| How much is your time worth? As a business owner, you wear so many hats CEO, CFO, HR, Marketing, Cleaner, Cook etc. Therefore it goes without saying that Time is the most valuable asset to you. It’s therefore surprising that not many business owners take the time to value THEIR time. To actually put a number on their time and be able to say that my time is worth £x/ hour. This is one of biggest differentiator between millionaire businesses and the ones which are still struggling. Why? Because making smart decisions is made possible by knowing how much your time is worth. I wanted to share with you a simple formula on how you can value your time and some advantages of doing this. This is not the only way to value your time but a great place to start nonetheless. The formula is based on the following assumptions: – There are 2,000 hours a year available to work (i.e. 50 weeks a year @ 40hours a week). – An average business owner is assumed to be productive a third of the time, therefore it is assumed that you will have 667 hours in a year in which you will be engaged in revenue producing activity in your business (i.e. 2000 hours divided by 3). – Therefore you draw £100,000 per year (i.e. 667 hours) from your business, then your hourly rate is about £150/hour. – If you sum up all that you draw from your business in a year, you can now calculate your hourly rate using the formula above. This is the magic number that will help you make smart decisions. Knowing the value of your time: 1) Helps your prioritise what you should do yourself and what you should outsource If you know how much an hour of your time is worth, it makes it easier for you to evaluate how you’re spending it. Based on the example above, if it takes you 2 hours to mow your lawn, that means that you have spent £300 to mow your lawn. Is this a good use of your time? You might as well have paid someone £20 to mow it for you while you spent that time actually making £300. You can only make such a decision if your know how much your time is worth. 2) Helps you make better decisions to improve efficiency on your business How long does it take you to complete a particular task in your business? If you could complete it quicker by paying a little extra would that be worth it? Sometimes as business owners we try to save cost by doing things from scratch. Yes, the raw materials might be cheaper than semi-processed ones. However, how much time does a semi-processed product save you? Having a value on your time will help you decide whether paying the little extra is worth it. At the end of the day you need to evaluate how you spend your time because it is the one commodity that you can never get back. How can you most effectively use it to make more money. Spending a little extra to free up your time in order to make the big bucks is a smart business decision! If you missed the discussion this week, be sure to catch the replay by following this link: How Much Is Your Time Worth? Have you valued your time? P.S. Join the ‘Simple Finance for Small Businesses’ community. |
How much is your time worth?
