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What is your time worth?

Treena Pitham is a virtual executive assistant and owner of Octopus Admin. It helps business owners find answers to business administration questions and streamline their workload, so they can focus on higher-value tasks.

OPINION: Most entrepreneurs feel like there aren’t enough hours in the day to achieve everything they want. As a business owner, your day should be focused on getting the results you need to meet your customers’/clients’ needs while increasing your revenue, all while not losing your mind! Time is therefore your most precious resource.

In the race to grow your business, you are often caught up in the day-to-day activities of running it. But is it the most valuable use of your time? Business owners are often caught between running their business and growing it at the same time. It’s easy to fall into the trap of taking our time for granted, because it feels like we’re saving money by doing all the chores ourselves. We rarely stop to consider the cost of trying to do everything.

Let’s discuss it in detail and see how we can change this misconception.

First of all, have you calculated the value of your time? Do you understand how much you earn working in the company and taking care of these daily tasks yourself?

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So what is this “value of your time”? It’s calculated based on your hourly rate, which is not the same as the hourly rate you charge for your product or service. It measures the return on your time, i.e. how much financial benefit you receive for all the time and effort you put into your business. You might be surprised at the result.

Your hourly rate = financial return divided by the number of hours worked each week

The first step in calculating your hourly rate is determining how much you are paying yourself. These can be salaries, drawdowns, profits, dividends, etc. Suppose you pay yourself an annual salary of $80,000 from your company and make a profit of $20,000. Your total financial return would be $100,000 per year. You might look at this and think it’s pretty good, and you’d be right. Most people earn nothing close to working in a typical job. But when you look at how much effort it takes to generate that paycheck, things start to look a little different.

Let’s say that on average you work about 50 weeks a year. This equates to $2000 per week. If it’s your salary after all expenses, taxes, etc., I guess that’s not bad, but let’s go a little further.

Treena Pitham: Beware the

Sarah Weber Photography/Supplied

Treena Pitham: Beware of “interrupt lag”.

Now let’s understand the hours you work for this return. In this scenario, let’s say you work 50 hours a week. Fifty hours a week is a 10 hour day. Most business owners would agree that they work long hours, maybe even more than 10 hours a day, but we’ll stick to that to make it easy. By working 50 hours a week, you get $2,000 a week; or in terms of hourly rate, it’s $40 per hour. And the more hours you work, the more your hourly rate dilutes.

Now, if that reality sounds like you, you might be okay with that, and that’s fine – $40 an hour is a pretty good hourly rate for people in typical jobs. This roughly equates to an annual salary of $83,000. But the difference between an employee earning $40 an hour and a business owner earning $40 an hour is that employees get paid sick time, they get four weeks of paid annual leave, KiwiSaver, and other benefits that business owners do not receive. Also, an employee usually only has to work 40 hours a week, and while they may work overtime from time to time, their working hours usually don’t change much.

However, as a business owner, you may not be paid for that day off if you are sick and unable to work. If you want to take a vacation, again, you may not get paid for that time away from your business. These are the things that business owners face, but never stop to think about the reality of what it means to own a business reaping the financial rewards versus the amount of effort they put in. In other words, they don’t stop to think about the value of their time.

Conversely to this scenario, you might be thinking, “How is it possible that I only make $40 an hour when my hourly rate for my clients is $300 an hour?” C is because you are trying to save money by doing everything yourself; believe it or not, it costs more than you think. How? It costs your time, where you could invest your time in doing what you do best instead of investing in other activities.

For example, suppose you are doing a job for which you could pay a contractor or employee $40 per hour. Suppose you charge your clients $300 per hour and the task in question takes one hour. In this case, this task just cost you $300. This is because you could have spent that hour earning $300, actively participating in activities to attract the next client, or promoting your services to increase your sales.

But, I hear you say, I do all of these daily activities when the workday is over, so there’s no harm in spending time doing these administrative tasks. My billable hours are over. Again, remember that your hourly rate is based on what you earn from your business divided by the number of hours you work. The more hours you work, the lower your hourly rate. If your hourly rate is $300 and you work 40 hours a week, unless you make $600,000 a year, you don’t make $300 for every hour you spend in your business, based on a 40-hour week over 50 weeks. a year. And, let’s remember that business owners typically work close to 50 hours a week, if not more.

Therefore, as a business owner, you need to start thinking about the value of your time.

– How much do you want/need to earn with your business?

– How much effort do you want to expend to obtain this financial return?

– Do you want to spend all possible hours of the day working or do you prefer to earn more and work less?

I don’t know about you, but I’d prefer the latter.

There are benefits and risks to owning your own business, but there is always hope that owning a business will give you the financial freedom and flexibility you desire.

The next thing you need to think about is how to increase the value of your time by increasing your hourly rate.

Identify any high-return activities that will increase your hourly rate.

Workbench Accounting/Unsplash

Identify any high-return activities that will increase your hourly rate.

Look at everything you do in your business, and I mean everything from answering emails, talking to your customers, sending out your invoices and marketing activities. Subscribing to a time tracking app can help you identify where your time is going.

Identify any high-return activities that will increase your hourly rate.

Devoting your time to these activities will increase your profits, increase your sales, increase your productivity and efficiency, and give you more return for your time and effort in your business.

Once you’ve identified the high-return activities, you need to focus on spending more time on them.

The less time you spend on activities that aren't a good use of your time means more time to do what matters most to you.

UNSPLASH

The less time you spend on activities that aren’t a good use of your time means more time to do what matters most to you.

Next, list the low value activities that could lower your hourly rate. These are the activities where you waste your time. This is where you need to identify how you can automate them, assign them to other people in your business, or outsource them.

This exercise will give you the clarity you need to find out what you are earning no matter where you are at with your business. I hope this gives you a new perspective on the value of your time. I hope this inspires you to pause the next time you do something someone else might be doing and think about how that time could be better spent growing your business! Ultimately, the less time you spend on activities that aren’t a good use of your time means more time to do what matters most to you, and the beauty of it all is that you can decide. Increasing your hourly rate, growing your business, or spending valuable time with your family are just a few benefits of being more demanding with your time.

Remember that resources are mostly unlimited. There is no limit to the amount of money you can earn, the number of customers you can have, or the number of employees you can hire. But, you only have 24 hours a day, seven days a week, and 52 weeks a year. You need to sleep, eat, play, grow with friends and family, and find time to relax in the hours you have. Your most valuable resource is time because it’s the only thing that’s limited, so be more discerning with it.

We usually stop to think before paying for other things we want (sometimes), but we rarely stop to think about how we spend our time.

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