Find Out How Much Your Time Is Worth Before You Waste Any More of It
This time management expert offers a formula for determining how much your time is really worth.
Now, let's set up your base earning target. Since you are your own boss, you write your own paycheck and you decide how much that paycheck is going to be. For most entrepreneurs, that number is whatever's left!
This is a huge mistake for two reasons: It indicates zero planning, and it means you pay yourself last -- the number-one reason entrepreneurs wind up broke. So, let's reverse all that and start with the planning. You've got to decide how much money you're going to take out of your business or businesses this year in salary, perks, contributions to retirement plans and so on. What is that number?
I'll tell you this: Eight out of 10 entrepreneurs I ask cannot come up with this number.
If you don't have a base income target, then you cannot calculate what your time must be worth, which means you cannot make good decisions about the investment of your time, which means you're not exercising any real control over your business or life at all. You are a wandering generality. Is that what you want to do -- just wander around and settle for whatever you get?
Now, you may not have a situation that lends itself to clear-cut billable hours as I do, so how can this strategy work for you? It has to. It's even more important to you than to me. Let's say you own six stores and each store has a manager. You'll have to decide how much of the business's bottom-line profit goal will be provided by the managers and how much is still inextricably linked to you. If you want $500,000 at the bottom line, and you figure half is dependent on you, you've got a $250,000 target.
For me, it's reasonably precise. For you, it may not be such an exact science. But, that's OK. I promise you that coming up with a number, even if it is arrived at through some pretty questionable calculations, is still a whole lot better than not having a number at all. Having a number is going to make such a dramatic change in so many of the decisions you make, habits you cultivate and people you associate with that the benefits will be so extraordinary, it won't matter if the original method of getting to a number had a technical flaw or two buried in it.
At least for the sake of our conversation, get a number -- your base earnings target for the next full calendar year. Divide it by the number of workday hours, which is 1,760 (220 working days per year times eight hours per day = 1,760). Then, multiply it to allow for unproductive vs. productive hours. If you don't have a good estimate of that, use a three times multiple. Now you have what your time is supposed to be worth per hour.
That little number may just change your life.
It's sort of like a heart attack being required to really get somebody to change their eating and exercise habits.
A lot of your decision making gets easy with this number staring you in the face. It's hard to con yourself with this number confronting you. In fact, I suggest having it stare you in the face a lot until you internalize it. Write your number "$____ per Hour" on a bunch of colorful four x 6-inch cards in bold black letters and stick these cards up in places where you work and will see them often.
Generally speaking, with this number confronting you, two business life changes probably come to mind immediately.
First, you realize you've got to surround yourself with people who understand and respect the value of your time and behave accordingly. This isn't easy, and they'll forget often because familiarity breeds contempt. Periodically, you'll have to re-orient them. You also must get people who don't respect the value of your time out of your business life. If you let people who don't understand and respect the value of your time hang around, you won't even have a fighting chance.
Second, you have to eliminate the need for doing -- or you need to delegate -- those tasks and activities that just cannot and do not match up with the mandated value of your time.