(Pt 1) 3 Reasons Why Entrepreneurs Appreciate the Value of Time (and How You Can Value Your Time Too)
There isn’t a single industry that doesn’t put a value on time.
So why do some entrepreneurs fail to put a value on their time?
When you are employed, you are paid by the hour. Even those on a salary are still being paid a fixed amount based on an agreed amount of time per week. Whether hourly or salary, your employer is buying your time by the hour.
Freelancers often charge by the hour. Heck, even in school we were told to do X amount of homework and assignments in a certain amount of time. It’s a framework that is ingrained in us from our earliest years.
However, for those of us who turn to the world of entrepreneurship, this deeply ingrained connection between hourly work and reward must be unravelled. You might not take a fixed salary, but you are still creating a level of income for each week or month of work. It’s important that as entrepreneurs we understand the value of each hour spent in the business.
I believe that when you know how much income you are creating each hour, you have the information and understanding to take your business to the next income level, or at least save yourself a hell of a lot of time. Knowing your hourly value ensures you are running as efficiently and profitably as possible.
Why entrepreneurs appreciate the value of time
When I first worked out my income per hour, it was much lower than I expected. This was because I was being paid for some of my hours and not all of my hours.
Entrepreneurs understand that not all of their activities bring in the same amount of income as others. Richard Branson would tell you that he focuses on creating new businesses and allows other people to deal with the day-to-day management of those businesses.
When you are running a business, not all of your actions are created equal. I often call these your high and low value tasks. For example, you might find that social media and blogging bring in different volumes of paying customers. The value of an hour spent writing a blog could be worth significantly more or less than an hour spent engaging with customers on social media.
1# Prioritising your actions
When you understand how much value you are getting from your time, you can focus on the tasks that are creating the highest value. This streamlines your daily, weekly and monthly actions, and you become more productive, efficient, and profitable because you are only doing the things that add value to your business.
It’s important to remember that this doesn’t mean only completing actions that directly bring in sales or leads. You have to do admin, banking, technical stuff, setting up systems, hiring freelancers, and all those other jobs that are part of the parcel of being an entrepreneur. It means freeing up time from the tasks that don’t necessarily need your direct attention.
Successful entrepreneurs understand this and will always look to outsource their lower value tasks.
Especially the tasks that they are not good at.
When you understand the value of time, it’s much easier to know which tasks you can outsource.
Let’s use the Branson example from earlier.
If Branson decided to run one of the arms of Virgin, his Virgin Media company, you could say that he was responsible for the 377.5m of turnover it generated in 2015. If he worked 2,600 hours that year, that would mean that for each hour he worked, he created £145,192 in value for the business.
But what if he paid someone £152,532 a year (the amount the prime minister of the UK earns) to run this business instead? It’s a no-brainer for Branson—he can create that value in just over an hour! Which gives him 2,599 hours to create value elsewhere in the business.
This is only a simplified example; there are obviously lots of factors that come into play when it comes to working out true value, but you should be able to see the fundamentals of how outsourcing to leverage time works.
Let’s look at it on a smaller scale, for example:
- If you know your time is worth £25 per hour, then paying a £10 charge to have your shopping delivered directly to your door is a better use of your time and money than spending an hour wandering the aisles doing it all yourself.
- If you know your time is worth £40 per hour, then it makes sense to pay someone £23.41 per hour to do your admin (the average UK cost of a personal assistant).
Most entrepreneurs know exactly what they need to outsource so they can keep focusing on their core strengths: the skills that pay the bills. It is much easier to scale and grow your business when you outsource all your low-value tasks.
3# Business development
Entrepreneurs also use their value per hour to stress test new business ideas. I once started a catering business in my hometown, but it was my failure to work out the businesses true return on investment that led to it going under. I found it extremely hard to outsource tasks in the business because of the high hiring costs of employees on a small start-up budget. This meant that I took on everything in the business by myself to save money and keep it running. My income per hour rapidly decreased because I wasn’t good at cooking or running a relatively new catering business.
How I appreciate the value of time
Let’s compare this to my most recent eBook launch. It took me a total of two weeks to write the eBook and £200 to for someone to edit, format and publish the book for me on Amazon. This eBook has already brought in over £500 in the last couple of months, and this has become a passive income stream for me. I was able to focus on getting the content down onto paper while outsourcing the parts that I wasn’t good at. I would call that a success and a much better return on the investment of my time. Leveraging other people’s time and expertise is a key part of balancing investment and return.
Successful entrepreneurs will start their business with the end goal in mind by removing themselves (or planning to) before the business has even started.
If the business can’t run without you, you are not an entrepreneur. You are self-employed and will always struggle to scale your business beyond yourself.
That brings us to the end of the first part of this value of time article. Next week, I am going to show you can put the value on your own time. Watch this space.
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