As a business owner, you have a lot of decisions to make. There are a ton of decisions around what you spend your money on. I know money is always a difficult subject for people in general, but in business, every dollar seems to have so much riding on it. Most likely because you know how hard it is to make each dollar!
I often hear business owners gripe about the “cost of things.” Whether it be fees, tools to make their lives easier, necessary evils like professional fees (hello insurance!), and paying for software, these all can send a business owner into a tizzy if they aren’t careful. I can see how watching money float out of your business can seem overwhelming and can hurt your bottom line over time, but there are a few things to keep in mind when you feel the pinch in you (business) wallet.
First, figure out what your time is worth. Yes, I know everyone knows what their “hourly” rate is to some extent. Whether they charge per hour, or just have a number in mind when pricing out projects. If you don’t know your hourly rate, take some time and really figure out what that is. If you need to come up with an hourly rate, there are a ton of components that go into calculating what you should charge.
A quick way to do this is to figure out what your desired salary (take home) needs to be, then extrapolating that out to find an hourly rate (Example, you want to make $100,000 per year take home, so you divide that by weeks then hours per week. If you want to work 28 paid hours per week at 52 weeks, that would put you at $68.68 per hour). Once you figure out your base salary per hour, then you need to add back in your cost of doing business (how much per year it costs you to run your business – rent, subscriptions, labor costs and so forth -say you average $3000 per month – if you divide that number by the number of hours per month – in this case 112, this means you need to add $26.79 per hour to cover overhead) then add in your taxes – this is a bit complicated based on your filing, your tax bracket and so forth, but let’s use 25% as an example ($68.68 + 26.79 = $95.47 * 1.25 = $119.34).
In this instance, to make $100k a year working 28 hours per week, your time needs to be worth $120 per hour. Food for thought, right?
So now that we have established what your time is worth, let’s talk about the make vs buy scenario. When you are deciding on things to purchase for your business, some of it is necessity, but others are just decisions on whether you can buy something to make your life easier (i.e. save time) or if you should just do it yourself.
For example, if something will take you an hour to do, or you can buy it for $120 – it is kind of a wash. BUT if you can buy something for $60 and it saves you an hour (daily, weekly, etc) then it is really WORTH IT to purchase it. Because you are saving $60 and that hour. This not only means tools and software, but also payment fees. If you can get paid faster (you don’t have to chase down checks, do your deposits, all the fun that comes with dealing with paper) by accepting electronic payment, at what point do you STOP saving money by accepting electronic payment? If you have high dollar value offerings, I think it is more of a concern, but if you are selling digital products, the convenience fee becomes secondary to the money you can make. Really run your numbers when you say you “don’t want convenience fees” in your business, or think that you should pass them on to your clients.
This also goes for software services. I gladly pay $10 – $30 per month for various software that saves me time and money. My favorite, as you might be aware, is Dubsado. The software simplifies my contracts and billing, and also helps me manage my leads effortlessly. I happily pay my monthly fee for a program that makes my business easier to run. This also goes for Zapier, Calendly, and so on. My hourly rate is more than I am spending on all these things and they give me hours back into my day.
My point to all this? Don’t just look at a dollar amount when it comes to your business. Factor in what spending that money will mean for your productivity and your bottom line. So often, you can spend a little to make so much more. This is how you begin to leverage your resources to create growth in your business. So really think about this – what is your time worth?