There are very few assets that you can build or buy by investing only time. In all cases some form of money is involved in a business project.
We use the expression “invest time” so much that the meaning becomes vague. When we work with an employee mentoring their career skills, we often say that we are investing time. In fact, we are spending time, both theirs and ours. For their time we spent the company’s money, in the form of payroll. For our time, if we are an employee of the company, we also spent company cash—our pay. There was a trade, an exchange of cash for time, between the company and us as individuals.
Time itself is a resource that we don’t own. While time is endless, we can possess it for just this… specific… moment. You have only this moment to use, and then it is gone. Another unit of time is there for us to use, and it will be gone too, followed by another.
Time is a resource that most of us squander. Stop and think for a moment; what did you do today that wasted time? Perhaps you sat watching a TV show. Perhaps the red traffic lights that stopped you wasted your time. Perhaps you spent twenty minutes looking at Facebook. Perhaps it took over twenty minutes for your computer to boot up, so you sipped your coffee. Perhaps even reading this article is a waste of time! But, we think not…read on —
Buying Time – Selling Time
There is another expression, buying time, that I think is confusing. Can you take money to a store and buy time? Will $100 buy you another ten minutes?
One measure of business effectiveness is the ratio of assets to revenue. The ratio should always be positive, i.e., $1 of asset your business creates $3 of revenue and $2 of earnings. Return on Assets (ROA) is an important measurement for any business. Capital intensive businesses like manufacturing will have a lower ROA than capital light businesses, like a services company. An asset-based trucking company will have a lower ROA than a truck broker.
In comparing your business with that of a competitor, there is a discussion of comparable ROA. His business has lots of assets, and yours does not have lots of assets. His business has inventory, buildings, trucks, and machines. Your business has a few computers, books, some printers, desks, and file cabinets. His ROA is much lower than yours is. Suggestion: The Ad Advisor might note that the time you have available could sell as an asset, part of the inventory to sell.
Consider that abstraction. It is easy to calculate the time one has to sell. Take the number of days in a year you are willing to work, and the hours each day willing to work, and there is a number. So lets assume 1,000 hours are there to sell in a year. That is a highly perishable asset! Just to write this essay this author spent over an 2 hours of time, in research and writing consuming the abstract asset.
Consider the abstraction one step deeper: What is the value of this highly perishable asset? The response: “Time is not free, it is priceless!” However, priceless is not a consideration. So how to value time?
Consider the basic formula of business. Assets create revenue. Subtract the cost of the asset and the expenses from the revenue to calculate the cash created. To create cash—the goal of any going concern—the revenue must be greater than the money invested in the asset and the money spent on the resources used to create the revenue.
How to set an asset value on time without choosing an arbitrary number OR agreeing with another person what an individual’s time is worth for the service I supply. The only way to set the market price for one’s time is to let someone else establish the value of the combination of a person’s time, knowledge and skills, which sets the value.
Chicken or egg. Selling time, skills and knowledge, but the market – the place where everyone meets, determines the value of the combination. There is a difference between the value of the my combination and the combinations presented by competition.
I may charge $350 per hour for my services, and a competitor may charge $50 per hour. Which is a better value? If it takes me an hour to do the job, and the competitor seven hours, the value is the same if viewed from the cost of the services—both of us will charge $350 to do the job. Consider the potential value outside the simple cost calculation. What if the job required the dedicated participation of the client’s employees? The employees are dedicated to my time for one hour, while they are spending six additional hours with the competitor! Who now provides the better value? So many factors to consider! The Ad Auditor helps you with all those variations.
Time, Money, Value, Employees and Your Business…how do you make the very best of all of them? Talk to us at The Ad Auditor and find out what you are missing from the recipe of success.