Protoscopic

You can\’t know if something’s worth your time if you don\’t know what your time is worth.

The first step in figuring out what business ventures are worth your time is to figure out what your time is worth. Shockingly most people never bother to figure out this question. The closest they come is when they’re considering a new job and they do a very subjective comparison of their current opportunity and the new one.

(NOTE: This is a worthwhile exercise even if you have no entrepreneurial goals. If you are being offered a new job, you need to be able to assess how the two jobs really compare. If a new job pays 10% more but is 50% more work, it may not be the good deal it appears to be on paper. This value will also be pivotal in helping us figure out what ventures may be worth your time.)

The first step in becoming any kind of entrepreneur is to stop thinking linearly about your ‘job’ and start thinking about yourself as “You Inc.” Regardless of whether you work for someone else or work for yourself is really just a question of where you’re budgeting your operating capacity. If you are a salaried employee, then you are basically just committing “You Inc.” to a contract that states you will expend a certain amount of effort in return for certain compensation. The goal is to figure out if we should keep renewing that contract.

You would think that this would be easier for an hourly employee than a salaried employee but the process is roughly the same. We need to figure out how many hours per week we spend doing things other people want us to do. Lets take an average week for an hourly employee:

• 40 Hours of work @ $9 per hour
• 5 Hours of commute (unpaid)

Total: 45 hours for $360 = $8 per hour.

For a salaried employee it’s usually easier to do it yearly, but it’s good to keep in mind how many hours you REALLY work. Many of us work more or less than the 40 hours of work that would be used for this calculation:

• 2150 Hours of work at $48,000 per year.
• 5 Hours of commute per week x 50 weeks a year = 250 hours

Total: 2400 Hours of “work” for $48,000 = $20 per hour.

Be honest with yourself about how many hours you work. If you travel one week out of the month, think about how many hours you really work when traveling. Oftentimes it’s much more than you would work in a week at the office. Also consider weekends worked or if your average day is more than 8 hours per day.

It’s also important in these numbers to take “benefits” into account. However don’t take into account your workplace’s assessment of what the benefits are worth; decide for yourself what they are worth. They may be costing your employer much more than they’re worth to you. For example, if I am a single man with no children, then probably the only ‘benefits’ that are really worth anything to me are the health insurance and 401(k) match. So basically I should add to my salary the maximum match the company will give me and the cost of replacing the health insurance.

Next you need to consider your tax bracket. If the government is taking 40% of everything you make, you need to take that off the top. If I’m making $20 per hour but I pay 35% in taxes, then an hour that I work is yielding about $13 to my bottom line. This is the number we want to work with for comparative purposes.

You can use our Passive Stream Calculator to help you do the math and come up with some basic assumptions.