How Much Money Do You Earn an Hour?
Episodes 139 & 140 – The Local Small Business Coach Podcast
Here is what we discuss in today's episode:
[Make More Money Series] – Increasing Your Hourly Income:
In part 1 of our 5 part Making More Money Series, we will discuss how the key to your journey to $100,000 annual take-home pay begins with identifying what your hourly income is and focusing on increasing it.
How Much Money Do You Earn an Hour?
Have you ever stopped to figure out what your average wage was an hour? Now, I’m not talking about what you charge an hour. That is a completely different number. I’m talking about the wage you earn, that you take home, for every hour that you work in & on your business?
In the below podcast episode, I took a deep dive and challenged my listeners to take a moment and using a simple calculation, figure out what they are earning. For example, if you work 60 hours a week and take two vacations weeks that is 50 weeks x 60 hours = 3,000 hours a year. And if you took $40,000 out of your company for compensation, you earned roughly $13.33 an hour.
However, everyone knows I’m a huge fan of getting to $100,000 in take-home. So, what would that look like an hour if you worked the same number of hours? Well, you would be earning $33.33 an hour! Wow, that is $20 more an hour!
The problem is, you want to get to the $33.33 an hour and the $100,000 but what keeps nagging at you is, “I’m already working 60 hours an hour, how do I create that much more money?”. Well, that is exactly why I am doing this 5-part series on increasing your average hourly wage. I want to show you the tricks to increasing that annual pay and that hourly rate!
WHY DO YOU NEED TO UNDERSTAND YOUR HOURLY WAGE?
But before we dive into those items, let’s discuss why this hourly wage is so important for you to understand and know.
I remember back when I went from an hourly employee to a salaried one. One of the very first things that I was told was not to divide my salary by the number of hours I would be working. I was going from 40 hours with overtime to 65 hours with no overtime.
But, you know I did. What did I find? I was now going to make $3 less an hour! Ouch! What a pay cut. Plus, it was even worse as any hours over 40 had overtime pay. While yes, I was taking a step back before I could take a step forward, but it still hurt. I’m sure most of you could make more per hour at a conventional job, but you choose to do this to make that huge step forward in your future.
I tell you this to make a point that what you think you are making is probably not what you really are making
In this podcast episode, I actually take a deeper dive into explaining the hourly wage phenomenon but keep reading I'll explain it as well but if you want just take a listen
GETTING PAID FOR WHAT YOU LOVE TO DO
For starters, as much as you love what you do, let's face it, you love to get paid and hopefully, you love to get paid well. After all, it is our paychecks (take-home pay) that pays our bills and provides for a family. So, it makes sense that you want nice healthy paydays!
I have been very vocal about the fact that I feel that every local Small Business owner should make $100,000 in take-home pay. Where are you on this goal? Are you at $35,000? $50,000, $75,000? Where do you want to be?
Earlier, I went through a quick calculation on figuring out your average wage. Have you done it yet? Let’s take a look at a few more examples.
To make it easy, we are going to stick to a common number of hours most small business owners tend to work, the 60 hours a week. Let's just say that you work 6 days a week, 10-hour days. While some of you will work way more than that, let’s just use an average. Adjust when you do your calculation.
Remember, your 60 hours a week will include the time that you work ON your business and not just IN your business. This will include the time you spend on bookkeeping, estimates, advertising, improving processes, etc. The critical time that usually results in increased business. This is very important time. This explains why I don’t want you focused on what your charge for a labor hour. These typically are hours you aren’t taking in pay but yet lead to the biggest paydays if done right. But more on that, later throughout the series.
Now with the said here is how it plays out for 3 different business owners, all working the same 60 hours a week.
Business Owner A makes $35,000 and earns $11.67
($35,000 divided by 3,000 hours)
Business Owner B makes $50,000 using the same 3000 makes $16.67
While Business Owner C makes $75,000 in take home, and with her 60 hours, she, therefore, makes $25 a business hour.
WHAT DO YOU MAKE AN HOUR? YOUR TURN
Ok, your turn. How many hours a week do you work on average? Multiply that times the number of weeks you work out of the year. Now divide what you earned last year by those hours. That will give you last years hourly wage.
Now, depending on when you read this, let’s figure out how you are doing this year. What have you averaged in working hours so far? Figure out how many weeks we have had and what your year to date take-home pay has been. Divide it out the same way and you will have your current trend.
This is a great number to have, by the way, so you can see how you make progress by the end of the year. Also, if you have a seasonal business, it is great to see what you earn during the peak times vs the slow times and how you can leverage each time period to the best you can.
MORE HOURS DOESN’T MEAN MORE SALES
Remember, this is assuming that you only work 10 hours a day but what about those of you that work 12-hour days 6 days a week. Well if you still take that same two weeks off that's going to mean that you're going to work 3600 hours a year which changes our 3 business owner’s hourly wage.
The person making $35,000 now earns 9.72 vs 11.67 and the person making $50,000 an hour earns 13.88 vs 16.67 this and the person making $75,000 earns $20.83 vs $25. Sounds crazy, but you can see, those extra 2 hours a day drops their hourly wage dramatically!
Time is money, so It makes sense that you want to maximize your hourly rate.
Yes, this is a new way for you to look at your income and the profits you are taking home. But, think about it, if you focused on what your time is worth,
HOURLY WAGE ISN’T WHAT YOU CHARGE AN HOUR
Earlier, I mentioned that your hourly wage wasn’t the same as what you charge an hour. For example, if you charge $40 an hour for labor that is not what you are EARNING an hour. We are talking ALL of your hours worked and let’s face it, some of those hours you are working really hard on a project or maybe social media or customer generation.
So one of your first goals is to learn how to maximize the business generation hours you work. While no money is coming in at the moment during these tasks, these hours need to be spent on driving sales & profits, improving your processes or creating better teams. Hmm, the same core areas I’m always talking about. Can you see the connection and why I feel these four areas are so critical?
When you look at the hours you work, you need to realize that not all tasks are created equal. The time that you spend on emails, for example, does not match the time that you spend on the actual doing of the job. That doesn't make one more important than the other. While getting lost in email is a bad thing, responding to customers questions and dealing with their problems, is huge.
Focus your time on what will give you the biggest bang for your buck which is usually anything that is either creating sales or creating profit. This is why your processes and your people are so critical because both of them impact your sales and your profit.
THE MAGIC HAPPENS WHEN YOU WORK ON YOUR BUSINESS
Here's the thing, in order to increase your average wage, it all begins with you working on your business. Here is where the big money is made without increasing the number of hours you work.
Successful business owners are ones that have figured out that working on your business is just as critical as the time that you spend on the doing. Here is where the magic happens.
WHAT IS COMING IN THE SERIES
In the next four parts of the series, we will discuss the actions you need to be taking to increase your average hourly wage which in turn, will get you to that $100,000 in take-home we have as a goal
Now to help you do this, we will look at each area: sales, profits, processes and people and how you can use each area to earn more per hour. And since we know that all four of these areas are very critical to you getting to your goals you will want to put in the work and dive into each of them to really figure out how you're going to take your business to the next level.
Here is where I want to really help get you focused on the game plan that you should be working on for the new year that is about to start. However, this also works at any point during the year. So depending upon when you're reading this or listening to the podcast, this is a great best practice for you to do at any given time if you want to know exactly where you are earning currently and what you need to work on.
WHAT ARE YOUR GOALS TO EARN AN HOUR?
Before you begin, you must know what you currently make, so hopefully, you have already figured that out. The next step is to identify what you want to make annually and what you need to earn an hour.
For example, let's just say that you want to earn $100,000 but you only want to work 10 hours a day 5 days a week. You want to take your two weeks of vacation each year as well. This means you want to work 2500 hours a year and with a $100,000 annual income, you will need to earn $40 an hour.
If you are currently at 35,000 a year, your goal might be to double your take home to $70,000 and work these same 50 hours a week. Doing the same calculations, you will need to earn $28 an hour.
So, your two missions before we dive into the next part of the series is to figure out where you currently are at today using your actual numbers and then figure out where it is that you want to be in your ideal world for the next 12 months.
Once you have those two numbers we will dive in and figure out the game plan on how you're going to get there.
Here are the links to the next four parts of the series. You don't have to do them in a specific order, but I do highly recommend that you do all four.
By the way, even if you do not have employees if you have anyone that works for you or helps you out then I would definitely take a look at the people one as well.
So, if you're ready let’s figure out your hourly income goals and dive in!
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Two Great Books to Help You With Your Small Business:
Highly Recommend all Local Small Business Owners Read the eMyth by Micheal Gerber. You will learn some critical things about running your business.
The second book is one I wrote based off a popular example I always use when folks are trying to understand their role as a leader with their people. Check it out.
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