Creating cash flow opportunities to build your business can be a challenge for businesses starting…
If You Sell Time for Money, Don’t Waste It
Benjamin Franklin’s saying “Time is money” has been replaced with the credo to provide value and not sell time but for some professions, you do still need to sell time for money.
If that’s you, have you ever considered exactly how many hours you can reasonably work during a week that you are able to charge for? Unless you have a practice or a business that provides all the admin support for you, the chances are that a chunk of your time will disappear in admin time, chasing up payments, paying bills and bookkeeping not to mention writing reports, collaborating with other service providers and time invested in referral relationships.
I call this capacity planning, and the steps I take professional service providers through when I’m presenting or running workshops are summarised as follows:
- Determine how many hours a week you want to work and how many weeks a year.
Take out any holidays, public holidays, allowance for sick days or personal leave days and identify exactly how many days a year you would expect to be working.
For example, if you work 30 hours a week on a permanent basis and take 4 weeks of annual leave, you need to allow for 10 days of public holidays and 2 weeks of personal leave.
30 hours per week x (52 weeks less 4 weeks of annual leave, 2 weeks of personal leave and 2 weeks of public holidays) = 30 hours x 44 weeks = 1,320 hours
- Next, look at how many hours on average you have spent in appointments that you charged for.
I recommend looking back over the past 12 weeks if you can to get a reasonably accurate average. If you’re starting out, the past 4 weeks may be more indicative of your average as you’re increasing the hours.
Let’s say you looked at the past 4 weeks and identified that you charged the following hours:
Week 1 – 14 hours.
Week 2 – 18 hours.
Week 3 – 16 hours.
Week 4 – 20 hours.
Total hours = 68 hours.
Now divide by 4 (as I’ve used 4 weeks in my example, but you’d divide by 12 if you used 12 weeks), and you get an average of 17 hours per week.
- Then look at what you’re doing in the rest of the hours.
Are you busy with admin work or do you have hours that you could be working if you had appointments booked in? What you’re looking to identify here is how many more hours could you be charging for and exactly what are you doing for the rest of the time.
Let’s say you identify that you could do another 6 hours of chargeable time per week and that you need 7 hours a week to deal with the admin, bookkeeping and promoting your services to referral partners.
- Now, let’s work out your capacity.
Based on the example, we’ve got 17 hours a week currently being charged, and we’ve identified another 7 hours we could easily be charging if we fill up the appointment book. That gives a total of 24 hours per week.
With a full working week of 30 hours, you would be operating at 80% capacity. That is 24 hours divided by 30 hours expressed as a percentage (or multiplied by 100 to make it super simple).
So, what can you do to increase your capacity, assuming, you want more income?
Here are three suggestions to get you thinking:
1. You could look at outsourcing some of your admin work.
You could look at employing a part-timer or outsourcing to a contractor. How much would you need to pay someone else to do that work for you and compare that with your hourly rate you can charge. As long as your hourly rate is greater than the cost of someone else doing it, that’s a win.
2. Work more hours.
Yes, that’s always an option, but if you’re already working full-time or long hours, this may not be viable and extended periods of long hours of work is not sustainable in any event.
3. Look at employing someone else in your business to take some of the appointments.
Whilst you won’t make the same hourly rate, you’ll be making the difference between what you charge and what you pay them and in this way you are able to leverage their time to make you more money.
I challenge you if you’re charging by the hour, to have a good hard look at your capacity and put a plan in place to make the most of your time and don’t waste it doing non-essential work that you can outsource.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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