Just pause for a second and really think about that. I’m asking how much money is your time worth to you? The question is not asking how much you get paid, or what your hourly rates are. I’m asking for a monetary value, how much is your time worth, per hour.
It’s likely that you don’t know, so let’s figure it out. I want you to dream a little. Perhaps you’ve just started your business, or perhaps you’ve been doing it a while but it’s not performing as well as you would like, you feel like you are working all the hours and not getting anywhere. I want you to visualize what your business looks like in 5 years, or 10 or 20, the timeline doesn’t really matter, it’s what you visualize that counts.
Dream a little
In this visualization, what does your life look like? What car are you driving, where do you live? Are you married? Have kids? What hobbies do you have? Do you go on vacations? Get a sense of what your dream life looks like. How much annual income do you need to support that lifestyle? Take a stab, $100K, $250K $1M? Don’t worry about how high this number is at the moment, we need a number to work with, but for this exercise to work you need to understand not where you are now but where you want to be.
let’s look at your dream business – what does that look like? Do you have staff working for you? Are you working from home or from an office? Do you have Mac’s or PCs? Use my Know Your Number Worksheet and start filling in the expenses per month section, of what your desired business looks like, not where you are now.
Cost of goods sold is a little harder to figure out since it’s linked to actual sales. This can be harder if you are selling a product over a service; you’ll tweak all of these numbers as you start to see the results. This exercise also helps to set your service rates and product offerings.
Now, here is the big one, how much time do you want to spend working? This includes time on money making activities (Working IN your business) and time on planning and growth (working ON your business). Enter this information into the worksheet too.
Make it uncomfortable
You should start to get a picture of what your time is worth PER HOUR. It probably looks a little high to you right now – that’s ok, this exercise was about looking at where you want to be not where you are now. It will help you to set your current prices with growth in mind and enable you to make good decisions around expenses and how many sales you need to build towards. If it looks totally unachievable, then you have to make compromises, maybe it’s not a Mercedes that you drive, or maybe you don’t vacation in Hawaii, maybe you don’t have a swanky office or a team of 5 staff, or maybe you want all those things and can find some additional hours to make it happen.
Keep playing with the numbers, understanding how many work hours you need to provide the business and lifestyle you want. Note, the hourly rate you settle on should feel uncomfortable; you want to stretch yourself. Otherwise, you will settle for mediocre and that’s not why you started this business. Also, note that there may be some offerings you can charge higher rates for, and others, less. You can also earn residual income which will contribute to your overall desired hourly rate.
As far as expenses are concerned, now you can begin to see what you can farm out to others and what you can “afford” to do yourself. If you are a consultant, aiming for $150 an hour, it makes no sense for you to spend time that could be used on billable hours on the administration that you can hire a VA to do at $30-$40 an hour.
Know your rates
DO you have an hourly rate in mind that you feel can’t get any lower based on business costs and lifestyle wants, yet feels too uncomfortable to charge? Get in touch and we’ll brainstorm some strategies and offerings to get you where you need to be!