How Much is Your Time Worth?
In meeting with my agents over the past few months to work on business planning and marketing strategies for the coming year, I’ve noticed a surprising trend: agents don’t know how much they are spending on their business, or the ROI of their various marketing strategies. I’ll do another post soon on ROI specifically, but the pattern got me thinking: if they aren’t tracking how much they are actually making, how could they know how much their time is worth?
In real estate your business is limited by two factors: time and leads. Hundreds of high quality, ready, willing leads are worthless if you don’t have time to work them. Yet many agents will constantly seek new leads even when they don’t have time for their current business.
If you’re not tracking and assigning a value to your time, it’s easy to fall into the trap that “anything that makes me money, I should do.” It’s important to recognize that the worth of your time changes over the course of your career. Newer agents need to work more for every dollar than seasoned agents do, because they are still building their referral sphere. As an agent, you want to be regularly reevaluating your time, and focusing on the high quality activities that produce the most revenue.
When engaging in an activity, remember time has an opportunity cost. For every activity you do, you’re giving up the ability to do a different activity. If you are touring homes, you can’t be returning phone calls. If you are printing and scanning an offer, you can’t be updating your website. While it can be easy to spot time-wasting administrative activities, it’s important to remember that some clients aren’t worth your time either. They might have all day to tour and reject every home on the market, but you don’t.
Once you assign a value to your time, it will help you determine whether you should participate in certain activities. If your time is worth $100 an hour, do you really want to drive 2 hours in traffic for every showing of a $150k property? Will you “break even” at the end of the transaction or will you actually lose money?
Now that it’s tax time, most agents should have a good idea of how 2014 turned out, including gross income and net income. Look at your income and determine how much you made per hour. Compare that to how much you need to make per hour to hit your financial and life goals. For a lot of agents, simple changes in their business can greatly adjust their hourly income.
Knowing your hourly rate and the value of your activities is crucial if you’re considering getting an assistant. If you have tasks that you could have an assistant do for $40 per hour and your hourly worth is currently $200, then it certainly makes sense to hire an assistant – assuming you have additional work to do. If you don’t have additional, high quality, activities to work on, or your time is only worth $80, having an assistant is probably not worth the money. The math only works if you can take the time you’ve been spending on admin and use it to work on revenue-generating tasks.
With all that said, don’t forget to assign value to leisure time as well. Most of us work so that we can play, so relaxation and fun need to be part of the equation.