How much is your time really worth as an entrepreneur? Getting a business off the ground and growing it to the point where it becomes profitable takes a significant investment of hours. But you can’t realize anything close to a realistic return on that investment if you consistently undervalue your time.
Benefitting financially from the hours you spend maintaining and expanding your enterprise requires two things:
- the assignment of a fitting dollar value to your time, and
- the employment of that value to figure out what constitutes a wise use of your working hours
Whether you sell a product or provide a service, as a business owner, you are your company. Not only does that make your time extremely valuable, it means that every hour you spend planning or executing a task contributes to or detracts from your profit.
Why Assign a Value to Your Time?
Unlike other business resources, your time is finite. The more of it you spend on low-impact activities, the slower your business development is likely to be.
Figuring out what your time is worth will help maximize your efficiency by ensuring you’re fairly compensated (on paper, at least) for your efforts. Assigning an accurate value to your business activities also allows you to set a fair price for direct time expenditures like consulting, and lets you take the compensation of others into account when you budget around hiring employees or outsourcing work.
Remember, your clients, personnel, products, and revenue may be limitless, but the hours in your personal work week are not. For bigger business gains, you can’t afford to sell yourself short.
Time Valuation Considerations
There are a number of ways to establish a reasonable rate of pay for your time, even if you’ve yet to draw a salary. Start by getting a rough idea of what you’re currently earning, then determine how appropriate that rate is or isn’t.
- If your business is still at the stage where you do most things yourself, divide your business income by 2,000 (40 hours x 50 work weeks) to view it as an hourly rate.
- If you employ others, weigh what you pay them against the value of your responsibilities as a business owner. As a minimum, you should gauge your time as being worth somewhat more than your highest-paid team member. As a maximum, consider what your compensation might look like if you were to perform similar duties for somebody else. Research pay rates for similar positions in similar industries in your area.
- Take a look at what the competition is charging for services comparable to yours. If you can translate their pricing into an estimated hourly fee less overhead, it will give you an indication of what similar business owners are earning.
- Engaging in networking with successful entrepreneurs in your industry offers many benefits, including an opportunity to discuss what they charge for their time.
Once you have an idea of what your time is actually worth, it’s easier to decide how to spend it. Optimizing your workday means being stingy with your time and delegating where it makes sense to do so.
Spend Your Time Wisely
If you’ve determined that your time is worth $45 an hour, you should consider that every 8-hour work period translates into a business expense of $360. Are you getting bang for your buck from that cost?
Take a few minutes to examine the activities you regularly engage in and determine whether a more disciplined approach might save you time. Don’t spend half an hour on the phone, for example, if a five-minute email will achieve the same result.
Finding success as an entrepreneur means carving out a certain amount of time for strategy and big picture planning.
Don’t Shy Away from Delegation
Many business owners find it difficult to rely on others to perform tasks effectively. Even those who understand the importance of delegation can be guilty of micromanaging their staff. And that, experts claim, is a growth-inhibiting business practice.
The more you can do to relinquish control where appropriate, the more time you’ll have for higher value activities - and the greater your income potential will be. Consider hiring one or two talented individuals to take on some of your many responsibilities or explore outsourcing certain duties like bookkeeping and online marketing.
In the end, recognizing the value that’s inherent in the time you devote to your business will help you make better decisions. As your most precious resource, the sooner and more accurately you learn to value your time, the faster your business will grow.