There are a lot of things in life that people need to know. How much an hour of a person’s time is worth is one of the most important ones, but the vast majority of people could not answer this question off the top of their head if they were asked. Do you know your number?
Why is it so important to know what your time is worth? The reason is because that will then become the main decision criteria for where you spend your time.
In “No B.S. Time Management for Entrepreneurs“, Dan Kennedy provides a quick activity to help you determine just how much your time is actually worth.
If you work a job where you either get paid by the hour or are salary, then the below example will show you your base hourly number. So in order to make $100,000/year, you need to make $56.8 an hour.
The above formula works great for an employee, but what if you are an entrepreneur? If so, then you need to add one more number to the calculation. You see, when you are not guaranteed to make your hourly rate, you need to make sure that your base hourly number reflects only your productive hours. Otherwise, you will fall short of your base earnings target due to the unproductive hours. Lee Iacocca estimated that top CEOs average 45 minutes a day of truly productive time, the rest of the day would be spent commuting, filling out paperwork, responding to email, organizing your desk, finding information that you need, etc. So for the below example, let’s estimate assume 1/3 of your time is productive while the other 2/3 are not. This would mean that out of every 3 hours, you only get one productive hour. So you need to multiple your base hourly number by 3 to determine what your hour must be worth to reach your base earnings target.
So why does this matter? That unnecessary 12 minute phone conversation just cost you $34.09. Was it worth $34.09? The hour you spend mowing your lawn costs you $170.5. If you were doing activities that allowed you to make $170.5/hour, do you think you could hire someone to mow your lawn for $20? If you mow the lawn yourself, you may “save” $20, but you lost the opportunity to make $170.5 during that hour.
Once you have your number, think about it constantly. Evaluate all of your work time/requests against it to help you judge what things you will and won’t do with your work time.
P.S. This calculation only matters to your working time. Please do not use a calculation like this for non-work situation. Time with family, for example, should never be measured in this fashion.