Being an entrepreneur means our financial analysis is about more than dollars and cents. Time is money. How much of your time are you spending on the business? Where and how are you spending that time? None of us went into business to spend less time with the people and activities we love. But inevitably, that tends to be exactly what happens. This is not a time management blog. I’m not going to tell you how to time block or “eat the frog” to get things done. I want to make sure you know what your time is worth and how to use any shortfall to drive business growth.
When I was in public accounting there was an unspoken rule. Don’t calculate your hourly rate. The hourly rate for a first-year staff in public accounting is pitiful. You’re working ridiculous hours (sometimes 80 hours a week) with an entry level salary. We were numbers people. We knew the hourly rate was awful and we did it anyway! Working crazy hours in public accounting was just the dues you had to pay to be a respected CPA. A lot of business owners go through a similar process.
You are in business because you’re passionate about what you do and the people you do it with. It’s easy to let our passion run away with us. No that’s not a typo, I don’t mean you run away with the business. The business sucks you up and runs away with you. Before you know it, that work/life balance you dreamed about when starting the business has gone up in smoke. Whether you’re paying yourself a regular salary, taking distributions from profit, using business income to pay personal expenses (yes that counts as paying yourself), or some combination of these…I want you to take a minute and calculate your hourly rate.
Personal Take-Home Pay From the Business / Hours Spent On the Business = Hourly Rate
Now put that number in perspective. The federal minimum wage at the time I’m writing this is $7.25/hour. The average small business CEO has a salary of approximately $155,000 per www.payscale.com. If you assume a 40-hour work week, that translates to about $75/hour. How does your hourly rate measure up? If you’re in the early years of your business, I fully expect this comparison to be cringe worthy. Don’t stop reading! We’re going to use this information to fuel creativity, balance, and growth!
All the Hats
The comparison above was to an employee level hourly rate and a CEO level hourly rate. I bet you are wearing both of these hats and many more. Most business owners can break their time into the following categories:
- Administrative Tasks (website design/maintenance, invoicing, scheduling meetings, etc.)
- Business Growth Tasks (content creation, media marketing, prospective client calls, etc.)
- Employee Tasks (hiring, performance/employee management, payroll, reporting, etc.)
- Goods/Services (client work or product sourcing/production)
Your specific categories will vary based on the stage your business is in and the type of business you own. What are your categories? In a given month, how much time are you spending proportionately in each category? If you aren’t sure, track your time for a month. Write down what you’re doing and for how long (it doesn’t have to be exact) then come back to this post.
Make it Personal
Now that we know the numbers, let’s ask some important questions to help grow your business!
- Why did you start this business? Be selfish…why is this business important to YOU?
- Are you spending more or less time than you want on the business in total?
- What category or aspect of a category do you most enjoy?
- What category or aspect of a category do you least enjoy?
- What category or aspect of a category are you great at and can knock out really quickly?
- What category or aspect of a category do you struggle with and spend a lot of time on?
- Is there a category or aspect of a category that you feel like ONLY you can do?
Analyzing the value of your time and where it should be spent is very personal. The decisions made by someone whose goal is to spend more time with their kids will be different from those made by someone that wants all the upside for a product/service instead of just a paycheck. One thing everyone will have in common is the desire to make more money with less time spent (increase that hourly rate).
There are two ways to increase your hourly rate.
Decrease the time spent on the business without decreasing net income
Increase net income without increasing the time you spend on the business
Many would tell you the relationship between time and money is give and take. I’m here to tell you it’s not. Time consuming tasks are not all created equal. Use your business categories and important questions to take action with one or all of the steps below.
Set Boundaries – The first step in taking action is to decide how much time you want to spend on your business and/or how much additional income you need to generate. Set your total time limit boundary (current hours or reduced hours). Allocate the time to the categories that give you the most “bang for your buck”. Any important tasks without time to perform them will require you to get creative (see automate/delegate and innovate below).
Automate/Delegate – Review your answers to the important questions. Could a product or person accomplish certain tasks faster than you ( e.g. virtual assistant, bookkeeper, employee, software). If so, what would that cost? Can you squeeze the money to fund this automation or delegation from another aspect of your business? Does the time saved on these tasks allow you to spend more time in revenue generating activities? Using automation or delegation to increase your hourly rate is a balancing act. You have to generate more income with the time you spend on the business and/or you have
Innovate – Both automation and delegation require you offset the cost (for additional systems, employees, etc.). Innovation requires you to think outside of the box. Are you really being as efficient as possible in your current processes? Can you save time or money by doing things different? A simple example of this would be a product based business that ships to the customer. The owner currently drives to the post office to ship each order when received. An innovative solution could be to wait and ship products once a week (though it might impact customer satisfaction) or work with the post office to have daily pickup options. That’s an oversimplification but you get the idea. Innovate is about changing HOW we do things instead of who does them.
If you’re not happy with your hourly rate and want to dig into this exercise more, I would love to help you problem solve and come up with the best solutions for YOUR goals and dreams. You can live your life and earn what you’re worth…you just have to get intentional, creative, and strategic.