By David Bloom, co-founder and CEO, fd unlimited
When you’re in growth mode and your workload has you and your team working 24x7, you start to think hard about being efficient with your time.
A good tool for the bag is to work out your own hourly rate so you can cost the tasks you are undertaking and see if it makes sense to carry on, stop, delegate or outsource. Here’s how.
Contractors typically do their sums based on 240 working days a year. If you take 365 days and strip out weekends, public holidays and 20 working days for holiday, you’re left with 240.
If your business is paying you a salary of £60,000, when you add 12.8% Employers NI on top, you are costing your business £67,680 a year (assuming no benefits). Divide this by the 240 working days a year and your daily cost to the business is £282. Assuming a typical 8 hour day — although you’re probably working at least 10 - then your hourly rate is c.£35. Divide this by 60 and your time costs your business c.60p per minute.
Now invest some of your precious time (no more than an hour i.e. £35) to map out the tasks you undertake regularly and split them between ‘winning new business tasks’ and ‘admin maintaining the existing business tasks’. Quantify the cost of these tasks by multiplying the time by your £35 rate.
This exercise will highlight to you the cost of your time being spent on what you should be doing, ‘driving the business forward’ and the cost being spent on ‘what has to get done but adds no value to the growth of the business’.
Every situation is unique but if you are spending more than 50% of your time maintaining the business the balance may be working against you. It could be time to think about bringing on additional resource to get you focused on driving the business.
Your hourly rate is a measure of your opportunity cost to the business and you should always be thinking about the best use of your time. Clearly if you are doing the bookkeeping and you decide to bring somebody on to do this for you, it is going to cost the business more as you’ll be paying for somebody else but if you’re paying £25/hr to free up £35 of your precious time to win £1,000 of new business, it will soon pay for itself.
Of course you may be desperate to bring somebody on but you can’t afford to do it. In this situation, think about offloading some tasks to other more junior members of the team. Your time invested in training up others often pays big dividends. The trainee feels empowered with new knowledge, increased loyalty to the business, and you are free to spend that time elsewhere ... and it’s not cost you a penny.
fd unlimited provides high calibre and cost effective part-time, interim and full-time Finance Directors, Financial Controllers, Finance Managers, Board Advisors and Back-office Services to dynamic companies with aspirations for growth. Our network allows us to match your need with the right resource, in a matter of hours if needed. Find us at www.fdunlimited.com
fd unlimited has a roster of experienced bookkeepers and financial professionals who specialise in supporting fast growth companies.