As part of my series on simple business metrics, here is an elaboration on metric #5 – Overall Hourly Rate Over Time., to wit, are you more productive per hour than you were in the past? You won’t know this if you don’t track your hourly rate over time. It sounds simple, and it mostly it is. I’ve found that tracking your hourly rate over time makes many decisions easier. Here is a partial list of the insights:
Insights from a Rising Hourly Rate
- In general you are on the right track
- You are doing more or less the right mix of tasks
- Your capital investments (computer hardware, software and training) were a good idea
- Now is a good time to bring on new people, especially people with similar skillsets to you
- Your clients are solid – and you need to find more just like them
Insights from a Falling Hourly Rate
- It might be a good time to invest in new software or hardware
- The market might have shifted away from your bundle of offerings, there might be new things to learn and offer your customers
- Your might want to find new clients, and new types of clients. Some clients will run you ragged if you let them, and it looks like your current clients are doing just that.
- You might want to reduce your outsourcing, or at least modify it – outsourcing should raise your rate (by allowing you to do higher dollar things)
Why you need to use tools to track your time
I have found that my internal estimates of how much time projects (and clients) is distorted by personal enjoyment of the clients company (or lack thereof) and how much fun the project might be. For example, a client that was a joy to work with who had an informative project might generate an off the top of my head estimate of 60 hours, when in fact it took 90 hours. Similarly, a client that was torture to work with a project of pure drudgery has generated an off the top of my head estimate of 110 hours, when it took only 60. Use an online time tracking service to record the actual data.
This blog post originally appeared on the Profit Awareness Blog – as that app is up for sale, it has been consolidated into the main Digital Tool Factory blog.
||Written By Steve French|