How Discovering the True Value of Your Time Will drastically Improve Your Bottomline
As a serial entrepreneur once of the most important things I’ve had to learn the hard way is to value my time. When I launched my first online business in 2004, I literally did everything myself from creating a logo for a website, to writing content, to doing SEO, to handling email. I was literally working 14 hours a day and I was burnt out.
Being Cheap Vs Being Smart
But because I was so intent in trying to keep costs down I thought I was being smart. I mean, that’s what they all try and teach you in the textbooks isn’t it? Keep costs low, don’t expand too quickly and with any luck you may be able to realize a profit in the second or third year. I don’t know about you, but when I start a business, I want to be making a profit in the second or third week! So I don’t have a lot of time for text books, especially the ones written by academics who’ve never left the comfort of academia. But I digress…
The real reason I was not being smart was because I was just being cheap. And by being cheap, I was actually hurting my business because I didn’t understand the true value of my time. I wasn’t prepared to leverage the time, effort and expertise of others because I thought I could save money by doing it myself. So when I thought I was being smart designing a $50 logo myself, which might take me 4 hours to do, I was in fact selling my time for $12.50 an hour!
How Much Is your Time Worth?
So let me ask you a question. How much is your time worth? It never ceases to amaze me that so many business owners have never sat down and calculated the true value of their time. You may be wondering what do I mean by true value? I mean the actions that you take on a consistent basis that directly increase your bottom line. I call these revenue producing activities. So in my online business, for example, if I know that spending an hour optimizing a PPC campaign could potentially increase by bottom line by 0.5%, then this would be a true revenue producing activity.
Unfortunately for most of us, the activities that we spend most of our time doing are not actually revenue producing activities at all. They are simply administrative tasks and whilst on the surface these tasks may seem important, the fact of the matter is they do not add one iota to the bottom line. Such tasks would include checking email, customer support, attending industry conferences etc.
I’m not saying these tasks shouldn’t be done. On the contrary, most of them are integral to the daily running of a successful business. What I’m saying is let’s get clear on the actions that actually produce revenue and those that don’t. Because I can guarantee you one thing. If you are not earning the sort of money you always dreamed of earning in your business, it’s because your time is not effectively being spent on the things that directly add to your bottom line.
So here is a quick and easy exercise that you can do. Keep a diary for a week of every single task you perform in your business and time how long each task takes to complete. If you’re tech savvy you can use a mind mapping tool to do the same task. When the week is up, mark any task that didn’t directly add to your bottom line as Non-Revenue Activities (NRAs) and any task which did as Revenue Producing Activities (RPAs). Now calculate the percentage of your total time for the week that was an RPA. I think you are going to be in for a shock and I would hazard a guess that in all actuality 20% or less of your time is currently spent on RPAs.
Now assuming I’m correct, that means currently 80% of your time is spent on NRAs. We now have a benchmark and something we can work on improving. Now, start going through the tasks and identify the ones that are one-off events and the ones that are performed on a recurring basis. Any recurring task that is performed in your business can be systemized and outsourced easily. And the reason it can be outsourced easily is that if you’ve done the task more than once yourself, you should have a pretty good idea of how to carry it out already.
The True Value of Your Time
Earlier, I was talking about not being cheap and working out the true value of your time. The reason why this is so fundamental is because your hourly rate just had potentially a 5 fold increase in value! If, for example, you earned $15,000 in the last 3 months and you work around 200 hours a month, you would think that your hourly rate would be $25 per hour ($15000/600 = $25) However, that assumes that 100% of your time is used to accomplish RPAs. However, if only 20% of your time was actually allotted to RPAs, this means that only 40 hours a month are used to directly add to your bottom line. And that, my friend, means that your true hourly rate is $125 per hour.
Once you realize your true hourly rate, there really is no excuse to be cheap anymore. It’s time to start outsourcing any task that costs less than $125 an hour. A few of the places where I have found great talented workers online are ODesk, Elance and vWorker . Whilst these sites are great for one-off tasks, I have had my best success in finding full-time workers by finding them directly. And the country that I have had the most success in is without a shadow of doubt the Philippines.
Why the Philippines is the #1 Outsourcing Hotspot
There are number of reasons why the Philippines stands out above the rest, but the main reasons include their excellent communication skills, their high levels of literacy (all the workers that I have are college educated) and their work ethic. They really do take a pride in their work. The wages are also a lot less than here in the West. You can find a good full time Virtual Assistant for around 12000 PHP a month (approximately $300 USD). That’s 40 hours a week full-time. So let me ask you the question. If you could free up around 160 hours a month for you do dedicate to RPAs, what sort of impact would that have on your bottom line?
Managing Your Workers
Is it all plain sailing? No. They do require you to manage them. In my own business, what I started doing was using a free screen capturing video like Jing to record small 5 minute tutorials that I could then show my outsourced workers. I also started creating process maps of all the recurring tasks that occur in my business. The advantage of the process maps over the videos is that it is visual and you can see step-by-step the actions that need to be taken to accomplish the task. Because it’s visual, you can also step back from it and really analyse the whole process. Sometimes, just by doing this, you are able to find more efficient ways of completing the same task. I also encourage all my outsourced workers to give their input and to create a process map of every new task that they perform. This way, not only can I see how they are performing their tasks, they are also providing me training materials for future workers we take on.
So in conclusion, value your time. Find your hourly rate. Outsource the tasks that you don’t need to be doing yourself and focus on the tasks that really matter. By doing this, you will not only see your profits grow, you will also have more time to do the things that you actually want to do. After all, isn’t that why you started a business in the first place?
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