Valuing your time is the first step in time management and once you get started in that direction, you can evaluate the COST per hour worked. One of the common ways to do it is to take your income and divide it by the total number of hours you have worked and you arrive at what you make per hour. This might not be truly representative but gives you a base to start calculating COST to customers as well. Some of the benefits of tracking your hourly rates are:

1) You can connect productivity to pricing

2) Helps you break down a task into achievable targets

3) Helps decide which projects are profit making and which are taking more time than what you are billing for

4) Makes it easy to give quotes to customers….all you need to work on is the time you will take to do the project

5) Can it be done by someone else at a lower cost? If yes, then you can evaluate outsourcing of tasks which are time consuming but valuable nonetheless.

However, there are some shortcomings of per hour rates as well and they are:

1) Many times, you might not be able to account for acquired knowledge when quoting per hour rates to customers. It also becomes difficult to add on costs of material things required to produce the results.

2) You might miss the ‘landed cost’ of outsourced work by not accounting for time spent by you in managing the outsourced piece of work

3) Difficult to increase pricing if you are per hour rates are already at industry levels.

Time & Material or T&M is a common concept in service industry which lets you sort out the first problem mentioned above. A total cost of man hours and material spent results in a flat rate for T&M (which includes costs such as computers, infrastructure, rent, and telecommunication costs) etc which can then be used to quote to customers. Pure per hour rates might not be representative of the actual cost of production and thus T&M is gaining favor across the world.

The outsourcing phenomenon works for tasks which you can define and these can usually be handled by someone else as it does not require the same level of knowledge as yourself. In fact, many individuals with home businesses are opting for Virtual Assistants who can get their day-to-day tasks along with some part of client assignments done while they utilize their time for higher paying tasks. The challenges faced in arbitrage of this kind are mostly related to communication and productivity which needs to be managed from the very start.

So if you are a business which does not have the ‘per-hour’ cost of work done, it is time to get this metric quantified so that you can develop the business in a more scientific way and compete with other businesses on fair ground. Getting a cost per hour is very likely to help you increase your business and like any entrepreneur, we are sure that is Priority No.1 with you as well!