struggling. If you choose to do work that’s worth minimum wage, that’s the wage you’re choosing for yourself. You have to pay someone else to do the lower value work so that you can do the more valuable work and earn more money for the business.
Don’t make excuses, focus on just one question: What would we need to do to make this work? It’s surprising how many hours you can gain even without taking on an employee. For example, you can outsource your bookkeeping easily. If you don’t want to lose control, use one of the cloud-based accounting software packages so that you and your bookkeeper continually can see and work with your accounts.