How much is your time worth?

As a small-business owner, have you ever worked out just how much your time is worth?

For some, this will be an easy equation. If you are a sole trader and you charge for your time, it is often just this figure. However, add staff into the equation and it becomes complex. But is it an equation worth knowing?

Consider this: if you are spending money to ultimately save time, how can you do so without knowing the answer?

An example

I had to make a few changes through ASIC the other day and my accountant advised that the fee to do so would be $70. I could either complete the task myself, or they could do it for $220.

I opted to do it myself. I considered it would take me around 30 minutes to do, which was reasonably accurate. So I saved $150 and it cost me 30 minutes. Is my time worth more or less than $300 per hour?

The task was updating the business name ‘Inject’, which wasn’t listed at the time. I was under the impression that this would be a trading name but apparently trading names are being phased out.

Understanding how business names tie into legal entities seems like an important thing to know about, so completing the activity was twofold: I saved money and learnt something important.

DIY versus outsourcing

Here are some activities you might consider doing yourself rather than outsourcing:

  • bookkeeping, finance and accounting
  • marketing
  • human resources – including recruitment.
  • Legal – including contracts and documentation
  • sales

Bookkeeping is something I think should be outsourced at a certain point. At the very least, you should be looking into cloud-based systems such as Xero to save time.

In terms of marketing, a lot of design work is inexpensive on sites such as oDesk, Freelancer and 99designs. However, you run the risk of getting what you pay so if it is really important, you may not want to go with an overseas freelancer just to save on cost.

How much should you spend?

The answer to this question is ultimately dependent on three key questions:

  1. How much capital do you have available to invest?
  2. How big are you looking to grow?
  3. How important is this area to you at that given point in time?

Quite simply, if you don’t have the money then don’t spend what you don’t have. However, as you receive more money, you have more to invest. As your business grows, the impact of your actions in marketing, finance, HR, sales etc becomes greater, so the value of these activities to your business can also be greater.

As your business grows, the impact of your actions becomes greater, so the value of these activities to your business can also be greater.

There is certainly merit in looking towards experts who can help by doing things better and faster than you can. However, doing everything by yourself might be more cost-effective and you may even learn something useful here.

In the end, the true test is the opportunity cost of what else you could be doing. If that is greater than the cost of the service then, assuming you choose a good supplier, it is worth considering.

Tommy Sim, Director, Inject

inject.com.au