Finding the Value of Your Time
Every year I make calculations on how I want to spend my time, considering my business, family, household, and my own pursuits. As I walk you through my process, consider your goals for your coaching business. Use my method to see how you might value your time.
Define your target for billable hours
Start by considering the time you want to invest:
- How many weeks a year do you want to work?
- How many days per week?
- How many hours per day?
Weeks x Days x Hours = Billable Hours
Your billable hours are the time that you have to generate revenue every year. Now let’s consider what you need to charge per billable hour.
Determine your billable rate
Desired Net Income + Overhead Costs = Gross Revenue Required
This calculation begins with the income that you hope to take out of the business. Add to this the costs that the business will need to cover and now you know how much revenue you need to generate.
Gross Revenue Required ÷ Billable Hours = Rate Per Hour
Here’s a case study from my early coaching career to illustrate how this works:
The first column was my plan for my coaching business in 2009.
- I wanted to generate $5,000 per month as a net cash contribution to my family.
- I planned to take 1 week per quarter to train alongside the athletes I coached.
- 4 hours of focused work per day
- 1 day off per week
Naturally, things didn’t go exactly as planned. You can see how things played out in reality (in the second column), and it was a good life. I discovered along the way that I am only productive for 3 hours per day. Consequently, I needed to work every day.
Nonbillable time offered another reality check. When I took 2 weeks off, I returned to 1,500 email messages. I realized that I can’t “bill” for my email inefficiency. While email supports my billable business, it is not a high-return activity for me. In recent years I have chosen to mitigate this because that time is better spent somewhere else (friends, family, or spouse). In contrast to this, throughout my coaching career I dedicated much of my nonbillable time to training and writing because these pursuits attracted more coaching clients.
I set a 5-year goal, which either seems small, or large, depending on where you’re at.
Commit to generating value
There’s a reality check in understanding where you are at as a coach. What are your clients able and willing to pay for your services? The market will give you feedback and you need to be open to changing your approach based on that market feedback. You might need to work more hours initially–do a lot of coaching for the best coach in your state. Invest in your professional development. It will pay off later.
Understand: Your average billing rate is your new minimum.
Vow: I will stop doing low-value work.
Consider: Where can I double my billing target in value-added?
I approached my calculation in terms of time rather than money. I found it was easier to deliver more value to the client with 1-to-1 interaction rather than spending a lot of time, inefficient at that, behind a screen. I wanted more interaction and less busy work. In looking at my average rate of just over $90/hour, I had to ask myself, Can I be three times more efficient than a coach charging $30 per hour? Yes. The two-year transition was painful, but I got there.
When I saw how my plan played out, it was time to make a decision–moving left (for a little more time) or moving right (for way more time).
In my case, increasing my value-added per hour over those next 5 years required that I do more than simply help athletes achieve performance. I needed to add back some work in finance. On a per hour basis, it is where my skills are most valued. (It also helps that I work for people who “bill” their time at multiples of my target.) The decision to shift my business toward far greater value-added made sense.
Rest assured, you don’t need to leave coaching to achieve that value on a per-hour basis. Even within the job of coaching, there are tasks that are more valuable to the client. Think about how you might redistribute your time for a more profitable mix.
Ultimately, for a business to be sustainable, it needs to do more than pay the bills, which begs the question: How much of your time is spent on what brings satisfaction to your life?
Start by knowing your hours and your desired cash flow. Then consider what that means “per hour.” That implies a certain demographic and style of work. The market will give us feedback and we need to be open to changing our approach based on market feedback.