You’ve heard it before hundreds of times, usually from someone waiting on you, trying to get you to hurry up.
But time really is money. What it’s worth may vary from person to person, of course. Minimum wage is currently $7.25 an hour. Bill Gates makes about $200,000 an hour, depending on how Microsoft’s stock is doing. But every second of every day has monetary value, whether you’re punching a time clock, running a business, or brushing your teeth. Every minute of every day that you’re not doing something to earn money, you theoretically could be.
A simple estimate of the value of your time is to take your annual after-tax earnings and divide them by 2,000. British economics professor Ian Walker has developed a more precise formula for calculating the value of your time: V=(W((100-t)/100))/C, where V is the value of an hour, W is your hourly wage, t is your tax rate and C is the local cost of living (converted to hourly). This leads to some pretty surprising findings.
For example, in a study Walker conducted, he found that the typical cost of cooking dinner, including the time spent and the cost of ingredients, was £10.77 ($15.72) for men and £9.81 ($14.30) for women, while the average cost of ordering a take-out meal was £5.01 ($7.31) for men and £4.96 ($7.24) for women.
This runs against conventional wisdom, right? Personal finance gurus are all over the media right now talking about how cooking at home can save you money vs. eating take-out. Yes, it can, if what you would do with the extra time by not cooking is just watch TV or something. If, on the other hand, you can work an extra half hour on your business, and that will generate more than the $7 difference in value between take-out and home cooking, then it’s actually a better financial decision to pick up take-out, or better yet, order delivery.
There are potential dangers, of course, of looking at your personal time as a constant stream of cash outflow, especially when you look at the bigger picture. “Sorry, honey, I really can’t go to the park with the kids — it’ll be too expensive,” simply doesn’t work. Eating at home is generally much healthier than take-out. Taking time for relaxation and healthy relationships will make the time you do spend working more productive. And besides… what are you working for?
Still, taking a hard look at the value of both your personal and business time may help you make some changes that both put more money in your pocket and improve your quality of life. Let’s look at a few examples.
Use the appropriate communications channel.
Trying to reach people by phone takes extra time, and setting up a meeting is even worse. There’s “time overhead” to use these forms of communications vs. email, and they often stretch out beyond the time you’ve allocated for them. Use email to communicate small chunks or lists of information. On the flip side, negotiating an issue or collaborating on a work product is often more efficient done in real-time. If it’s gone back and forth via email more than a couple of times, pick up the phone Also, communicating by phone or in person help build rapport more than email — operating 100 percent digitally can make you seem cold and impersonal. Know the pros and cons of each medium and use the most appropriate one. Doing so can save several hours a month.
Buy the right tools.
Just about every home probably has a couple of screwdrivers around, but if you do home projects or any of your own repairs, you very quickly realize you’ve got to have an electric screwdriver. The right tool for the job can cut the job to a fraction of the original work. This is equally true in business. That new piece of software may seem expensive, but how much is it costing you in time not to go ahead and buy it? Think an iPad or Kindle is a luxury you can’t afford? How much more work could you get done if you took the bus or subway to work and used a mobile device to have your email or your business news reading all done by the time you get to your office?
Work in batch mode.
Multi-tasking is an illusion — we can really only pay attention to one thing at a time. There’s a time cost associated with switching tasks — anywhere from a few seconds to a few minutes, depending on the task. One of the most important things you can do to improve your use of the time you have is to work in batch mode, i.e., stay focused on one task for as long a period as reasonably possible. Unless it is absolutely essential to your business model, don’t take incoming phone calls yourself; schedule calls via email and block out a time to return phone messages. You can have an open-door policy for your office, but encourage people to schedule a time with you instead. If you work from home, set boundaries with your family about interruptions.
Delegate and empower.
As an employer, you don't want to pay someone $25 an hour to do $8 an hour work. Why, then, do you do it yourself? Think about every routine activity that you spend time on daily, weekly or monthly. Could you delegate it to an administrative assistant? One of your managers? Or on a project, can you outsource parts of it to a web designer, a writer or a virtual assistant?
Sometimes getting something off your plate requires empowering other people beyond their current authority. Author Tim Ferriss talks about this in his book, The 4-Hour Workweek. He had outsourced customer service for order tracking and returns but was still handling product-related questions himself: 200-email per day, taking up the bulk of his day. When he looked more closely, he realized that the bulk of the emails were not product questions, but escalation issues from the customer service reps themselves. So he sent one email to all the supervisors that turned his 200 email per day into fewer than 20 per week:
I would like to establish a new policy for my account that overrides all others.
Keep the customer happy. If it is a problem that takes less than $100 to fix, use your judgment and fix it yourself.
This is official written permission and a request to fix all problems that cost under $100 without contacting me. I am no longer your customer; my customers are your customer. Don’t ask me for permission. Do what you think is right, and we’ll make adjustments as we go along.
Not only did he save 100 hours of his own time per month, customers were receiving faster service, returns dropped, the outsourcers spent less time on his account, which in the end saved him money. As an entrepreneur, it can be challenging to relinquish control, but it will pay out in the long run.
Outsource your personal life, judiciously.
Some things, you really should do yourself. I frequently chauffeur my son, even though my time is “worth” more than my wife’s — doesn’t matter, because that time is one-on-one time with his undivided attention, and I treasure that. But why do things you don’t like doing, that somebody else can probably do better, and cheaper, once you consider the value of your time? I hate housework, and I’m not too fond of yard work. So we have a maid and a yard guy every two weeks. I figure it saves us about 20 hours a month at a cost of $250 — well worth it, whether we choose to spend it working or playing. Unfortunately, it’s not tax-deductible — sure ought to be!
Get seriously organized.
Yes, there’s a time cost to planning, organizing and tracking your time and actions, but study after study have shown that there’s almost always a net gain for anyone other than those with very simple lives. How many entrepreneurs lead very simple lives? Get serious about getting organized. I’m not just talking about keeping a calendar and a to-do list, although for many people, even that’s a good start. Learn and implement an actual system: Getting Things Done (GTD), FranklinCovey, whatever — just do it, and the sooner the better.
525,600 minutes. Your situation and your skills may be different, but you get the exact same amount of time every year as Bill Gates. It’s your most precious resource, because it is the only one that is truly scarce. Be a good steward of it and put it to its best use.
Scott “Social Media” Allen is a 25-year veteran technology entrepreneur, executive and consultant. He’s coauthor of The Virtual Handshake: Opening Doors and Closing Deals Online, the first book on the business use of social media, and The Emergence of The Relationship Economy. His latest venture, NFN8 Media, maintains a growing portfolio of niche content and community sites. He enjoys working with entrepreneurs and serves on the advisory board of several startups.