There is no pleasure in having nothing to do; the fun is in having lots to do and not doing it. - Mary Wilson

Outsourcing and calculating the value of your time

Posted: July 13th, 2008 | Author: | Filed under: | No Comments »

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If you read the popular blogs and business books de jour, most notably the four hour work week, you’ll hear much about outsourcing any tasks that cost less than the value of your time. Calculating the value of your time is important as it allows you to make better decisions; not only when choosing to outsource, but when making any purchase.

The easy version of this formula is to take your annual salary, say $50,000, cut off three zeros and divide by two to get $25 per hour. So the theory goes that anything which costs less than $25 an hour should be outsourced. Well, I’m hear to to argue that your time is simultaneously worth far more and far less than that $25 per hour.

Why you’re worth far less than your hourly rate

The first chop to your hourly rate is the tax man. This is any obvious one. According to wikipedia the average tax rate in the US is between 30 and 40 percent. So in our example above, we’re down to around $16 per hour. But what else comes out of that $25? The first factor that determines what we make each hour is the number of hours we work. The simple formula above assumes that we work 40 hours. I average about 50 hour per week and like most proffesionals I don’t get paid for the extra ten hours. So now we’re down to about $13. This isn’t looking so good. But wait…it gets worse. Do you get up at 6:30 and put on a tie every Saturday? No, of course not. We’ll estimate a conservative half hour drive each day to work, which puts us under $12/hour. Add the cost of gas and $500 in clothing (a few shirts, a pair of shoes, and a cheap suit) and we’re at $11. Triple these expenses if you live in a major city. Do you eat $9-12 lunches and drink Starbucks on Saturday? Let’s say we eat or drink an extra $5 per day as a result of going to the office. Now we’re at $10.50 and I’ll bet you can think of other expenses you end up with because you show up to the cube farm. All of the sudden all of those virtual assistants charging $20 per hour aren’t looking so hot.

Why you’re worth far more than your hourly rate

So why should we pay some guy from across the pond $20 per hour to set up our website or affiliate marketing campaign when we’re only making $10 an hour? Well, we probably suck at affiliate marketing. We probably suck at html and programming. I do, and I spend half my time in college programming. What don’t we suck at? Telling other people what to do! It is infinitely better having others work for you than working for someone else. You will never be rich or have time if you spend your time making others money.

The other reason to outsource is that those $20 virtual assistants don’t cost $20 per hour. If you’re smart they cost nothing. Here’s how:

  • The Internet – Thanks to Al Gore, starting a business is easier than ever before. We can set up a store front, find manufacturers, create ads, etc. in minutes not years. This means that you need very little virtual assistant time to set up or even run your business. If it only takes a few hours to be up and running you can turn a profit that same day. Read Tim’s blog for some tips.
  • Deliverables – Whenever you hire or sign contracts you should specify measurable deliverables. My favorite of these deliverables is profitability. Second only to profitability are deliverables that directly correlate to profitability; click through rate in advertising for example. If you we’re running an ad campaign designed and implemented by your virtual assistants you can specify a certain return on ad expenses in the proposal. If you don’t get paid they don’t get paid. Another example: offer them a percentage of the revenue as payment (for a specific time period). Not everyone will go for this, but there are an unlimited number of people to outsource your work to.

Without virtual assistants most of us will sit around watching tv or perhaps reading business books, not starting companies or making millions.  We have a limited amount of free time and don’t have much to show for it.  $10 per hour?



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