Do you know? Here’s a road map to find out how to make more.
Everyone wants more pay. From the first entry-level employee to Fortune 500 executives. Have you ever really thought about how much pay you have to have? Here is the area that unfortunately gets the least amount of attention during school, outside of recruiting efforts, school counselors or until you go out into the world to find that first job. Many assume if you are the best at what you do; the world will beat a path to your door. Consider this for a minute; what if no one knows you are the best? Then how do you get work to show how good you are? This is true for any job where you create value and profit for the company. Your time and talents are valuable assets to the business world. The intent here is not a discussion on time management as it is a conscious effort to help you add to your bottom line.
What is the magic formula?
The formula for success is simple, but the discipline can be hard depending on your personality type. This is not to point out personal shortcomings, but to make you aware of what will and what will not be in your best interest. Regardless if you are a business owner or an employee, you need to create value. Being a business owner, particularly a small business owner, you have to take time for accounting and business records, marketing your services to other businesses, client meetings and other non-billable efforts, this will erode the amount you can ultimately bill a client. Another big bite goes to time wasting, we are all guilty of it at one time or another, but we have to understand that time surfing the web for non-business purposes eats into our ability to earn money just as much as wasting time at the water cooler chatting about “the big game” last weekend. This does not mean chaining ourselves to the computer, but we must be aware of non-billable overhead activities and time wasters having their impact on our ability to earn more.
Show me the money!
It is positively a fact that there are a finite number of hours in any given year. Time is the only variable that is equal to everyone. For this example, we can assume that there will be 2080 hours (52 weeks x 40 hours = 2080 hours). This is not an arbitrary number; many human resource departments in any variety of business types use as labor hours for a full time employee (FTE) for one year. Based on an average 8-hour day we can make the following assumptions (based on pay per hour before taxes and other deductions).
So what does this mean to me? Can I make this change? The answer is yes and no. Using the example of a website designer or writer working on projects this would be your billable rate. If you are a freelancer or consultant, you will have to charge more per hour due to the fact that you have certain activities that are not billable directly to the customer but are necessary such as accounting and marketing possible tasks for regulation and compliance to operate as a business. The good news and the bad news is that most customers do not understand how long it takes to produce a website or write a technical manual, but they do know what they are willing to pay. As you gain proficiency in producing your work, you will get a feel for how long it takes to produce a specific product. Where you gain competitive advantage is by producing quality work and producing it faster. The faster you can work, the faster you can take on new work and the faster you earn money. This is what we call velocity of turnover.
Velocity of Turnover
Turning to the website designer again, assume the first website he or she built took a week and the client was charged $500. Being the first website, there were probably some issues that came up and it took additional time to resolve those problems. This new experience will speed up the second website and perhaps two websites were built the second week, resulting in $1000 in billing, or effectively doubling the website designer’s income. Through improved processes, reusable code and additional skills, it is possible to produce five simple websites in a week, raising the income to $2500 per week. What was different? It still took the same 40-hour workweek, but how efficiently the time was used made the difference.
However, there is a different side to this equation. From the employer or customer’s perspective the question as to why should I pay you more per hour than a different candidate? The ready answer should be (and the ability to back up the claim) is that it will take less time and the ability to produce a superior product. This is where you can gain value in the mind of the hiring manager or client.
When you master how efficiently you can produce work, this is where the real fun begins. It really does not matter here if you are a business owner or an employee. By creating quicker payment cycles, you are inherently more valuable. This translates to more opportunities to add to your personal bottom line.
Photo by Pixelbay from Pexels