Assessing Your Opportunity Costs In Small Business Oct 9, 2018
The opportunity cost of their own time is something that is too often overlooked by small business owners. As a small business owner there is a much wider array of things you could accomplish with a few more hours in the day if you did not have to do certain tasks which does not require your knowledge, expertise and skills.
Think of it like this, if you currently spend 10 hours of your week doing bookkeeping for example, you are saving whatever amount you would have paid to an employee. But what if in those ten hours could have been used to secure a new client? Every task you choose to complete in a day incurs a cost for the ones you did not. That is the opportunity cost of your time.
As a small business owner time is money for you and the most valuable asset of the business is your time – your passion for the business – which is best focused on getting clients to scale business growth.
The opportunity cost in such instances is evidenced in time spent by you the business owner is doing administration and compliance work that is required to be done but does not bring clients through the door and cash flow into the business!
An easy way to assess the opportunity cost of your time as a business owner is to assess how much time each week you spent on the following:
1. Writing Blogs and Maintaining Social Media – essential for your business growth but it takes time to compose blogs and create attractive posts to social media.
2. Bookkeeping and Accounting – How much time are you spending ‘crunching numbers’? – financial reports and cash flow above all is the life blood of small business, but it takes time to process transactions and produce reports. What is your time spent on these tasks each week?
3. CRM and Database Management – do you have a CRM? If so, are you spending time on data entry/import in CRM? and what about integration with mail chimp, your website and the rest? – how much time each week are you spending on this?
4. Administration Support – we look at is as any task that involves some aspect of business compliance that is essential but does not bring in cash or clients directly.
Add up all the time you spent on the above each week.
Then assign a dollar value to your time as a per hour cost. This should around what price you charge clients for your time.
Multiply the time spent working by the hourly rate.
The result is the opportunity cost of your time, time that is better spent acquiring new clients, engaging with existing clients and creating more cash flow in your business.
In 2017, 328,000 small businesses commenced business and a staggering 261,000 had to close (source AICD Magazine) – because their owners do not truly assess the opportunity cost of their time and how it impacts cash flow for the business.
SBA’s outsourcing solutions allow you to accelerate your business growth by assigning a lower opportunity cost to your time. We allow small businesses to build enterprise value by creating robust back office processes that are not reliant on the business owner to run!
Go on that holiday, finish work early, grow your business through deployment of the SBA away team.