Time is money we have all been told. We all gain compensation based on the number of hours we work. We learned that concept when we got our first job as a teenager mowing lawns, bussing or washing dishes, or working at the local fast food joint. That minimum wage job at the time seemed like a lot of money for a kid. As we progressed in life hopefully our hourly value progressed as well.
As real estate agents we are now business owners, commission people, and some are executives with a salary and additional compensation from the net dollars earned by our company. For most people while climbing the ladder of success they have lost touch with their earnings on an hourly basis. They tend to focus on stock options, bonuses, and benefits. Ask an administrative staff person what they earn per hour, they know to the penny. Ask an executive, manager, or salesperson and you get a blank look.
Your hourly rate or hourly value is one of the most important numbers in your life. Some of you might be saying, "Now wait a minute, the money in my bank account is more important, or my net worth," or even the health conscious revelers would say, "My cholesterol count is more important." Some people who are extremely family focused could focus on the number of kids they have or how many years they have been married to their spouse. All those are important numbers to a great degree.
What you are worth per hour translates into your quality of life both now and in the future. The hourly rate enables you to have more options for you and your family. For example, if your hourly rate is in the minimum wage category, the options or odds of you owning your own home, travelling the world, saving for retirement or funding college tuition for your children is severely hampered.
That level of your hourly rate could even affect your overall health because the cost of fresh fruits and vegetables for yourself and your family are much higher than a box of macaroni and cheese. Numerous studies have indicated the lower income earners have more health problems with cholesterol, high blood pressure, diabetes, and other ailments due to diet and exercise.
A high hourly rate also leads to more time off with family, potentially a higher savings rate, and more experiences with your family (i.e. travel, theatre tickets, sporting events, country club or athletic club memberships, piano or ballet lessons). All these experiences create lasting skills and memories for a family.
Most respected professionals including doctors, dentists, accountants, or attorneys fundamentally sell time for a price. The higher their professional skills and the greater their reputations and success level, the more they are able to increase their hourly rates in order to earn more income. A successful attorney can decide to charge $350 an hour instead of $225. A dentist can decide a gold crown will cost a patient $1200 instead of the former price tag of $900.
For some of us we can't change our hourly rate that easily by charging more for our services. You can raise your value of each hour invested in business by increasing your productivity. This will raise your hourly rate through commission or increased recognition of value from your boss which results in a raise. To calculate your hourly rate, follow this formula:
Hours Worked per Day X Days Worked per Week X Weeks Worked per Year = Total Hours Worked.
Gross Income divided by Total Hours Worked = Hourly Rate.
The goal for every professional should be to raise your hourly rate. Your hourly rate creates an average of what you earn per hour. The truth is some hours and actions have significantly more value than others.
For example, a salesperson that earns $100,000 for a year's worth of sales performance that works 2000 hours in the year is worth $50 an hour. The real truth is that some of his hours are much higher than the $50 an hour and many of the hours are less. Through our studies in sales, we have determined that most people in sales spend a good 70% of their time in administration. When doing administration, a salesperson only earns the value of an administrative assistant which is an average of about $15 an hour. The salesperson must be doing something that has high value or a high hourly rate to push the $15 an hour to a $50 average. The answer is that the sales functions of prospecting, lead follow up, and making sales presentations earn far more than $50 an hour and in some cases 10 to 100 times for highly skilled salespeople.
Let's dig a little further to illustrate my point. I am going to use a real life example from one of our coaching clients in sales. Fred in Seattle, Washington is a solid sales producer who ears $100,000 a year working eight hour a day and makes $50 an hour. Fred's daily earnings are $400 a day, 8 hours a day X $50 an hour. The challenge is 6 hours are invested in administration at the value of $15 an hour. 6 hours X $15 an hour = $90. He makes $90 of the total $400 for the six hours of administration he does supporting his sales. The remainder of his earnings of $310 comes from the two hours he invests in sales functions for two hours a day. 2 hours X $155 = $310.
Fred has a choice to make $155 an hour or $15 an hour! Until I took Fred through the math of his hourly rate he was like most people. He didn't know his value and how value is attached to the activities you do. His over investment in administration dropped his hourly value by 310%. Armed with this information, new focus, and our coaching, Fred more than doubled his earnings and hourly rate in the next 6 months.
Your hourly rate is a key indicator of your business success and value in the marketplace. Use your current hourly rate as a benchmark, and then get a goal to double, triple, even quadruple the earnings and value you wring out of each hour.