Last week I shared some observations with you about valuing your time by delegating. Be honest, was your reaction, "That's great, but I can't afford to pay someone else right now?" Don't give in to that thinking. Keep reading and let me show you how to do the math that might prove your automatic response wrong. |
Opportunity Cost the value of something given up to obtain something else. |
Example 1:
As the owner, Sam's primary role is securing new business. On average, her customers spend $10,000 in services, requiring about 50 hours of Sam's time. |
Task - Sales $10,000 / 50 = $200/hr |
Sam's company has been steadily growing from 10 customers five years ago to five times that amount. Monthly bookkeeping tasks required an average of 2 hours per customer.
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Task - Bookkeeping 2x10 = 20 hrs 2x50 = 100 hrs |
Opportunity Cost 100 hrs bookkeeping = 2 sales $20,000 income |
Bookkeeper Cost $500/month ($6000 annually) |
Contracting Bookkeeper Yield 70% Return |
Example 2:
Jen's administrative assistant works three days per week. Jen bills her clients by the hour, and because of her unique skills, she commands $150/hr. Jen pays her assistant $15/hr. Some recent positive press has increased potential customer inquiries, and Jen cannot keep up with the number of proposals that she needs to write and send. Jen thinks that she needs to increase her administrative support to 5 days per week, but she is not sure that she can afford to do so. LET'S DO THE MATH. |
Admin Cost $15 x 24 hrs = $360/wk Jen's Target Revenue $150 x 30 hrs = $4,500/wk |
Opportunity Cost Lost Revenue writing proposals $150 x 8 hrs = $1200/wk |
5-day Admin Cost $20 x 35 hrs = $700/wk |
Net Gain $500/wk |
I want every business to have the opportunity to grow. Twice a year, I have an open dialogue with my clients about the cash flow of their business and what they want to achieve. My objective is to provide guidance and make their banking experience smooth. - Amanda Vandervort, Amanda.vandervort@pnc.com
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