Running a small business is far more difficult than the world gives you credit for, right?
Of course, there are those entrepreneurs out there who seem to have it all figured out… they have booming businesses and still manage to eat dinner with their families, maintain a social life, and do all that other work/life balance stuff.
But why do those people get to have their cake and eat it too, when you’re struggling to find a 25th hour in your day?
A huge part of their secret lies in their mindset around scarcity.
When you started your business, chances are you saw money as a scarce resource. In order to be more profitable, you needed to either get more sales or reduce expenses… so spending less money instantly made you more profitable, right? This is the mindset that many starting businesses adopt.
Does any of this sound like a familiar inner dialogue?
“I need to get my accounting/books done. Bookkeepers cost around $300 per month… guess I’ll be doing these myself. I just “made” $300!”
“Marketing is expensive and I don’t really have a budget for it, so I guess I’ll be relying on word of mouth to get this business going!”
“Hiring another person to absorb this work would just cost too much… I guess I’m here until midnight. Again.”
If you find yourself nodding with familiarity to any of these, you’re not alone.
This acceptance that money is a scarce resource is one that keeps many small businesses afloat through their earliest stages.
However, if you’re struggling to get your business to “really take off” or to “get to the next level,” it might be worth readdressing your mindset around scarcity.
The reality is, if you’re consistently wearing too many hats, it’s your time that limits your business’s growth, not your cash flow.[Tweet “It’s your time that limits your business’s growth, not your cash flow.”]
Let that sink in for a second…
How Much is Your Time Worth?
When I consult with business owners, I encourage them to consider how much one hour of their time is worth.
If you haven’t done so already, I encourage you to do the same.
To calculate the value of one hour of your time, you might look at:
- Your hourly rate. If you provide a service and charge by the hour, then it’s easy to determine the value of your time.
- The cost of your product/the time it takes to produce it. If you provide a product, then you might look at the cost of your product divided by the number of hours it takes to produce.
- Your monthly revenue/160. Another way to calculate the value of your time is to simply divide your average monthly revenue by 160 (40 hours/week x 4 weeks).
How to Decide When to Outsource
When running a business, there are so many tasks to become overwhelmed with, but most of them are low-value tasks.
All too often, business owners get stuck in their day to day operations, when they should be focusing on growth, culture, etc.
By assigning yourself an hourly value, you can easily determine if something is worth your time to do yourself, or if it’s something you should delegate.
Let’s take the example of needing to get your books done…
Unless you have a background in accounting, chances are it would take you upwards of 10 hours a month to close the books for your business. You’d need to do a ton of research, plan your general ledger, map your accounts, learn your accounting software… and that’s just to get set up!
Then you still have to perform the action of closing your books every month and reconciling your accounts. If a great bookkeeper would cost $300 per month, you’re basically paying yourself $30 per hour ($300 / 10 hours), not counting your set-up time.
If you value your time at less than $30 an hour, then you’re getting a great deal and should continue to do your own books. But, if you value your time at more than $30 an hour, why would you ever consider doing this yourself?
(Pro-tip: if you have what it takes to own a business, I hope you value your time at more than $30 per hour).
So, by implementing this simple filter, you can easily and quickly decide if a task is (a) something you should pay someone else to do, or (b) something you should do.
The Benefits of Outsourcing
And here’s the best part… What you’ll quickly start to find is that your hourly value goes up and up. As you focus more on high-value tasks your business will grow.
As your business grows, your cash flow increases and you gain the ability to further grow your team. As you bring more team members on board, you get to focus on even higher level tasks. Essentially, every task you delegate to someone else frees you up to grow your business.
This is the underlying philosophy of strong business owners: great teams build great companies.