time managing for small business

What’s your time worth? Calculating your real earnings

If you spend your days like I do banging away at a keyboard you can lose track of time. Especially if you are into internet marketing, where (hopefully) you can draw some connection between the amount of time you spend working and your income.

The tendency is to just keep working on whatever project is in front of you. If you’re lucky, it will bear fruit. You make money. You’re a success!

But maybe not so much…

Your time is worth money, and has to be included in any calculation of how successful your project is. If you finally got that new site off the ground and sold $250,000 worth of product in the first year – great. But what did it take to get there?

I am a firm believer in keeping track of the time I spend on a project, just as I would if I was working for someone else.

Let’s say you spent 10 hours setting up the site: domain, hosting, WP install, plugins, site config, shopping cart. Then another 10 hours plugging in the products and setting up the pages. Then more time re-writing product descriptions so they are unique. So finally it’s all done and it took you say 80 hours – 2 full weeks, but you have a beautiful site tweaked to within an inch of its life.

Now you have to rank it. If you do this yourself, expect to spend time every month writing and building backlinks. Let’s say you picked a really great niche, and you’re pretty good at this stuff, so it only took you 10 hours per month to rank the site high enough to generate some decent traffic.

Of course, once the traffic is flowing, you have to process orders – so let’s say another 2 hours per workday all year for that. Let’s see, where are we now?

Site setup: 80 hours
SEO: 120 hours
Order processing: 500 hours

Total time spent: about 700 hours

Orders: $250,000.00 / 700 = $357.14 per hour! You’re a genius!

Oh wait. That’s sales, not profit. your gross margin is 40%:   250k x 40% = $100,000
Running the business (shipping, accounting, taxes, etc) eats up another 25%:   250k x 25% = $62,500

You’re left with $37,500. Damn – that’s a tiny number. Or is it?

$37,500 / 700 = $53.57 per hour. Not too shabby. Your real earnings from your e-commerce site are 15% of sales.

Now we are only talking about the first 700 hours of your year here. Supposedly, you don’t want to live on 37,500 per year. How may hours per year will you work?

Most people calculate it this way:   50 weeks x 40 hours = 2000 hours / year.

So 2000 x $53.57 = $107,140 per year. Not too shabby. Over 100k per year, no boss, setting your own hours, working out of the house (no commute!).

If you track how much money comes from each of your projects, and the time spent, you can tell where to put your time next year. If you don’t you’re guessing, and most likely spending time on less profitable projects.