The first piece of advice given by Benjamin Franklin in Advice to a Young Tradesman is: “Remember that Time is Money.”
Despite having long ago become a cliche, “Time is Money” remains a succinct summary of an important financial concept that must be mastered by any tradesman, operations manager, professional, or entrepreneur. In all contexts, the principles are the same. Losing time means losing money. Lost time is as expensive as lost money.
This article explores the value of time from a variety of perspectives, but the punchline is the same for all of them. Be efficient. Be effective. Be quick. Be selective. In the name of Warren Buffett, do not waste time.
Opportunity Cost is one modern term used to express Franklin’s advice, and it’s a good way to begin evaluating your own time habits. If you’re a tradesman or professional who bills by the hour, you already have a good idea of what your time is worth. When you lose time, you have a good idea of your opportunity cost. If you’re an operations manager, your opportunity cost gets more complex but you probably needed to estimate your employees’ profitability before deciding how much to pay them.
If you’re an entrepreneur, you may not have had a chance to calculate the worth of one hour. And even if you know the value of your time when you’re creating your deliverable, you’ve also got the back of house work to keep your business afloat. Estimating the value of your time can get difficult.
Difficult maybe. Important absolutely. Here is an easy way to get started.
Track Your Time
Start by logging your time. Track where your time goes each day. This has several benefits.
First, it should help you focus on important tasks. To successful track your time, you’ll need to know what category you’re logging your time as.
Second, it should remind you to stay on task. Nothing drains time like distraction, and holding yourself to your target task should start saving time already.
Third, it should help you speed up. Reporting your time will naturally highlight when you’re wasting time and when you’re being more efficient.
Money Value of Time
Once you have a log of your time, play with the information in a spreadsheet.
First, add up all your time and compare it to the money you earned that week or period. If you were honest in your log, you should be able to figure your income as an hourly wage.
Second, add up each category. Get an idea of where your time has gone.
Third, identify categories that are necessary, important, unimportant, and wasted. Decrease or eliminate future time spent in avoidable categories.
Making Money by Making Time
As humans, we have a funny tendency to be careful with our money but less careful with our time. That is a costly mistake, and one you should reverse.
Go beyond eliminating obvious categories. Treat your time log like it’s your balance sheet. Go through it to see where you can cut lost efficiency, double up on your effectiveness, get work done faster, be more selective about the work you do, or otherwise stop wasting time. Be as careful with your time as you are with your money.
Keeping overhead costs down is essential for any business. Do the same with your time.
Time Value of Money
If you’re still not convinced, consider the concept in reverse. Because money has the power to earn interest, one dollar today is equal to one dollar plus that interest next year.
Since saving time lets you increase your income, that means an hour saved today pays you money today and interest forever after. An hour saved tomorrow, next week, next month, or next year loses some of that interest-bearing time.
The best moment to start saving time is now.
The Power of Full Engagement advances the idea that our scarcest resource isn’t time, but rather energy.
Remembering to be efficient with your energy is an important limit on your efforts to be efficient with your time. As you focus on your time, remember that there is such a thing as hurrying too fast. Find the sweet spot. An all out sprint one day isn’t any good if it leaves you dead on your feet the next day.
Saving money by saving time is an effort that benefits from the expertise of a CFO. Some companies need a full time CFO but some benefit from hiring a part time CFO or even a temporary CFO. An outsourced CFO is the most affordable way to get expert advice while avoiding the high cost of an internal officer.
Please speak with Preferred CFO for any additional questions.