Are you making decisions without knowing your VALUE?

Are you an individual sole proprietor or the head of a business with multiple (even hundreds of) employees?

As the leader of your own business you need to understand your worth and value to the business in order to determine how, when, who, and why you are making the decisions you are within your business, impacting your own productivity, contribution, and effectiveness.

Let’s break this down:
Simply, there are as many tasks, chores, and activities that need to be done when operating a business. Everything from taking out the trash, calling and scheduling appointments, working on your marketing content, advertising, making sales calls, networking, paying bills, ordering supplies, filing, managing your team, handling customer service, operations, and many more. We could go on and on across the spectrum of Sales, Marketing, HR, Finance, Legal, Administrative, Operations, and IT functions.

Have you yourself documented all of the various functions that your business requires in order to operate effectively? If you haven’t you should, but I digress.
As a business owner, and even more so if you want to be an entrepreneur, you cannot expect to execute and manage yourself all of the things required to run a business, if you want to both do them effectively and grow your business at the same time. And your core role as the leader of your business is to GENERATE REVENUE! So you need to know when and how to manage the constant barrage of work that comes across your desk each and every day.

An easy way to doing this is to understand your actual value to the business, what I call your Hourly Contribution Rate. Knowing this single $ number provides great clarity and focus to the decisions and actions you take in your business.

To calculate your Value or Hourly Contribution Rate to the business is to:
• Take the Total Gross Revenue your business will generate this year
• Divide it by the Total # Hours worked in a year (typically) - 2080 hours.
• That will give you your Hourly Contribution Rate

This number is then used for every decision you make every day on where and when to spend YOUR time.

For example: say your business plans for 2009 is to make $250,000 Total Revenue. You work a typical yearly schedule of 2080 hours (which does include vacation, sick, holidays). Based on that: $250,000 / 2080 hours = an Hourly Contribution Rate of $120.00 per hour. That is the hourly rate that your time is worth to the business in order to ensure the $250,000 in total revenue you have planned. This rate of $120.00 is then used by you to decide when and where you spend YOUR time, and then WHO should be doing a task or activity that holds a lesser value to the business than this hourly rate.

For example:
You find that you are spending 4 hours a month on paying bills and updating the books, which equates to a total cost of $480.00 that you could be contributing to the business as the leader and entrepreneur of your business. Your responsibility is to decide if YOU doing the bookkeeping is worth spending $480.00 or is it more valuable to the business to go hire or outsource a Bookkeeper to do it?

Another example: you spend 3 hours per week or 12 hours per month updating your Contact Management System (CMS) with all of the business cards, follow up, and detail on the people that you are meeting and greeting with throughout the month. Those hours if spent is lost from doing any other revenue generating activities once you spend it, so you need to decide, is it worth the 12 hours of YOUR time and contribution at a total cost of $1440!!!! That is right, $1440 dollars, that could be spent on planning, preparing, scheduling, or creating what is needed for sales calls, workshops/seminars, booking appointments, and other REVENUE generating activities. Or should you be paying someone else a much lesser cost to do it for you.

One last one: you spend conservatively 2 hours per week calling and scheduling appointments, following up, confirming, and recapping partner/prospect/gate opener meetings. Total monthly hours = 8, therefore the total cost = $960.00 per month. And this task can only be done during the work week, so it is definitely impeding on revenue generating work hours. Is it worth it to you and your goal of $250,000 to do this yourself, or should you be hiring or outsourcing this task to someone else?

Now, you may be saying to yourself, as an individual or small business I cannot afford to hire anyone? My response is, you cannot afford NOT to, or you need to be happy with just having a job, and not building a business.

As the leader of the company your time is precious and oh so valuable. You have to weigh the cost of paying third parties to delegate certain tasks to the cost of you NOT having those hours to generate the revenue ($250,000) that you have planned for the business. Your success depends on it!
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