I say it every week on the Real Value Podcast – I am very appreciative of all the listeners investing their most valuable asset and resource, their time. Time is a non-renewable resource and we all have the same amount. You can make more money, get a different job, buy another car, but you can never go back in time and get back the hour you spent doing something. Every hour gone represents one less hour to do something else with that hour, that’s just the way the math works. You can’t bank your hours; you can only invest them, so it might just be a worthwhile exercise to figure out what your time is worth. What I hope to do in this article, however, is not just help you figure out what a current hour is worth to you, but to help you have a paradigm shift in thinking so as to to figure out what a potential future hour is worth to you.
The Math Seems Simple
There’s a simple calculation to figure out what your current hours are worth: first figure out your net take home pay. This can be a weekly number, a monthly number, and even just an annual number. The time frame will simply affect the divisor. To use simple numbers, imagine you net $100,000 per year and you average 50 hours per week, while taking two weeks off per year. 50 hours per week times 50 weeks per year is an average of 2500 hours worked. $100,000 divided by 2500 hours is $40 per hour. Another way to calculate is to take your annual net of $100,000 and divide it by 50 weeks, which leaves you with a total of $2000 per week. $2000 per week divided by your average of 50 hours worked equals the same $40 per hour. But is that the end of the story? And why does it matter?
Why Does It Matter?
The cost of an hour matters because it’s a metric that should be used, not only to decide what to say ‘yes’ to, but more importantly, what to say ‘no’ to! What we say ‘no’ to is often far more important in the short, and the long term, because every decision about how to spend each hour will either positively or negatively affect that hourly rate. What those decisions will also ultimately affect is your happiness, which rarely gets factored into the hourly rate calculation. So, while you might be able to increase your hourly rate by increasing your average fee, lowering your time on each order, and even outsourcing some of the low cost tasks (highly recommend this), a better set of questions and calculations is needed if you have any desire to grow, be more profitable, and enhance your lifestyle.
A Better Set of Questions
The first set of questions revolve around what you enjoy doing and what you find to be drudgery. The things you find to be drudgery are most likely the things that take the most time, if only because you find yourself procrastinating and working less efficiently on those tasks. These are most likely the tasks that could, and possibly should, be handed off to somebody who can do them more efficiently and at a far lower cost than your $40 per hour. If somebody can do those tasks better for $10, $15, even $20 per hour, which frees you up to work on more profitable tasks that you may actually enjoy, why wouldn’t you?
The next set of questions revolve around a potential future not yet realized. When we’re working with coaching students, we work through a variety of exercises that bring awareness to, not only current hourly rate, but the potential future hourly rate if you were able to expand your mind and, in the process, expand your business metrics. One of the exercises I recommend working through is the 10X and 20X process. The 10X and 20X process entails multiplying your hourly rate by either 10 or by 20 and imagining what changes would have to take place to realize those numbers. Taking your $40 hourly rate and multiplying it by 10, and then 20, your future potential hourly rate becomes $400 per hour and $800 per hour. Can’t think that big? Ask yourself ‘why not?’ There’s really no downside to doing this simple thought exercise, so why not give it a shot. Every time you’re confronted with a set of tasks, orders, and business decisions, start asking yourself, “what would $800 per hour ‘me’ do in this situation instead of $40 per hour ‘me’?” As the value of your hour increases, the decisions you make about your time change since you have to be much more discerning about each hour and each choice. What might be an even more important realization in doing this exercise is that you won’t start thinking like a $400 per hour or $800 per hour business person after arriving at those hourly rates, you have to first become a $400 or $800 per hour ‘thinker’ before you’ll ever arrive there.
Have any comments or would you like to submit content of your own? Email firstname.lastname@example.org.