How often do you fall into the trap of stepping over the dollars to get to the dime?
It’s a common trap that many businesses fall into – spending too much time to generate or save not very much money. For example, spending hours and hours trying to do something you could easily outsource instead of focusing your efforts on generating revenue? Or when chasing a prospect to close what amounts to be a very small project.
Instead of thinking of time and money independently, start thinking of them in tandem. Determine payoff for the time you spend – either in terms of cost savings or revenue generated. Using time versus money as a metric for gauging your activities will force you to focus on higher payoff activities.
For example, spending 3 hours creating a leverage product that you can sell over and over again may be a better use of your time than working 3 hours for a client who is paying you an hourly rate for that time. Weighing your time spent versus the money generated will enable you to determine the best course of action.
How to Prioritize Your Time Versus Money
#1: Calculate the Value of YOUR Time – Too often entrepreneurs make the mistake of thinking of their time as free because they don’t need to pay themselves to get access to it.
In reality, their time is extremely expensive as they are responsible for generating revenue for the entire company. A simple way to calculate the value of your time is to divide the annual revenue by the time you spend working on the business.
#2: Focus on High Profit Activities – Get clear on how much time it takes to earn how much money. That means analyzing which of your products and services are the most profitable for the time investment.
For example, selling more of a low-priced item may be worth it because doing so costs very little of your time. If, however, the sales effort required to close bigger projects is only marginally more, than focusing on big ticket items is a better use of your time.
#3: Calculate the Outsourcing Opportunity Cost – Trying to do everything yourself to “save money” is another common entrepreneurial trap. Instead of defaulting to doing everything, consider what activities you aren’t doing because you are too busy doing the daily tasks – the tasks you could outsource.
Are you skipping out on business development? Missing the mark with your marketing? That is the opportunity cost of not outsourcing. Now ask yourself if you are really saving money by doing it yourself when the cost is missed opportunities.
#4: Establish Time versus Money Metrics – It’s important to establish checks and balances to stay focused on what types of activities you spend the time most on. The simplest way to do stay focused is to quantify how you spend your time in terms of money.
Track your time versus money. Meaning track how much you time you spend versus how much money that activity brings in. So spending 3 hours bringing in 5 new clients is better than spending 3 hours catching up on administrative tasks.
#5: Identify Potential Time Profit Leaks – Watch out for potential time profit leaks. The ones that you get a bill for are easy to identify, but the inefficient processes that cost you extra people time are a little more difficult to identify.
Common profit leaks are unnecessary steps, too many people, overly complicated processes or anything that could be automated! All these leaks are because too much time is wasted which translates to money out of your pocket!
Hope that puts the saying “Time IS money” into perspective!