(From Laura: I am on the road again this week. Today I’m delighted to welcome Heather Allard as a guest poster. She may be best known as the inventor of Swaddleaze and Blankeaze, wearable blankies for babies. Having started several companies, she now runs The Mogul Mom, a service which helps other women entrepreneurs grow their businesses. She’s here to talk about time and money, and how we should be thinking about the two of them together).
By Heather Allard
Hey 168 Hours readers! Do you have a small business? Then read on for an eye-opening exercise that is a MUST DO for any entrepreneur.
I’m sure you’ve heard the expression “bang for your buck”, and as grown-ups paying for everything from groceries and car repairs to at-home business startup costs, we certainly want the most bang for our hard earned bucks.
But have you ever thought about your “buck for the bang”? That is, the hourly income you earn from the hourly time you invest in your business? Until recently, I hadn’t given it much thought either.
The Big Idea Meets James, hole poker extraordinaire
A few months ago, I hashed out an idea for a brilliant new service for mom entrepreneurs.
So of course, I emailed my friend, James Chartrand, and gave her the basics of my idea. Because more than writing, drinking Shiraz or ice skating, James loves talking business strategy, poking holes in plans and playing devil’s advocate, and she’s damn good at it.
James liked my idea, but challenged the execution of it. She wanted to know exactly what would be involved, how much time it’d take me each day and what my pricing would be.
Well, sheesh, I hadn’t thought of all that.
James suggested I write down on paper every part of the service I’d be performing, how much time it would take me on a daily & monthly basis, and my anticipated monthly income for this service.
So I did.
Wherein I Calculate My Buck For The Bang
I discovered that, combined with my current obligations, my new idea would add an extra 15 hours of work each week and an extra 60 hours each month. Then, I took the amount I planned to charge for this service and divided it by the number of monthly hours I’d be working on it.
Gulp. That number looked damn near minimum wage.
After calculating my buck for the bang, I realized that I’d have to completely rework my idea, reconsider my pricing and look for things in my schedule to eliminate, automate, streamline or outsource.
Man, was I glad I took James’s advice before launching my big idea…
Knowledge Is Power
So why should you know your buck for the bang? Because if you’re super honest and track everything you’re doing in the name of business, you’ll know if you’re spending your time wisely and pricing your products and services correctly – and if you’re not, you’ll also discover your biggest time sucks (compulsive email checking, anyone?) and opportunities for improvement.
You see, when it comes to productivity for entrepreneurs, it’s not about getting the most stuff done in the workable time you have. It’s about earning the most income from the stuff that you’re doing during those precious profit generating hours.
Once you calculate your buck for the bang, you’ll know if you’re on the right track or if, like me, you need to rework, reconsider and rethink how you’re spending your time and running your business.
Come on…try it!
First, download and print this nifty Buck For The Bang Worksheet.
Then, track the number of hours you work this week. And by work, I mean everything you do in the name of business and revenue generation – checking & answering email, selling in person and online, producing products or content, consulting, social media networking, handling customer service, tracking down receivables, attending trade shows and networking events, fulfilling orders, training employees, paying bills, etc.
Then, record those hours in the “Daily Bang” fields on your Buck For The Bang Worksheet.
Then, add up the total number of hours for the week and record those in the “Weekly Bang” field on your B4B Worksheet.
Next, take your revenue for the week and write it in the “Weekly Buck” field on your B4B Worksheet. Then, divide your Weekly Buck by your Weekly Bang.
Voila, your buck for the bang.
How do you feel about that number? Are you shocked or elated? Are you earning top dollar or minimum wage for your work? Tell us in the comments.
Great post! I have a huge spreadsheet where I track everything that goes into each type of job that I do and how much I’m bringing in per hour. I quickly learned I was in great need of raising my prices!
@Emily – glad to see some real world evidence that these suggestions work! I bet there aren’t too many of us who do this and go, hey, I’m overcharging…
So glad you’re highlighting this for business owners. I think it applies even more to people in corporate jobs – they think they need to stay in the job for the paycheck when if they looked at their per hour rate, they could do better on their own.
The only point I would add is to distinguish between start-up rates and established rates. When I first started my coaching practice, I put in way more hours and got paid less. But as I established myself over time, I got more efficient and effective and could charge more. So budding entrepreneurs might not want to give up on their dream too quickly even if the bang for their buck isn’t there immediately. It might just take some time.
Looking forward to interviewing you on my SIRIUSXM radio show this week Laura! People can find a free trial of SIRIUS to tune in here: http://www.maggiemistal.com/radio.htm
@Maggie – looking forward to our interview as well! And a good point on start-up vs. being in total flow-zone with your work. Over the past three years I have made a conscious decision to direct my career toward book writing and longer article writing. In that I’m doing fewer short pieces and ghost writing/editing projects, my income has taken a hit (and hence my per hour rate). But I have high hopes that I’m ramping up again, and this time doing what I want to be doing.
Emily – the spreadsheet is a GREAT idea! Thanks for sharing!
Maggie – you’re absolutely right. It’s quite common to work longer hours for less pay when you’re in start up mode.
And I think more corporations need to look at productivity vs. number of hours worked. They seem to have a false notion that having employees work 70 hour weeks equates to getting more done. Not so at all.
Laura – thank you for the opportunity to post here on your blog! 😀
Heather