Calculating true value of time in your hands
Do you know the value of your time? Ken Segall, creator of Apple’s famous “Think Different” ad campaign for agency Chiat/day, said he got thrown out of a meeting once by the founder of his agency, Jay Chiat. “Why are you here?” he asked Segall and the art director, who’d shown up with everybody else. “We’re just responding to the invitation,” said Segall. Chiat told them to get lost. “Go create something,” he said. Jay Chiat knew the value of his creative people’s time. He knew it wasn’t worth it for them to go into that meeting when they could be putting together the next big ad campaign. They were more valuable to the company doing the creative work that made it run than attending a meeting. That’s what knowing the value of your time can do for you; it tells you what’s most important. Time is the one resource all of us have, but it’s also painfully finite in nature. You can’t bank it -- all you can do is invest it wisely. As an entrepreneur, if you don’t know the true monetary value of your time, how are you going to prioritize your business and your life? What does it take to find the monetary value of your time?
INVEST YOUR TIME.
Be aware that your time is likely to appreciate in value. If you’re a founder or running a successful business, your time's value will increase as your business does. That’s why we refer to “investing” time, not just spending it. So, as your business grows and develops, sooner or later the monetary value of your time is going to surpass the importance of money. It’ll be more important for you to invest your time in moving the business forward because your time is going to be worth more. According to a 2016 paper by Steve Yoo, Charles Corbett and Guillaume Roels, the most important and neglected part of establishing a business is the boring stuff -- establishing processes and procedures that can save time in other areas. Invest your time on process early, lest you spend it later putting out fires.
CRUNCH THE NUMBERS
Entrepreneur James Clear decided to approach this problem sys- tematically -- he talked to everyone from poker players to executive coaches to figure out what the optimal method of measuring his time’s value was. Then, he sat down and tracked every hour for three months. The upshot of that time investment was a very clear process that you can use to lay out what your time is worth. First, figure out the amount of time you spend to earn money. That’s not just time spent working. Are you commuting? That’s time you’re using towards work that’s not going elsewhere. Daycare? That counts. Drop the kids off at school? Add it on. If it’s related to the time you spend earning money, add it on. Clear’s estimate guesses that most full-time employees and entrepreneurs spend around 2,500 hours a year on this (his exact estimate for himself came out to 2,742). Then, figure out how much you earn in takehome pay per year. That calculation should be pretty simple, though if you’re a business owner, it’ll be a little more complex as you figure out taxes and withholding. Divide your total earnings by the hours you spend to earn it. That’s your time’s value. Surprised? It’s probably lower than you expected, especially if you calculated the extra hours devoted to things like dropping of kids at daycare or commuting accurately. We don’t often think of our work value in terms of total hours spent. Create a system of checks and balances. You don’t want to just rely on that, though. Maybe you’re being underpaid (or underpaying yourself ). Maybe another factor is throwing it off, or your math has an error. Consider a few other factors: - What do other people make to do your job? - What would you pay someone else to do your job? - What could you make on the open market if you were to go find another job? Run those numbers against each other to determine an average. For entrepreneurs, this changes everything. Once you understand this number, it’ll change the way you approach everything in your business and your life. One entrepreneur I know who understands the value of time is Jason Bliss, co-founder of Healthy Living Network. He’s built plenty of companies himself, worked as a venture capitalist and more. His time is valuable, and he knows it. I recently asked him what changed when he started thinking this way. He noted, “I used to spend a lot more time on meetings than I do now. When you start counting up the amount of time you use sitting in rooms talking about things as opposed to actually doing them, your thinking starts to change.” Bliss echoes the mindset of Ken Segall, who sent his star designer away from a meeting that wasn't worth his time. “If you knew that a meeting is costing you $6,000, would you be there? Would it be worth it? Or, could you find a more efficient way to invest your time?” Know what your own time is worth. Remind yourself of it constantly. If you do, you’ll find yourself more productive, efficient, satisfied, and successful. So what are you waiting for? Invest wisely.