- 4 Questions Every Entrepreneur Must Ask Themselves - October 23, 2021
- 4 Common New Business Money Mistakes (and How to Avoid Making Them) - June 14, 2020
Time is the most important asset you have. Unlike money, once you’ve spent it, you can’t get it back, and how you spend it is important. They say time is money, but time is your dream. When you’re running a startup, you’re in the dream business. And every minute you can spend on your dream is one more minute you’re working toward making a difference. As you grow, you’ll need to build a team. Most likely, you’ll need accountants, contractors, marketers, lawyers, etc.
StartupNation exclusive discounts and savings on Dell products and accessories: Learn more here
But before you build that team, it’s important to answer the following four questions:
“How much is your time worth?”
Since your time is limited and becomes even more limited as you grow, you must learn to maximize it. When I get with potential clients, I like to do an exercise to get them to see the importance of delegation.
You can use the equation:
Income ÷ hours worked / week ÷ weeks worked = Hourly rate
This equation works for both full-timers and part-timers, and you can use an arbitrary number. Let’s say your income for the year is $200,000 and you work 50 hours a week on average for 50 weeks (You get two weeks’ vacation, of course).
Your hourly rate would be:
$200,000 ÷ 50 hours/week ÷ 50 weeks = $80/hour
Now, that you’ve determined your hourly rate, you must answer three other questions:
“Would you pay someone to do a necessary task at your hourly rate?”
You would probably instinctually say, “No,” but most likely the real answer is, “Yes.” We waste most of our time on non-revenue generating activities. Most, if not all, of it is office work we don’t want to pay others to do. We do this work because we think it saves money, but we usually lose money by doing these tasks ourselves. Now that you’ve determined your hourly rate, let’s compare it with the going hourly rate for the tasks you’re doing but shouldn’t be doing.
For example, if your hourly worth is $80 per hour and you’re doing a job you could pay someone else $25 per hour for:
Your hourly rate – going hourly rate = Money wasted/hour
$80 – $25 = $55
You probably think you’re saving $25 per hour, but you’re wasting $55 per hour doing that work yourself. And that doesn’t account for the time you’re using to do that task. That’s time you should be using to generate revenue for your business, your number one core business activity. In addition, if you’re doing a task a professional should do, you’ll probably take more time to complete said task than the professional would. That’s more time and money wasted.
“What are you best at?”
Operate to your strengths whenever possible. However, doing what you are best at may not be the best use of your time. This is a challenge when we move from being an employee to an entrepreneur. A change in position means your requisite skills will change and you will have to come out of your comfort zone. Which leads to the last question…
“Which tasks generate the most revenue?”
Generating revenue is your number one task. Period. Your time should not be spent (an expense term). It should be leveraged (an income term). Everything you do should be geared toward your number one task. This means delegating all other tasks. It doesn’t mean that the other tasks aren’t important to you; it just means they are not as important for you to do. This is a difficult concept to grasp because it involves spending money, which is probably in short supply. Although you’ll have to spend a little money up front, your business will get ahead in the long run.
Knowing what your time is worth is important because it will help you to determine how to build and lead your team. You can’t do everything yourself, even if you feel like you have to. Hiring the right professionals will raise the quality of your work and increase the amount and the speed of the work you and your team can accomplish. It will also free up your time so you can focus on your most important task: generating revenue. It’s all about building on a solid foundation. Answering these four questions will help your startup to build that solid foundation and make the impact it’s designed to.
Originally published Jan. 15, 2020.
Verizon Small Business Digital Ready: Help for small businesses
Big news. StartupNation and Verizon are bringing something special to all small business owners. Verizon Small Business Digital Ready is a free resource for learning basic business skills, the latest digital technology and more. Sign up now.