If you have ever said, “I just don’t have enough time to do [an activity I love]“, this advice is for you. Be prepared: This post is designed to get you thinking differently about your business and your life. Your ego is guaranteed to raise objections to this type of thinking. As those objections surface, write them down, and consider how you can overcome them as you give this advice a try.
What’s the Problem?
A lot of personal finance blogs and books, including the otherwise excellent Your Money or Your Life, make a key assumption that is incorrect for entrepreneurs: that your job can be boiled down to a real hourly wage.
In fact, Your Money or Your Life devotes significant effort to helping you figure out what the real costs of your job are. In an example in the book, a person earning $11 per hour was actually earning $4 per hour when all costs – including commuting and “work clothes” — were factored in.
This works for salaried workers, but not for entrepreneurs. Why? As an entrepreneur, some hours of your work are amazingly productive. For instance, when I ran Simpli, I spent 3 hours over the course of one week focusing on getting my company to the first result in Google for certain web hosting-related search terms. Those 3 hours paid off, netting my business over $250,000 in annual revenue.
On the other hand, I spent many hours ordering office supplies, doing payroll, and answering easy support tickets — things that were a net negative on my time as CEO, because they could easily be outsourced for a low hourly rate.
What is my hourly wage as an entrepreneur, then? Somewhere between $10 and $83,333 ($250,000/3). How do we as entrepreneurs value our time so that we’re not stuck doing menial chores instead of advancing our businesses?
Solution: Set a “baseline” hourly rate for yourself, and outsource all work that falls below that hourly rate — either in your personal life or in business.
What Baseline Rate Should You Set?
Most people will probably pay you a fixed amount to do something at an hourly rate. For instance, my attorney father should be charging $300/hour for client work. Set your baseline hourly rate at half of what you believe you could get paid as a consultant. In other words, my father should not be doing any work that brings him less than $150/hour. That includes pro bono or “cheap favors” for friends.
For writers and those just starting out, I suggest setting a baseline rate of $40-50/hour. As entrepreneurs, we tend to wildly underestimate the amount of time we put into our businesses. If I gave you a formula like “Take the income you make per month and divide by the number of hours you work in a month,” you would easily forget all those hours you spent answering email, posting on forums, reading relevant books and blogs, and deleting spam. Don’t use a formula. Just set a baseline and adjust from there.
Are you are concerned you will alienate others by doing this? I suggest you tell them that for the next 30 days, you will not be doing any work that falls under this hourly rate. Do a 30-day trial and then adjust your rate as necessary after 30 days. After 30 days, you can consider taking on some work that is meaningful to you, but falls under this threshold.
Which Tasks Should You Outsource?
A key point of this method is that, since you are an entrepreneur, you must outsource in your personal life as well. Can cleaning your house, mowing your lawn, doing the laundry, making doctor’s appointments, answering email, answering phone calls, and dealing with insurance companies be outsourced? You betcha! Anything that is below your baseline hourly rate should be outsourced.
Right now, the typical parade of ego excuses should already be screaming in your head. “But doing my laundry/mowing my lawn gives me time to think.” “I just can’t afford to suddenly spend all that money on other people!” “I don’t know who I could hire.”
Let’s address these one at a time:
- “Doing menial labor gives me time to think.” What would you rather do: do laundry for the rest of your life, or get some time to think on [insert vacation here]? Remember, a vacation doesn’t have to involve lavish tropical getaways. Maybe driving out to a local park and sitting under a tree will also give you time to think.
If you can’t think of anything else that will give you time to think, I suggest learning meditation. 15-20 minutes of meditation will give you plenty more time to think than doing menial labor — and your thoughts will not be cluttered by “oh, ****, I put the washer on the wrong setting again.” Give your mind time and space to come up with new ideas.
- “I just can’t afford to spend all that money…” Let’s be really clear on this. I am not suggesting you go out and hire a full-time assistant, a full-time nanny, and a personal chef today. Take it one step at a time.
For instance, I recently decided to hire a personal assistant. She works about 8 hours a week for me at $16/hour. That costs me a little over $500/month, and in exchange, I’ve sold most of my clutter on craigslist, I never have to worry about laundry, she follows up with thank-you notes to people I appreciate, helps me shoot videos, and even does the dishes. I also hired a cleaning service at $70/cleaning, or $140/month.
For just $640/month, I get almost 40 hours a month of additional time. If that is too much, I suggest a cleaning service once or twice a month as your first step. That should cost you $50-$100 and will immediately free up several hours of work. Once you start earning more money, you can raise your hourly baseline rate and begin to hire more people to help you.
- “I don’t know who to hire!” I found my assistant on craigslist. There are also many sites like eLance and Guru.com that will help you find people to outsource tasks to. If you can’t find what you’re looking for, make sure you have stated your request clearly. I wanted an assistant who could work 8 hours a week and come over twice a week. As soon as I got clear and visualized my request, as well as clearly explaining why it would help me, I found the right person. The clearer you are, the more likely you will be to find the right fit. If someone isn’t the right fit, fire them and move on. This is business — even when it’s a personal assistant or a housecleaning service!
The decision to set a baseline hourly rate, on your part, comes down to how much you value yourself. I believe that I can deliver much more value to the world by writing and interviewing successful people than I can by mowing the lawn and doing the dishes. Do you believe that you have a calling to help the world? Then you better get it in gear and utilize your true talents. By doing the same things you always have, you will miss new opportunities. Even going to the park instead of doing the laundry may result in a chance meeting or a new idea triggered by seeing something you wouldn’t have at home.
Try this for 30 days — and see how saying “No” to those who cheapen your time frees you up to live the life you dream of. Have the courage to say — if not to anyone else, to yourself — “I am worth more than this.” Some will value you enough that they will agree to pay you more instead of waiting out your 30-day trial. That is a win-win situation.
Are you ready to go on board with this idea for 30 days? Please leave your comments below, and I may interview you for a future followup post. In the followup, I will also explore how not following this advice may have already cost me over $1 million. Stay tuned, and don’t forget to subscribe to see the next post!
Recommended Reading:
- The 4-Hour Workweek by Tim Ferriss. “Learn to ask: If this is the only thing I accomplish today, will I be satisfied with my day?”
- How To Avoid One of the Most Common Mistakes Women Make When Starting a Business Women tend to think we have to “do it all”, and thus we build side businesses; while men hire out, outsource, and thus build empires.
- How Can You Have That Perfect Flow State More Often? My journey from being burned out and exhausted to finding a workable way to get to a flow state on a daily basis.
- Changing Your Perspective About Work: The 2-Hour Work Day If you only had 2 hours a day to get everything done that you needed to do, how quickly would you change your work life so that you could still meet all your goals?
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8. July 2008 at 6:14 am
Great blog!
8. July 2008 at 6:17 am
Huh, I think this is my favorite post yet.
8. July 2008 at 9:41 am
Very good points.
Now about that outsourcing, where do we look to? Does this mean you encourage ordering out instead of cooking? How about valuing time at the gym? Why don’t you give us a breakdown of your time and perceived value in your daily activities?
)
8. July 2008 at 12:15 pm
Another thing I’d like to add:
Compensate yourself for investments as well. If you own investment property (for example), and you don’t have a property manager working for you, make sure you are compensating yourself for the job. If your investment isn’t paying your mortgage, taxes, insurance, HOA, repairs/maintenance, AND you (as the property manager), you are losing money.
My 2 cents…
8. July 2008 at 6:24 pm
Very thought provoking, as always, Erica. I’ve been thinking about hiring a virtual assistant but waffling. Just having trouble wrapping my head around it. What I need to do, as you point out, is to get very clear on what exactly I want done.
9. July 2008 at 2:38 am
Erica, a great post and instructive. Placing monetary value on our activities is a great way to alert ourselves to the real cost of much of what we do…especially those menial activities that take away value from our lives.
9. July 2008 at 4:12 am
Great post! Please continue posting on this theme. I’m starting to get it.
I feel like too many people get hung up on the proper way to calculate their real hourly rate. The true power of this exercise is that it forces to you to start leveraging other people’s time. The most successful people in the world achieved their astronomical hourly rates with the help of others.
I’ve read that Bill Gates has earned on average $100k / hr since 1986. He could not have achieved this rate without the thousands of people who work for him. 64,000 people work for Mircrosoft worldwide. Bill Gates has effectively harnessed their collective efforts to make him the richest man in the world.
I believe, as an entrepreneur (in business and in life), I cannot afford to do everything myself that will be required for me to be successful.
Your 30 day exercise would help me practice delegating and stop micro-managing tasks that should be done by someone else. Also, I need to learn to effectively communicate my expectations to my assistants.
The only thing I’ll add is that it’s always better to eliminate tasks that don’t need to be done, rather than outsourcing them.
9. July 2008 at 4:24 pm
Two things:
1. Every single person I have read that advocates outsourcing everything including personal work has either a passive income stream or a semi-passive income stream (low hours/week work). Every single person. I bill my time directly by the hour. Paying someone else is essentially me paying that person from my own sweat and toil, which means I have to work MORE to make the same amount of money. This is not to deny the validity of your post, just that it doesn’t work for me, yet…
2. Every single person I have read that is successfully outsourcing spent *years* doing everything themselves. They didn’t wake up one day and say, “Hey! Let’s start a new business! I’ll just outsource everything!” No. They started out doing all their own books, all their office work, errands, cleaning the toilets, everything. I am absolutely convinced that is a necessary evil. To repeat: every post on this topics starts with “I did everything myself for years…” And I don’t think that’s a bad thing.
All of the above being said, I am actively subcontracting a fair bit of work now, and look forward to outsourcing more, as more passive revenue comes on line.
Always a fan, -d
10. July 2008 at 8:19 am
@Angie: I used to eat out a lot. Now my boyfriend cooks fairly often. I think that one is more a matter of personal preference.
@Rico: EXCELLENT point. I can’t believe how many people forgot that in the recent real estate boom. They were so busy assuming they’d get rich with appreciation that they forgot that most real estate investors have made their fortune through cashflow. Great comment.
@Anne: Definitely. I offered some tips in my previous blog post How Can You Have That Perfect Flow State More Often?
@Stew: Definitely…thank you for commenting!
@Dale: Agreed. You and Dave’s posts have made it pretty clear what I need to write for my next post in this series. I want to address some of what both of you have said. I will be posting that here in the next week or two!
Thank you all for the great comments!
-Erica
12. July 2008 at 6:51 am
Erica,
Gotta take a bit of issue around the pro bono work and whether your dad should charge $150 an hour for that. There is a kind of satisfaction that comes from doing things free for other people who need it, that you cannot get any other way.
A big bank account is a pathetic substitute.
If you were to get talking on a Karmic esoteric level, I suspect that you would find that giving your energy out to the universe without expectation of return pays off well in the long run. If you didn’t want to get esoteric about it, you could justify your energy expenditure under networking. Either way I think that pro bono work comes under the heading of happiness and that sitting on a big pile of money by itself won’t lead to happiness although sometimes it certainly feels like it will.
I am glad to hear that Richard likes to cook:)
Nisha
14. July 2008 at 12:28 pm
Dale:
Eliminating tasks that don’t need to be done is the hardest thing for!
Couple of ways to do this:
1. Overcommit yourself. What doesn’t need to get done won’t get done. The key to this is to NOT go into crisis management mode… easier said than done, but it’s a main technique of mine, and my life is fairly low stress (albeit busy as ‘ell).
2. For any particular task, ask yourself WHY it needs to done. If there isn’t a bottom line return (or CYA if necessary), then it can get pushed back in the stack. This is much harder for me to do than overcommitting… partly due to rewiring myself from a pure research mode where serendipity is often found in “low value” activities.
I suspect that as I become more successful, I’ll go full circle. In not-very-humble opinion, most of current crop of high powered CEOs could do with another tour through the corporate mail room once or twice a year. I look forward to that myself.
14. July 2008 at 5:36 pm
Hi Nisha,
Good point, and it’s why I suggest you do a 30-day trial. Saying “no” is an empowering thing — it helps you gain perspective on what is really worth your time.
“There is a kind of satisfaction that comes from doing things free for other people who need it, that you cannot get any other way.”
That’s true, but there’s also a lot of burnout if you do too many things for other people while undercutting your own momentum. Steve Pavlina calls it “lightworker syndrome”, and I see this fairly often with folks who really want to do a lot of good in the world. Find a balance. If it’s really worth doing, it will still be worth doing after a 30-day trial.
@Dave – Overcommitting yourself? Well, whatever works for you!
When I overcommit myself, I just feel overwhelmed and depressed…but this is definitely a personal thing.
Thank you for the comments!
-Erica
3. August 2008 at 12:15 am
Hi Erica,
Will Pemble here. Thanks for your article. Heck! Thanks for your whole website!
I’ve been successful in business almost entirely because I know how to get things done… without always having to do things myself. BEFORE I HAD THE MONEY FOR AN ASSISTANT, I still had a clear vision of what I wanted, where I wanted to go, and how I wanted my various businesses to help people.
And because I had a CLEAR VISION, and was able to communicate that to others, I was able to ASK FOR HELP, and get it!
Sometimes, friends, co-workers, or relatives would help me because of those relationships, and sometimes we’d work out some kind of deal, usually based on the success of the venture.
But NEVER in my life have I found it impossible to get help. Money, or lack thereof, is ONLY AN EXCUSE for inaction.
In order to help people get things done without having to do everything themselves, I also built The Pemble Assistant, which is a virtual assistant/concierge service. It costs about $30 a month, and you’d be amazed how much we can help. I built the service because I’d have killed for this kind of help back in the day. Check it out at http://www.Pemble.com.
So, here’s to you, Erica! Naturally, if there’s anything I can do to be helpful, let me know.
Kindly,
Will Pemble, President
Pemble.com, Inc.
http://www.Pemble.com
20. October 2008 at 8:02 am
This is a great post! I do believe getting the appropriate help for your business/your life can make a huge difference in how much you accomplish and what level you can take your dreams to. I work as a virtual assistant because I love helping other business owners get the help they need to improve their business and reduce their stress. It’s a win-win situation!
29. November 2008 at 1:12 am
Thanks for the great tip! I totally agree with you. It can be the people around us (family) who may not be used to such an entrepreneurial calculation – my boyfriend would have a hard time allowing a cleaning person into his home – it just seems weird to him. Something I’ll have to work on when my business grows – if I can make $100 per hour and do the cleaning myself, it just cost me $200 to clean my house! Maybe I have to explain it to him like that