What’s your time worth?
Is it worth your time? You have a prospect that has indicated they may consider buying from you if you do x, y, and z. Well x, y, and z take a lot of time on your part. Should you do x, y, and z as an investment in future business, or write it off as not worth it?
The difference between good sales people and great sales people is wisdom. Great sales people know when and how to say no to a prospect. They don’t waste time chasing business that provides little or no return on their time. Decide what is worth your time by using a proven method we at Sales Concepts call CPOD or cost per order dollar.
Here’s how it works. Figure out the number of hours you have to work for an entire year. There are 365 days per year. Take out 104 days for weekends and another 14 for vacation. Take out another five or so for personal days. (Insert laughs and jokes here.) You now have 242 days per year to work. How many hours a day do you work? (Insert more laughs and jokes here.) Let’s say you work nine hours a day on average. Now you have 242 days times 9 hours a day gives you 2,178 hours a year to work. Now, you are in sales so you have a quota, right? Let’s say your quota is a cool million dollars. That is how you justify your existence to your employer. You have to come up with that million for the year or else. How much do you need from each of those hours to get a million? Well, one million dollars divided by 2,178 hours is approximately $459.14 per hour. To fulfill a quota of $1,000,000 you need to sell almost $500 per hour. Now how do you feel about that fifteen minute coffee break? Is that coffee break really worth $125?
Once you know what your time is worth it becomes easier to allocate it. How much time should you spend to win a $30,000 order? Using our formula for a 1 million dollar quota:
$30,000 order ÷ $459.14 per hour = about 65 hours and 20 minutes.
Wow! You need to be pulling in $30K every seven business days!
You could invest about 7 business days to get that business, anything more and it’s not worth it. Let’s try a different number. How much time should you invest to win an order for $350K? Same math applies:
$350,000 ÷ $459.14 per hour = 762 hours and 20 minutes.
762 hours = approximately 84 business days, give or take, but you get the idea.
We have not addressed the element of risk. You may not want to risk 762 hours if you feel you have a small chance in winning the business. Spending that amount of time and not winning the business would be disastrous. What does CPOD tell you? Don’t risk any more than 762 hours in the preceding example. However, if you believe you only have a 10% chance of winning that business, you should only spend 10% of 762 hours on that business, or 8.5 business days. The topic of risk can become complicated. We’ll save that for a later time.
What’s your time worth? If you don’t know, you owe it to yourself and your company to find out. We all have 24 hours a day. Your competition has the same amount of time you do. Use it wisely.
Do you have a different method of calculating the value of your time? We’d love to hear about it. Please leave a comment below.
