How much do you work for? What's your real pay rate? Turns out last month I worked for $18 an hour.
Here's how you calculate it. Take your after-tax after-super pay at the end of the month - the money that actually hits your bank account, or your pocket so-to-speak. Subtract everything you spend in a month as a result of running your business (or doing your job). Travel costs, clothes you buy, coffees you wouldn't otherwise have, lunches you buy, dry cleaning, the drink you need at the end of the day because you need to unwind etc. Everything that you wouldn't spend if you weren't working. That's your actual pay.
Then work out how many hours you give to your business (or your job). Not just time at your desk, but time you travel to work, time you are thinking about the business, time you spend unwinding etc. Divide you actual pay by the number of hours you give to your business, and that's your real pay rate.
Its an extremely revealing exercise, and a very useful measure. If you are looking to get more money and more time out of your business, your real pay rate is a measure for both. I have two strategies to increase my pay rate from $18 per hour. They are very sophisticated, and I think contain the secret to more money and more time from your business. These two strategies are:
- make more money
- work less hours
See - pretty profound. But seriously having my hourly rate as a KPI for myself will let me know if its happening or not.
This methodology comes from Your Money or Your Life by Joe Dominguez and Vicki Robin. I've read a lot of books about money, financial independence, the psychology of money and so on - Rich Dad Poor Dad, the Richest Man in Babylon, The Millionaire Next Door and many others. This is hands down the best.
My wife and I read it a month ago, and its already had a significant impact on our relationship to money and our finances. One of the steps is to work out your real rate of pay. When you have done this you can then assess everything you spend in terms of the hours it takes you to make that money. I might spend $90 pretty easily, but if I think of it as 5 hours of my life, I might think twice.
What does this have to do with loving your business? A powerful relationship with money is critical to creating a successful business, and many of us are anything but powerful with money. If you could use some help in this domain, read this book. The cheapest place to get it is at the Book Depository (and if you buy it from this link, 5% of the purchase price will go to The Hunger Project).
So how much are you working for?