Time is Money, But How Much?

By RENATA STERNFELD-ALLON

To figure out how much an employee really costs, the trick is to divide the annual salary by 1000. But, where does this trick come from, and what can it teach you about your business?

An article in Small Business Trends explains this very carefully including instructions on how to do it yourself.

Here are the basics we all know about:

– Figure out the hourly rate of an employee (take salary divided by 52 weeks, then 40 hours a week).
– Double it.
-Don’t scream! You have to take into account all the expenses that accompany having an employee: payroll taxes, insurance, telephone, internet, coffee, water cooler, office space, office furniture, electric bill, paper etc. doubling it is not an absolute number of course but it brings you pretty close.

You can and should calculate the same about the cost of running your business, how much is your hour worth? Then start thinking in terms of the adage, “time is money.”

– How much will it cost to have the meeting catered instead of going out for lunch? How much time will it save you?

– Are you spending extra time by shuttling people in a bus, or is an individual cab cheaper when you think of the time involved?

– How much time does a business book or magazine have to save you before it’s worth it?

– How much time will a new software save you and is it worth the price?

You get the idea. When you put a price tag on the things a business owner does, and consider the time it takes away from other priorities, important decisions become much clearer.