Did you ever read a business book and then wonder why you wasted your time? I have. But that wasn’t the case when I read Laura Vanderkam’s 168 Hours. In my fifteen years as an entrepreneur this is one the best investments I have made of my leisure reading time.
Why? Because this book helps you understand exactly where your hours are going. Yes, it takes a bit of legwork to figure all of this out (click here for a handy spreadsheet). But if you subscribe to a time tracking service, as I do, you can use it to track more easily where the time goes.
As a small business owner, there are three great reasons to track the hours of your business day: Measuring profitability, measuring efficiency, and increasing productivity.
Let’s talk about all three.
1) Measuring Profitability — The first is easy enough. The amount of time clients are billed for vs. what employees are paid for those projects should equal profitability, right? Not so fast. There is unbillable time to account for. The first is pitching new business (not marketing, but actually talking to potential leads). Then you must integrate new clients into internal systems like accounting, contact lists, customer management databases, etc. It was fascinating to discover that I had “unbillable” time which should have been built into costs charged to the client.
2) Measuring Efficiency — This one is handy when reviewing employees performance and seeing how efficiently people are using their time. Are they spending too much time on a simple project? Are they not spending enough time on a project which is complex? Are you spending too much time on social networking or blogging without seeing a return on investment? Time is money after all. I measure my time by the following categories: Marketing, Client Management, Accounting, HR, and Admin, which covers administrative tasks such as quoting new insurance rates or talking to people who help me run my business (my landlord, my coach, consultants, etc.).
3) Increasing Productivity — After you begin to keep a time log you will find many places to increase your productivity and your bottom line. It probably isn’t worth it to argue with the phone company to save a few dollars per month if you employ less than five people. But if you employ a larger number of people and your business is more complex, spending time negotiating makes sense when amortized over a period of time. If your blog isn’t getting any hits, it may be time to outsource things to a ghost writer or think of a different marketing strategy. If the latest training course you took wasn’t valuable, it’s time to be more choosy with your continuing education pursuits.
And really we’re just scratching the surface. You will discover many things on your journey of time tracking, the least of which is where the time, and hence the money, is really going.