Recently I was talking to a successful entrepreneur and he commented how he saves money flying into a remote airport and driving an extra hour to a city on a regular customer trip. That got me thinking about the value of time, and quantifying it as an hourly rate.
The simplest way to come up with an hourly rate is to take your annual compensation for last year, divide the number by two, and then drop the three zeroes on the end. So, if last year’s salary was $50,000, dividing by two is $25,000, and then dropping the three zeroes results in $25. Meaning, the approximate hourly rate for your time is $25/hour.
For entrepreneurs getting their business off the ground, it makes sense to save money and sacrifice time to be more capital efficient. But, as the business grows and scales, time becomes more of a limiting factor, and resources become more plentiful. When this happens, entrepreneurs need to consider the hourly rate for their time and start using money to create more time.
What else? What are some more thoughts on the hourly rate for your time?
David Cummings on Startups 
Enlightening! As consultants, what is considered billable time when sometimes ones time is given away in minute increments that can add up substantially over the course of a day, week or month just in answering emails, communicating via chat rooms, and even in passing?
Good concept mom.
Janice, can you sign her up for the email from him. thanks
I understand the concept and what you’re saying in theory but….I don’t know, when its early in your cycle and you’re trying to manage cash flow, sweat equity can be used to trade for $$$. Saving $500 on travel costs for a single trip could help pay for your developer for another week, all by just giving up an hour or two of your time, that you could then make up later that night in the hotel room.