How much do you value your time?
Let’s guess: you value it a lot, right?
OK, but can you put a number on it? A monetary value?
We’re not talking about your daily rate if you’re doing some consulting. Instead, when you’re planning your day or week, are you able to associate a value to every discretionary task that you do?
If not then you might want to consider using this simple formula which will enable you to get to that number:
Earning Potential / (Time Available * Discretionary Productive Time Multiple) = Discretionary Hourly Rate
Don’t worry if this doesn’t make a lot of sense right now. Below we’ll define these terms before trying out the exercise on a hypothetical you, with some real numbers.
We need to consider a goal. Whilst we could work with your current salary where is the fun in that? Even with the most altruistic of motivations for being in business, you need to earn some money and it doesn’t hurt to have a target to aim for. So, choose a number here for your annual salary that’s realistically achievable within the next couple of years, erring on the side of high.
For your long-term, successful future you need to be healthy, alert & happy. This means taking the time to rest, be with your friends & family, eat well, reflect, dream, exercise and do those things that make you, well…, you. This means we’re going to ignore early mornings, evenings and weekends for the scheduling of work related activities.
Also, you may get sick, you will take holidays & go to conferences. Depending upon where you live there will also be a number of state holidays. Taking all of this into account figure out the number of days you’re likely to be working in a year.
Discretionary Productive Time
You need to understand that we’re only interested in the time that you have available to do discretionary tasks during each day, once we’ve removed those standing jobs that you’re going to have to do anyway.
Let’s run through some example categories:
Team management. Staff, external contractors, peers and even arguably your clients all need managing. You need to cultivate these relationships and help your team grow. This takes time and can’t be skimped on.
Planning. Your day, week, month & year planning are vital business activities and should be factored in as such, If they are not there’s a tendency for them to get sidelined and then you’ll start drifting.
Comms. You need to communicate with people. Even if you’re the master of keeping physical meetings, Skype/Hangout, email and of course the dreaded “Have you got a sec?” to an absolute minimum, there will still be a chunk of your business life that is dedicated to communicating with others.
Sustenance. Basic stuff: you need to eat, look out of the window, grab a water, pop to the loo. During the day and week it adds up.
Reading. Learning new things to apply to your business. Proposals from suppliers or contracts from clients. Essential stuff that’ll take time out of most weeks.
Miscellaneous. Popping out to buy a new shirt for that meeting tomorrow, calling the bank because they overcharged you or fixing the *beep* printer because it’s decided to suddenly stop working and if you’re a parent let’s not forget the multitude of school assemblies, parent’s evenings and sports days. Even if you have a PA or subordinate to outsource tasks to, you’re invariably going to lose some time each week to these sorts of tasks, so you should probably account for it.
One really effective way of mapping this all out is to use time blocking in your calendar. Whilst you may not choose to plan each week out this way, for the sake of this exercise try and map out all that stuff you need to get done on a weekly basis so you can come up with a number of the hours available for discretionary activities.
Your Discretionary Productive Time Multiple is related to the ratio of time taken up by non-discretionary tasks when compared to the maximum hours available in your day/week.
To work with some real numbers let’s calculate Jane’s Discretionary Hourly Rate.
Jane runs a small consulting business. She works on average 9 to 5 / 10 to 6 for 5 days per week with the morning
herding of cats school runs being shared (mostly!) equally with her partner and the first few hours after school being covered by their child-minder.
That’s a nice and simple 8 hour day and 40 hour week.
She has a team of 8, with 3 direct reports as well as her PA. She’s ruthless with her time management, blocking 30ish mins per day for calls & email. She permits herself to 30 mins a day for consuming information and allows herself a luxurious 30 mins a day for review as well as a further 4 hours per week for planning.
Because she likes round numbers she’s aiming to have her consultancy support a salary of at least £100,000 for her within the next 2 years. This feels achievable though it is not going to happen unless she starts to really focus in on her businesses future and starts to prioritise her most important business tasks on a given day or week.
Jane lives in the UK and reckons she has 217 work days available to her each year, this takes into account bank holidays, 5 weeks holiday and allows her 2 weeks off sick.
Plugging all these numbers into a spreadsheet, she gets:
|Planning & reviewing||6|
|Max hours per week||40|
|DPT ratio (27/40)||0.675|
|DPT multiple (1 – DPT ratio)||0.325|
|Earning Potential||£ 100,000.00|
|Hours available (217 * 8)||1736|
|Discretionary Hourly Rate||£ 177.24|
Remember that the Discretionary Hourly Rate is calculated as follows:
Discretionary Hourly Rate = Earning Potential / (Time Available * Discretionary Productive Time Multiple)
DHR = 100,000 / (1736 * 0.325)
For every hour that Jane has ‘spare’ during her working day – about 1/3 of the hours available to her, averaged out over a hypothetical week – then she could be thinking that to get her to her earning target for the year, that hour needs to provide around £177 of value.
Or to put it another way, the next time she’s asked “Do you have a minute?” she could be thinking to herself “No. Not really, it’ll cost me £2.95, and you’ll end up taking 10, which will cost me nearly thirty quid!”.
This has of course only been a thought exercise, but I hope you’ll agree a valuable one nonetheless.
By taking the time out to consider what you’re doing day to day and week to week, you’ll get a much clearer picture where your time is going and, more importantly, how little you have left to be spent applying your own unique blend of secret sauce to your business.
Of course you might be thinking that those numbers would be different for you. Jane’s 4 hours for reading adds up to a lot and maybe you could squeeze an extra couple of hours in each day?
Regardless, the point is that you come up with a metric for valuing the discretionary time available to you during your working week.
What number did you come up with? Did I miss out any non-discretionary activities? How does this system work for single parents? What about if you’re not running your own business? I’d love to hear from you. Please leave a comment below or feel free to email me directly: email@example.com.