Business Basics 101

by Ellen Rohr

"I would willingly stand at street corners, hat in hand, begging passersby to drop their unused minutes into it."

Bernard Berenson

The most precious commodity is time. You can always make more money. You only have so much time.

In order to be successful in business, you must account for your time: the time you spend and the time you sell.

How are you spending your time? Try thisÉ

Fill out a time card. Yep, you, the boss, the owner, the executive É whatever role you play these days that allows you to walk past the time clock. Figure out how you are spending your day. Record your activities and hours spent. How much time is spent doing tasks that won't lead you closer to your hopes and dreams? You don't need to clock-in forever. Just do a study and confront how you spend your time.

Beef up your personal discipline. You need to make changes. Ask yourself, about each task you perform É

Is this task necessary to achieve my goals?

Is this the best way to do it?

Could, or should, someone else do it?

Of course, you don't want to waste time asking yourself too many questions, either! Find the balance. Do what needs to be done to get you where you want to go.

Now, how about the time you sell? Are you in the service business? Doctors, lawyers, accountants, mechanics, haircutters, contractors, caregivers sell their expertise, their time. Service providers are bound by the number of billable hours that they can sell per day.

If you want to maintain your sanity and have your family know you by first name, you will want to limit the number of hours you work per day. Eight hours is reasonable, though most self-employed folks work at least 10 hours a day. Of those hours, how many can you sell to your customers? How many billable hours can you generate?

Are you tracking your billable time? You can use your time card, or add up your billed hours from invoices. If you aren't keeping track, you'll guess that you have far more billable hours than you really have.

The number of billable hours is a critical number to nail down in a service business. You see, all the costs of doing business must be recouped via the billable hours.

Let's say that you are a one-person company in the appliance repair business. You decide your salary will be $50,000 and budget another $50,000 for all other expenses, a total of $100,000 in costs for the year. Now, how much time do you have to sell?

Assuming that you will take a two-week vacation reasonable idea! there are 50 work weeks in a year. Forty hours a week times 50 weeks = 2,000 total hours. (I know, you'll work more É but is that the point? Stay with me!)

You keep track of your time with a time card. Wow! During that 2,000 hours you have to sweep the floor, do the books, order parts, schmooze with customers É you may have only 1,000 billable hours appliance repairing hours in a year. Therefore, your break-even cost per hour is: $100,000 / 1000 hours = $100 per hour.

You need to charge $100 per hour just to break even. We haven't even accounted for taxes or profits yet. Hmmmm. (No wonder you aren't making enough money.)

If you sell products, not just service, you still need to keep track of the selling time. How many hours a day are you open? How many dollars per hour must you generate in sales to float the boat?

Add the hours and crunch these numbers for your own situation. Figure out the hours you spend and the hours you sell. Nail down the time factor, and you will be unstoppable in your business.

"Time is money."

Benjamin Franklin

(Ellen Rohr's mission is to help folks make a living doing what they love. Her new book is called "Where Did the Money Go?" - a Beginner's Guide to Basic Business Scorekeeping. To order the book or visit with Ellen, e-mail her at

maxrohr@earthlink.net

or call her at 753-3998.)

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