One of the things you need to do, if you want to improve your results, is leverage your resources and assets more effectively. For a start-up or small business a key asset is the owner’s time, knowledge and skills.
To work out how much your time is worth think about the value to your business of spending your time working in the different roles in the business.
Perhaps you are worth £40 an hour doing revenue generating work but what are you worth doing bookkeeping, marketing and sales?
Bookkeeping is an easy one because a good bookkeeper will probably cost £25 an hour. The value of your time as a marketer is linked to sales so let’s look at it as one.
Let’s assume you need to spend 10 hours to create a lead and you need three leads to make a sale. And, the time on the three opportunities comes in at another 10 hours. That means you need to spend 20 hours to make a sale.
Now, if you did that full time you could make 75 sales a year for your business. If an average sale is £10,000 and the net profit after materials and paying someone to do the work is £1,000 then the profit for the year is £75,000. Your time in sales and marketing created this so your time is worth £50 an hour.
But, what is that work is recurring revenue and generates referrals?
If the 75 customers stayed with you for five years and each one generated one referral then your profit from the year work in sales and marketing would be £75,000 x 5 x 2 = £750,000. All of a sudden your time is worth £500 an hour.
This is what a business model with recurring income is one of the things to look for and why referrals are so important. It’s also why you need to consider outsourcing administration work and employing people to do the work for you.
By the way, if you spend money creating leads (rather than your timer) and invest your time is selling you can increase your effective rate even more. You may get your time worth £1,000 to £2,000 an hour.
If you want to examine your business like this give me a call. It’s often one of the first mindset shifts that will help you drive your business forward.
Image from Flickr by Robert Couse-Baker.