Do you value your time?
I would suggest that you do.
But how much do YOU think your time is worth?
$20? $50? $100? Per hour? $1000?
That can be quite an uncomfortable question.
And even more uncomfortable when you have to communicate that to someone.
Most business owners I meet would grossly undervalue their time. As a matter of fact they do. And that hurts them, their family and their business in the long run.
Even consultants who charge by the hour undervalue their time.
And that is a big problem. But i will show you how to evaluate your time and show you how to best communicate it as well, without feeling awkward.
Are you ready?
For starters, I want to clarify that there is an internal evaluation of your time, and an external hourly rate that you might communicate. If you’re a consultant for example.
But let’s assume you run some kind of trades or service business. And let’s assume you have some contractors or employees working for you.
You pay your employees an annual salary, and your contractors an hourly rate.
Let’s say your employees make $80K per year and your contractors something like $45 or $50 per hour.
You then charge them out at say $75 per hour. Plus minus. Whatever.
So what should your rate as the owner of the business be?
Maybe $100 per hour? $150?
I’ve talked to owners of businesses with over $1 Mio in revenue, and they would have valued their time at $25 to maybe $30 an hour.
Crazy right? But it feels safe. And humble.
But it is actually quite stupid.
Let me show you why!
Let’s say your business turns over $750K per year.
And you pay yourself $80K per year plus $40K profit.
So you make $120K per year before taxes.
Assuming you work 46 weeks, 40 hours per week, that would make your hourly rate $65.
Without you the business would not exist. THe $750K per year would not have been created.
So the right calculation should be:
$750K / 46 / 40 = $407
Not bad hey? You actual hourly rate is $400.
Obviously you don’t charge this to your clients.
But when you think about how much your time is worth. That is the number you should have in mind.
As I said, if someone asks you what your hourly rate is, you don’t quote them this number. I would suggest the number you should quote for should be based around what it would cost to find someone to replace your position.
E.g a general manager, and then add 25%-50% on top of that. If they want to “work with the owner” 😉
Let’s say a general manager would cost $120K per year, then I would set my hourly rate at say $150.
Easy right. And it feels like quite the bargain compared to $400.
Anyways, just something to think about.
To your success
P.S in advertising and marketing, we tend to make similar misjudgements. Yes, you might find someone “cheap” to build you a website or run your ads. But how much money are you leaving on the table because of it? Click here and have a chat with someone that knows what they’re doing.