The numbers don’t lie. The problem is, many of us don’t know the numbers and pay little to no attention to them.
I’m not talking about your website metrics. I’m talking about something bigger than that, yet much simpler. That simple metric is…
What is your TIME worth?
Have you ever actually calculated it?
Here’s a simple equation you can use to calculate what your time is worth:
Your Annual Income / 2080 = Your Hourly Rate
This is actually super simple. Assuming a full-time 40-hour work week for 52 weeks per year, you have 2,080 work hours per year. Obviously, I’m aware that there’s a give & take to this for varying reasons, but we’re just keeping it simple here.
So, for example, in 2010, my online business grossed roughly $210,000. If you do the math on that, my hourly rate comes in at about $101/hour.
Why Does This Matter?
Obviously, with an equation like this, we’re assuming a lot of things. We’re not taking into account weeks we don’t work. We’re not taking into account costs of doing business (such as taxes). Those things don’t matter here one bit.
The point here is to get an actual dollar value for what your time is worth, with a real dollar figure that is based on real numbers.
When you know what your time is worth, you can make much better decisions on how you spend your time.
I mean, when you think about it, time is the ONE resource that, when you burn it up, you’ll never get it back. Ever. The clock just doesn’t run in reverse.
Using This Information
Would it be worth it to hire a virtual assistant to do work for you? Or a developer?
One of the big mistakes I see from a lot of newcomers to this business is concentrating solely on the outflow of cash rather than the tradeoff. What I mean by this is that they focus only on the fact they have to spend money – and how much they have to spend. They don’t consider the personal opportunity cost of that cash outlay.
Do you do this, perhaps?
For example, let’s say you want a nice blog design. You know about the premium themes out there and you know you can hire somebody to do it. However, that costs money and you’re trying to avoid spending money at any cost. So, instead, you spend countless hours trying to do it yourself. Between research, learning and doing… plus the fact that you have other things going on in your life… you end up taking three months to “perfect” your blog design.
In the end, you either come up with something that probably looks pretty amateur… or you give up. And, it took you 3 months to do it. How many actual hours you spent on that, who knows.
OR… let’s say you know you can buy a premium theme and pay a designer to customize it for you. Let’s say $70 for the theme (much cheaper with Elegant Themes) and $500 for the customization. Fine, so that’ll cost you about $570. They can have the whole thing done for you in a week or less. Plus, it looks a lot better.
But, what about the money? Well, what’s your hourly rate as calculated above? What is all that lost time worth for you to do it yourself? Plus, if it takes you 3 months, that’s 3 months you could have spent growing your blog rather than dicking around with code you don’t understand.
The “Gotcha” I Know Many Are Thinking…
I know, I know. You might be thinking something like, “Well, I’m not making any money with my blogging yet, so this doesn’t count. My hourly rate is zero.”
Oh, the things people say.
If you’re already running your own business, then the calculation is simple.
If you’re an employee of another, then just take your annual salary and work it. Doesn’t matter if that income is coming from blogging or not. The point is… your time IS worth something. The moment you start thinking like that, the closer you’ll be to whatever your income goals from the Internet are.
How This Has Helped Me
Assigning a dollar value to my time has helped me. Not only does it help me choose when to hire others, but it also helps me make decisions on whether to say “yes” or “no” to certain things.
For example, I used to do website development for people for $60/hour. I don’t do that anymore and haven’t in a few years now. Why? Because it isn’t worth my time. My hourly rate is way over $60/hour. Plus, I just don’t feel like dealing with clients. 🙂
When I look at my business and all the various tasks that need to be done, I now judge it from the standpoint… is this work worth my hourly rate? Sometimes I’ll do it even if the answer is “no”, but it provides an easy way to decide if hiring makes sense.
Also, what about opportunity cost? Could I be doing something more important with the time?
Lastly, as for balancing business and personal, it helps to know the rates. For example, we need to unbury some sprinkler heads and repair one in my yard. I could do it myself, but is it worth it? Between the trip to Lowes and the time to actually get it done, it could take me a few hours. Or, I could pay somebody a couple hundred bucks (2 hours of my time) to do it for me. I can spend my time doing something more in-line with what I’m good at.
So, think about it. Work the equation and see what you come up with. It doesn’t matter if your hourly rate isn’t as high as mine. You might even consider non-monetary factors as well…. things that don’t make you money but you enjoy immensely. However it works, I encourage you to assign yourself an hourly rate.
Your time is valuable. Know what its worth, stop devaluing it. Once you’ve spent it, its gone forever.