Time equals cost

Knowing how much your time is worth gives you a sense of where to pin financial goals for yourself and for your business. By working through things like budgets and expense reports the bigger picture starts to become clearer.

When time is not enough or when you have too much time.

Dear Diary,

Considering the fact that I now work for myself, my reality of how I spend my time changed drastically. I still find myself sitting and waiting at my desk. Perhaps for instruction or inspiration to strike or both to jump start me into my routine. As much as I don’t have to get up at the crack of dawn to ready myself for someone else’s business, I must evaluate how my time will be spent within the day.

I now have to prioritize what I do and at what time, as opposed to other things just done at random that don’t serve the end goal. Similarly, this means that I am becoming more disciplined as my day goes along. I sort and organize my day and find that I often have to do this ahead of time so that on the day in question I dive right in and hit the ground running. If I don’t plan ahead then I sit in the morning for long periods at a time (like the whole morning) trying to organize my tasks for the day.

Does one take a day in advance to sit and go through what is a priority and what is not and set a schedule based on the findings? How much is this of value to me as a newfound business person? Does it mean I’m losing days or gaining them by comparison to my job as an employee? What if I assign a cost to my days? To see how much my chosen free time and working time are affecting my budget?

I have put together a rough budget to evaluate how that affects my per hour cost. I must start by managing myself in order to manage my business effectively.

Personal expenses report

By writing down all my expenses and assigning a cost per hour to it I can see how much my time is costing me in my business. This budget merely takes into account my personal expenses. The business will also incur expenses for itself, which will add to my personal expenses. It is important to count the cost of running a business to see if you can afford it. Otherwise, you can place yourself under added financial pressure. My proposed business is internet based and is seemingly less expensive in terms of an initial financial outlay. However, I am still responsible for buying related software and licenses, perhaps even additional equipment to make an online business work.

I have roughly calculated that my per hour personal expense is a cost of R76.43. So for every hour that I choose not to do something for my business, I lose R76.43 alone. I have become a cost to my business too, I am it’s employee now, it has to look after me and pay me for work supplied. I have to work not only to cover my business costs but also my personal costs, which the business incurred when I decided to start it. My business has expenses and costs that desperately need to be covered by a certain time before it even starts to operate within the market properly. Scary thought.

Prioritize

This means that I cannot afford to be idle. I have to use my time wisely. I have to decide if I am causing added expense for my business or if I am working productively. Meaning, Is watching Netflix helping me produce work that is saleable for my business to make a profit in those hours? Or surely doing sales calls for that amount of time is better for my business. Comparatively, my time vs business time has to be prioritized.

Because I now work for myself, I might need to work on weekends and on public holidays to get work done. If I choose not to work and I compare it to the day rate I would’ve made as an employee, this becomes a personal cost to me. Provided it is within reason as it is related to how much money one wishes to make, achieving certain financial goals within a set time limit. It becomes an even greater personal cost if I have not produced income receiving work within my work week. As a result, I make a loss because my expenses will inevitably pile up while no income is received.

If I made R980 as an employee on a public holiday, how can I recover that ‘loss of income’ within my business? Does this mean I now have to work each and every holiday plus days in the week and weekends to recover money lost? No, this is why setting a budget for myself is important. How do I do this?

Budget questions

  • What do I need? (meaning what is urgent)
  • What do I want? (meaning, what is a luxury that I can wait for?)
  • What can I do without? (can I sell or trade something to ease financial burden) e.g lighting equipment from my photography hobby, old cell phone, my second car, etc.
  • What are my expenses? (everything I must pay for)
  • What are all my sources of income? Including spouse’s contributions
  • What are my savings? (money saved up from fixed deposits, 32-day accounts, investments)

As we answer these questions by writing them down, our budget starts formulating. Knowing how much your time is worth you get a sense of where to pin financial goals for yourself and for your business. By working through things like budgets and expense reports the bigger picture starts to become clearer. A business needs to focus on sales. There must be a focus on income. This leads us to think of ways in which we can become better at sales in order to get an income. Sounds obvious, but it’s not always logical when we just look at the peak of the mountain that is business. There is so much to it. Clearly defined, logical ‘pathways’ are required for us to get to the top.

How can we focus on income?

  • Invest in sales training (free courses are available online)
  • Read books and online articles
  • Ask to be trained, by a mentor or business wiling to help, volunteer
  • Work in sales part-time
  • Practice by doing it in your business (sales calls, email marketing, direct sales)

I have lots to think about regarding my time and having costs assigned to it now that I am in business for myself. I may have more liberties as a self-employed person, but that doesn’t mean that I can do as I please. Our time becomes more valuable, which means we choose wisely what we spend it on. It could mean the difference between failure and success.

Until tomorrow, dear Diary.