The Cost Of Entrepreneurs Doing The Work

Work On Your Business

Michael Gerber, author of The E-myth Revisited (a must, must, must read for every entrepreneur ever – but I digress), taught us the key to business growth: Work on the business, not in the business. Yet, entrepreneur after entrepreneur keeps working in their business.

When you, the entrepreneur, do the work it costs you nothing except your time. You don’t need to pay an employee, because you are doing it. You don’t need to pay a vendor, because you’re doing it. You save lots of money, because you are doing it. You would think. But you’d be wrong.

 

Your Time Costs Real Money

Your time does cost money. Just look at your tax returns, and you will see your cost. It’s your income, draw, salary or distribution, depending in how your accountant classified it. Or how you classified it, if you “saved money” by doing it yourself.

I know you get it. You pay yourself something, so your time does cost your business. But I bet you have never figured out your hourly cost. You know it for your employees. You know it for your lawyer, your accountant and your other vendors. Now you need to know it for yourself.

 

Your Hourly Wage

Here is the simple formula. Take your annual income (its on your tax return). Then divide your annual income by 2,000. The number you get back is your hourly cost, as you would pay a full time employee who works 40 hours a week.

For example, say you you took home $100,000 last year (congrats, by the way). Divide that by 2,000 hours and you will find that you cost $50/hour.

Now the next time you are about to do something, determine how much time it will take. If you can get it done in 2 hours, it will cost your company $100. If your employee can get it done in 4 hours, and you pay him $20/hour, the cost is $80. It is cheaper for him to do the work.

 

Do The Big Things

It is more than just the comparative costs. It is most important that you do the work that will have significant long term impact. Build the systems that make the business run on automatic. Sell the deals that overflow you with profitable business. Build a corporate culture that is unbeatable.

Your time is much more valuable that you think. Spend it wisely.


Comments

2 thoughts on “The Cost Of Entrepreneurs Doing The Work”

  1. Love that book. I think one of the big challenges, especially for newer business owners, is control. Starting a business can become kind of a “if you want it done right…” experience.

    What types of business activities/tasks (ex. bookkeeping, etc) would you recommend somebody start with in order to find a good delegating/control balance, and which activities do you feel should be handled personally for as long as possible (marketing decisions, etc)?

    1. Emyth is truly amazing. For the activities… I would love at the EASIEST to delegate. What will take you the least time and least effort to assign to someone else. Even if it removes almost nothing off your plate, it will start the snowball effect to making systems. Start easy. Prove it to yourself. Then systematize the harder stuff.

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