How Much is Your Time Worth?

Central to any appreciation of time mangagement is a sound understanding of how to place a value on time. This is important for any undertaking, but is espceically crucial for a small busines.

Have you ever asked yourself this simply question - How much is my time worth? And if you do know - do your act upon it?

Without some means to measure, compare and decide between two (or more) ways to spend our time, we would never make any rational decision. In business the universally used means of comparison is of course money - is one activity likely to produce a higher monetary yield than another.

If you are employed the judgement is very straightforward. After adding in time taken in travelling to work and perhaps also "tied" hours, such as lunch breaks which cannot be used freely, the value you place upon that time must be less than the amount you are paid. If you did not value the remuneration more highly than the time spent, then why are you doing it?

But it is not as simple as that. Most of us would feel that it would be unhealthy to place a value on all of our activities in this way. It would hardly benefit your relationships with your spouse/partner and children to devote time to them according to some idea of a how it looks in a profit and loss account. Yet in some ways that is not a bad analogy - "profit" (quality of family life) relies upon "investment" (time with family). We forego spending time at home with loved ones in order to earn a living. From this we learn learn something important - the value we place on our time is not a fixed figure - it shifts so that we may be comfortable working say 40 hours each week, but not 50 - even if the extra 10 hours would be paid at a higher rate.

The situation is further complicated if you run a small business. You may undertake a range of activities which reward at different rates and some which produce no income of themselves, but which are required in order to support other income generating activities. Now complicate the matter further and add to the mix the considerations I have explained about the value of work versus family time and it can be seen that placing a value on one's time is not easy for someone who runs a small, perhaps home base, business.

Many small business owners do not attempt this calculation, in fact many do not even know, with any degree of reasonable accuracy, the number of hours they work in their business. Without this data they cannot make any calculation about the value of their time. Yet it is very important for any business that this calculation is made.

It is very important for any small business owner to keep an accurate record of the number of hours that is worked in their business, not just in terms of the total number, but also the pattern of the house worked, and on each major activity. By comparing this to net income figures (after deduction of expenses) it is a simple matter to arrive at average weekly, daily and hourly rates of earned income, and also the hourly income derived for each major activity.

Any small business owner should look to keep overheads to a minimum and stop doing what is of no real importance, and the immediate reaction to any suggestion to keep needless records should be resisted - in other words it must be recognised that maintaining this information will be an additional activity, but it is easily done in a simple and cost effective way. However this is not a problem because these calculations can be made quickly and easily.

This information should be at the heart of considerations about which activities to expand or drop and which to invest further effort in etc. But without information the temptation is simply to look at the profit and loss account. However these do not give enough detail to determine comparisons between activities in terms of the profit per hour. The small business owner may intuitively know this, but concrete information is more likely to encourage action.

For a larger business, the situation is not always as critical, a profitable activity can be retained whilst finding resources to expand others and then afterwards perhaps shift the focus of the business towards the more profitable. For a small business owner, there may be no option other than to choose between two activities - and may be the only way a business can be sustained or expanded.

In conclusion, in a small business knowing how time is spent and the value to place upon that time in terms of all and each activity is of fundamental importance to its survival and growth. Records to gather and compile this data can be can be maintained at minimal cost - and their value will far outweigh the time and effort to do so.

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