There is only so much time in a day right?
So it just makes sense to focus as much of your time as possible on the things that produce the highest payoff.
Most small business owners are do-it-yourself types and get sucked into doing the littlest silly work faster than you can say “Oh look, the copier is jammed again.”
If you want to achieve any of your goals and finally start making what you are worth then you’ve got to find a way to stop doing $5/hr work. Period.
As you might have suspected, I believe that every business owner’s highest payoff work or best use of time is any amount of time spent doing effective marketing.
Here’s a little math quiz that I suggest you play with to help drive home this point. Figure out how much money you make annually or, better yet, how much you want or need to make annually to achieve your dreams and goals.
Now, divide that number by 2080. (That’s the number you get if you work 40 hours a week for 52 weeks a year - I know, I know, you work 80 hours a week but just work with me here.)
The answer you get is what I call your PAY or Personal Average Yield. The idea here is to pin down what your work is worth an hour and realize that if you can hire someone to do any of the things you currently spend your time on for less than that number, you can’t afford to do it yourself - did I mention that you could use the spare time to do some marketing.
So let’s run some numbers. Let’s say that you want to make $150,000 per year. Well, using our little formula that means that you need to be doing work that is worth a little over $72/hr - 8 hours a day.
But guess what…we haven’t even factored in any overhead or costs of doing business. That number might really get big if you’ve got those as well.
This is the point at which many people finally come to understand that they are undercharging for their services…but that’s another issue all together.
So I ask you. Is fiddling with the copier, chatting with the mailman, running to the office supply store, making deliveries, or returning meaningless email paying you $72/hr? For that matter, doesn’t mowing your own grass, washing your own car, cleaning your own windows take you away from marketing your business? I know, now I’m asking you to give up most of the fun things you like to do everyday but hey, if you can get the neighbor kid to mow your grass for anything less than $100/hr, therefore giving you 3 hours to write a killer sales letter - it’s probably a steal
Figure out your PAY number, paint it on the wall in your office, and then go about setting up your business in a way that allows you to focus on the only things that can really pay that kind of money: marketing, innovation, and customer service. – cause everything else is just a cost.
Comments
This entry was posted on Tuesday, August 14th, 2007 at Aug 14, 07 | 6:33 am and is filed under Vision. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
[...] John Jantsch revives a classic example of calculating your worth. [...]
Very important post John, perhaps one of the most important areas in a small business! I found colors works well as it is high level, and easy to think about whenever you are doing anything - here is what I mean:
The critical point is that you need to establish the best use of your own time. Rolling up your sleeves and serving your clients keeps the business on track short term but doesn’t really help you long term. It is this day to day work that is all consuming. It blocks any sense of vision of what could be. Write out everything you did today and then highlight the items according to the following three categories:
RED – all back office tasks such as filing, administration, chasing debts, office related duties etc.
ORANGE – the time you spend doing what you do – in other words, the carpenter building things, or the attorney working on client cases.
GREEN – the time you spend working on your business (where it is going and how you are going to get there).
I won’t complicate this; let’s just say if you are spending all of your time chasing outstanding debts or making the widgets, who is looking after the long term health of your business? You, the owner, need to be spending most of your time doing GREEN activities.
Amen.
I’m a big Brian Tracy fan, and a big fan of the 80/20 rule. I try to work by the strategy you are describing.
But here I am reading your blog and writing a comment instead of doing my $x an hour important work.
I think the unfortunate truth is that we can’t always be productive, and that X percent of your time is going to be wasted doing some kind of useless crap when you really should be doing something important.
Even if you approach it in an imperfect, slacker way like I do, you’ll find that you get a crapload more done each day than you were getting done before.
Any hey, can’t I count reading your post and writing this comment as learning about marketing, which is one of the only important things on your list?
No, really. Can’t I?
Because if not, then I am looking pretty foolish right now.
Lars,
Of course reading and commenting on my blog is a high payoff activity!
Scott,
I like your highlighting system it keeps the focus on the important. The trick is to also get the red and yellow done too.
This post is a “Meat Cleaver” post, and chops right through the B.S.
Thank you for this post, and keep up your most excellent work.
David
My hourly target is pretty high, and I have a lot of chaff I need to separate.
I live and die by my to do lists.
I prioritize.
Then bright and early, if possible, I get at least the number one task done.
Do I do low skill tasks that I could probably delegate?
Yeah.
‘Cause the brain needs some downtime.
By the way… was hanging in the bookstore last Wednesday.
A guy comes in, all in a panic, no staff anywhere, scanning the shelves.
I ask if I can help and am told…
Must find “Duck Faced Marketing”
I translated, handed him your book and he left happy.
I have no idea why the urgency.
Pent up demand.
LOL
Nice figures there John. The numbers make sense. I would add that a perspective shift might help in grasping and implementing your advice. Most people, think of time as a fixed commodity that only loses - hence we use the words “waste” or “spend”, when we speak of time. The shift occurs when you think of time by using words such as “invest”…or a little fancier “maximizing opportunity per unit of time.”
So, Invest instead of waste or spend
K,
Duck Faced Marketing is the title of my next book! No, really, thanks for spreading the word.
David,
It’s funny how in tune with this idea folks who charge by the hour can be. Most small business owners don’t connect what they do with what they make because it all kind of gets lumped in with the general tornado of things.
Wow, you made me stop and think. Does it really make sense for me to spend hours trying to figure out my bad-mannered printer (should just cut my losses and buy a new one)? Or, those excellent trips to Staples to buy supplies–what a waste of time. And, I cringe when I think just how much time my business partner spends fighting QuickBooks–that’s what accountants are for, right?
Thanks for sharing your thoughts on time management. It will truly help me priortize tasks and, more importantly, realize when to outsource.
I’ve just repositioned my business to focus on Internet marketing rather than strategic sales and your blog is very timely for me as I’ve been outlining the pricing model. I want to provide peripheral services to retain clients but there’s little profit in that if I do the work so outsourcing this component is the way to go leaving me to focus on the areas of my consulting practise that offer the biggest returns. Your post reinforced my belief that this is the right strategy to take. Thanks!
[...] Published in nightshiftr 15Aug Interesting article which I really need to take to heart: Are You Worth More Than You’re Making?. SO much of this rings true for me, and probably will for you as well. What was especially [...]
John it’s like you’re reading my mind! I was doing this activity just today using a free rate calculator available over at Freelance Switch (no affiliation) here:
http://freelanceswitch.com/rates/
I found that when I put in all the numbers that the rate I have been charging just isn’t enough to get me where I need to be. Just recently though I decided to drastically change my business model and raise my rates. I’m happy to say they fit much better with what I want to achieve in a year.
Angela Wills
http://www.StarVA.com
John,
May I offer you my grass cutting services at the low low price of $99/hour?
Chad
Chad,
You’ll need to sharpen that price just a bit in this case.
Good advice all around. However because of our cultural diversity, e.g., indigenous people of North America, time has a different meaning and concept.
Al
[...] Great point on Duct Tape Marketing about not spending time doing things that others could do when you (I) should be marketing: if you can get the neighbor kid to mow your grass for anything less than $100/hr, therefore giving you 3 hours to write a killer sales letter - it’s probably a steal [...]
[...] your services. I came across a related post at Duct Tape Marketing, where John Jantsch asks “Are You Worth More Than You’re Making?” He also suggests a way to determine your pay rate, but here’s what I’m bringing [...]
[...] wrote about the idea of time management and focusing on work that is the highest payoff in a recent post. I think the idea of utilizing virtual assistants goes very nicely with that [...]
Your article makes awesome sense; in fact, it’s one of the reasons that I’m finding my new business so very attractive. I’m an independent distributor of the new nutritional juice beverage MonaVie and the business model is awesome. I spend no time doing “time wasters.” All my time is building my business.
I’ve just picked up this thread - all very useful. I’m a great believer in outsourcing - not just for economic reasons but where expertise can really make a difference.
The trouble is, especially with start-up businesses, is that there is an enormous pressure on trying to keep costs down - small business owners try to be a ‘jack of all trades’ and can easily lose sight of the big picture.
I’ve linked up with a fabulous virtual assistant who is worth her weight in gold - makes sense that she can do those tasks while I concentrate on growing the business.
Debbie Leven
Profile Matters - PR Consultants UK
[...] Are You Worth More Than You’re Making? [...]