Small Business: How Do You Value Time?
Dave Pederson (Guest Post) on 07/21/2014
Any employer engaged in a service type business knows that time is an integral part of both billing and profit. When you go to a grocery store, you pay the price marked on the product. But when you ask someone to do something for you, how do you know what price is fair? Abraham Lincoln said about his own profession, “A lawyer’s time and advice are his stock in trade”. So how do you value your time or advice or that of an employee?
One place to start is by keeping track of the time spent on each thing done each day. While that sounds like a lot of work, a person usually finds that while it seems like he or she works on a lot of things every day, the reality is that there are usually fewer distinct projects, and more “going back to” those projects.
Keeping track of time provides a person with proof of the amount of time spent. If a customer asks why something costs what it cost, there is a record of what went into the finished product. One might also look at time records and determine something is taking him or her too long, and they need to work faster to make the cost reasonable. An employer may determine that certain types of products or services are simply not profitable. They cost more than customers are willing to pay.
How does one decide what he or she is “worth” on an hourly basis? An employer usually makes that decision, and may charge $50.00 per hour for the work of a person who is being paid $25.00 per hour. While that initially looks like a nice $25.00 per hour cushion, the employer needs that extra $25.00 per hour to help pay rent, taxes, insurance, leases on equipment, supplies, bank loans, and the list goes on. Hopefully there is a profit left after those payments are made.
What is the point of valuing a person’s time? For an employer it is the difference between making and losing money. For an employee, it is a chance to demonstrate his or her value to the employer. The more valuable the employee, the greater an employer’s desire to make sure that employee stays with the employer. An employer with motivation to keep a profitable employee is far more likely to provide a place people want to work, and pay a salary that will keep profitable employees happy.