A few years ago, my company ShortStack moved into a new office. Instead of paying movers to transport our things from the old place to the new one, my employees and I took the afternoon off to do the job ourselves. At the time, I thought this made the most sense: use the resources we already had to do a job we were all capable of doing. One offhand comment was all it took for me to realize this logic was majorly flawed.
During that move an onlooker I knew said to me, "That has to be the most expensive moving crew I've ever seen." He was right. I just hadn't seen it that way until that moment.
My moving crew consisted of me, three high-level platform developers and a handful of other key team members. Had I known the value of my, and each of my employee's, time, I would have known that hiring professional movers for the afternoon would have actually saved the company money.
Calculating the value of your and your employees' time is easy. And once you've done the math, it will help you decide if you should delegate certain tasks, or outsource.
Can't decide which of your team members should train your newest hire? Do the math. Want to decide if a certain employee should produce content or oversee what several less- seasoned employees are creating? Do the math. Does everyone need to be in that staff meeting or are you better off limiting it to a few key employees? Do the math.
When you take the emotion out of how you spend your working hours--as well as how you request that your employees spend their working hours--it helps you come up with answers faster.
Here's the simple formula I use to determine the hourly value of my, and each of my employees', time:
For Business Owners and Employees with Equity
Company's annual revenue * the percentage of the company owned = X
Annual salary plus monetary value of benefits / the number of real hours worked in a year = Y
X / Y = Hourly value
For Salaried and Hourly Employees
Annual salary plus monetary value of benefits / by the number of real hours worked in a year = Hourly value
This formula is just a starting point, but it will help you decide whether having your $100-per-hour developer move furniture is better than hiring Two College Guys to do the job.
Then there are a few questions you can ask yourself that, if you answer "yes" to, mean you can forget about the formula:
- Do you enjoy what you're doing? This question trumps all. If you enjoy doing the tasks that need doing, don't worry about any formula--just do it.
- Do you see long-term value in what you're doing? Not all tasks have an immediate return. If you're confident a certain effort will likely lead to a result you'll be proud of in the future, then move forward on whatever it is you're considering doing.
- Do you have a good motive for what you're doing? Even the most successful entrepreneurs and business minds use a good chunk of their time for the things that matter most, like family, friends and giving back. Take Bill Gates for example. He's worth $72 billion, making an hour of his time worth roughly ... A LOT. Yet he seems to spend a lot of his time giving his fortune away. The point is, a person should not let an hourly value stop him or her from doing things that have significant value and substance.
Everyone's time is worth money--you just have to calculate how much. For business purposes, it's helpful to know your and your employees' hourly values to help you make well-informed decisions. But of course not everything in life--or in business for that matter--is about money. Use my formula to help you decide on things like if you should hire a moving crew or not, but use your gut and the answers to those three questions to help you make the final call on the rest.
Have you ever calculated the value of your time? If so, let me know in the comments what formula you used.