If you know me, odds are you’ve heard me say “every minute we take away from our business is an investment, so spend it wisely.”
As I’ve been speaking with groups about my book, “Lunching with Lions: Strategies for the Networking-Averse” there’s one part of my presentation that creates an interesting deer-in-the-headlights look from audience members. It’s the part of my talk where I ask them how much their time is worth.
See, when we budget for networking, some of us (not all of us, as I’m learning) are pretty good about budgeting the cost of group membership, the cost of the lunch or drinks consumed at meetings, event costs, gas costs, even mileage and travel costs. The one thing that most people seem to ignore is the cost, or value, of their time.
Which is interesting, because time is the only cost that is truly, absolutely, finite.
We can earn more money to spend, but we can never earn more time.
One of the statistics I uncovered while researching my book was a study done by Dr. Ivan Misner, founder of BNI. His study showed that people who networked an average of 6.5 hours a week realized more than 40% of their business from networking and referrals. People who averaged 20 hours a week traced more than 70% of their business to those sources.
6.5 to 20 hours a week. AVERAGE. Away from your desk. Not performing work. Not generating income.
That, my friends, is a huge investment.
The question is, do you know how much that investment is costing you? If you don’t, you should.
One of the first things I do with my clients regardless of their goals, is to calculate their hourly billable rate. Your hourly rate is the amount of money you need to make every hour that you work in order to cover your operating costs and desired salary. It’s the threshold that determines whether you have a “jobby” (a hobby that makes some money) or a business.
The calculations for your hourly billable rate are fairly simple. Add your desired salary, operating, expenses, health care costs, and tax liabilities, along with any other outlays. That becomes your adjusted annual salary.
Next, subtract any time you plan to take off work (vacations, sick days, conference or training days, etc.) from the total annual work hour number of 2,080 (40 hours a week multiplied by 52 weeks). Finally, if you don’t plan to work a full 40-hour week, adjust your hours accordingly. The final number is your adjusted annual work hours.
The last step is to divide your adjusted annual salary by your adjusted annual work hours. The resulting number is your hourly billable rate. It is the amount of money you need to make every hour that you are working to cover the needs of your business and to achieve your desired revenue goals.
On the flip side, it’s also the amount of money it costs you every hour you spend away from your business.
When you go to a two-hour networking event, you’re spending twice your hourly rate to be there. In fact, you’re actually spending more, when you consider travel time.
Here’s the dealio, business owner. If you’re working and not covering your costs, then you’re volunteering. If you’re covering costs, but not making a profit, then you’re running a not-for-profit business (literally). Businesses exist to make money and bring profits to their owners. Understanding what it takes to do that is a fundamental part of owning and succeeding at your own business.
Likewise, understanding the costs of networking – in terms of time and money – will ultimately help you track your results more accurately. When you can calculate your total investment, and the results you’re getting from participating in a group or event, you can calculate your return on that investment and make sound decisions on where to best spend your time.
Because every minute you spend away from you business is an investment. Spend it wisely.