Recognising a false economy and what to do about it
It’s a familiar refrain: tradesman client meets me for one of our regular reviews and his biggest complaint is that he doesn’t have enough time to do what he needs to for his business or in his personal life.
Of course, he doesn’t – typically working a 70-hour week. Every week. That’s never going to leave time for anything. Even if he found some spare time, he’d probably be too tired to want to do anything other than flop in front of the telly.
Together we conducted a review of every task requiring his attention in any working week, itemising all of those he disliked doing and calculating how much time was spent on each of those. Turned out to be a significant chunk – around 30% – of his average 70-hour week.
When I suggested employing an assistant to handle all tasks not specifically requiring his tradesman’s expertise, the first words he uttered were “what will it cost me?”. The way he said this was more amusing than the fact he said it – it’s often the first thing someone in his position thinks. That’s when I offer the flipside – what will it save you?
Paint a picture of how saving 20 hours per week delegating tasks he dislikes, actually releases 20 hours per week for more appropriate and more lucrative tasks requiring his skillset – it’s hard to argue with. In simple terms, he could earn $115ph for every hour working on something other than the disliked tasks, and the business cost would be $25ph to employ someone to handle these tasks. A net gain of $80ph – why wouldn’t you?
Alternatively, he might choose to use the time saved on an improved work/life balance; spending more time with his children, getting back to his old hobby of racing cars, or simply relaxing and refreshing himself ready for the next working week.
Initially resistant to the idea, but eventually convinced by the economics, he agreed to employ someone to take over these tasks. Soon afterwards, as the benefits became clear, the part-time, 3-days per week role, became a full-time 5-days per week position. In the short time since hiring someone, not only have business earnings increased, but the owner now works far less hours every week. His work/life balance is greatly improved and the old, familiar smile has returned to his face. That has to be a win.
Do you or someone you know need help with cash flow, time management or recognising where the false economies lurk in your business? Make a start by emailing me – Mark Calleja – at email@example.com or call me on 02 9923 2959 and see the true value of an accountant.