Tuesday, July 11, 2006

How Much is Your Time Worth?

By Thomas Murrell MBA CSP, International Business Speaker

So you've had it with office politics, working for a bad boss and making someone else rich.

You decide to quit and set up your own business.

Before you do, you need to work out what your time is worth.

Take this typical job in PR as Communications Manager for a major company in a big city.

Here's the headline of the job in the weekend paper.

Corporate communications role, big office near a major park, full-time staff position with salary of $145k+ super

This is the job description when you first applied.

"Our new communications function plays an important role in the management of internal/external communications, reputation risk and providing expertise in community relations.

Reporting to the General Manager, Business Development, your responsibilities will include coordinating internal and external communications initiatives, including publications and the intranet; media relations, assisting in the implementation of external stakeholders strategies; providing counsel to projects in the management of community engagement; preparing speeches and presentations on behalf of senior management; and maintaining an emergency and crisis communications management plan.

Essential skills and experience require ideal candidates to have proven experience in delivering enhancements to internal and external communication. Minimum 5 years experience in external stakeholders relations is essential as is oustanding written, verbal and interpersonal communication skills."

So let's take this fictional role and compare it with what you would need to earn if you ran your own PR business.

One of the speakers I most admire, Matt Church CSP provided the inspiration, insight and permission for the basis of this article.

"Don't give up your day job, well not unless you value your time correctly," Matt says.

He says the focus is on how you value your time if you run your own company compared to working for someone else in the job mentioned above.

"What do you need to earn for the year? There are two figures to consider here; Your annual "turnover'' from fees and your specific "take home" before tax. As a simple rule of thumb, those of you comparing your income equivalent in a day job should look at an annual turnover at least double your potential professional salary. In most cases it needs to be double plus 25 per cent; the 25 per cent factors in lean running costs," Matt says.

"You should then divide the grossed up figure by 100 days and you get close to your day rate. As you play with this you can start to get clear on what you need to earn as a benchmark each time you sell what you do."

Let's look at an example: Pauline the PR professional!

Pauline can earn $145,000 a year working as the Communications Manager in the above example.

Double her day job equals $290,000 in fees (2 x $145,000)

Lets then add the 25 per cent (25 per cent of turnover) for a lean operation running costs.

She now has a calculated budget turnover of $362,500

Divide this by 100 saleable days a year equals a day rate of $3,625.

Now here is what usually happens according to Matt!

Pauline or any other professional moves out of her day job as advertised above and starts to think all she needs to do is replace her salary. Matt reckons this is "a seriously bad move!!"

"They then divide this by around 220 days a year. That's a lot of hard work for very little money."

In Pauline's case she would have a day rate of approx $650!

Now, I've even seen PR jobs advertised as low as $19.50 an hour! Why is this so low compared to a lawyer four years out from law school who earns at least $400 an hour?

I argue an effective corporate communications professional will add more value to a business than a lawyer any day!

"Don't let anyone tell you that your day rate when compared to an employee is way too high. The on costs and base costs in a business will smash you every time. As an aside, smart doctors share resources to drive down the base costs," Matt says.

According to Matt, if you don't value your time correctly 3 things will happen;

1. You will find yourself earning lots and taking home nothing.

2. You will work way too hard and not have any time to develop new business

3. You will constantly think you should go back to a day job!

"In a practice based income business model, take-home is king not turnover! So pay yourself first and don't sell yourself cheap!"

This is really valuable advice for people wanting to run their own PR, media or management consulting practice.

And how do I know? Well, over the past eight years of running my own business, I've been there and done exactly what Matt says you shouldn't do.

I was so tight for cash flow at one time, I spent the weekends renting my office carpark to football fans just so I could survive.

Fortunately, I've learnt and been able to turn my business around through fair and value-based pricing.

And of course that's the value of having a mentor or coach. Someone who has been there before and can advise on all the pitfalls.

My thanks to Matt Church CSP for his insights and I highly recommend his Thought Leaders website - http://www.australianthoughtleaders.com/

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