Updated: Nov 17, 2020
There’s nothing wrong with wanting to save money. Being frugal, to a point, is one of the keys to building up savings and investing in your business. However, entrepreneurs often believe they are being frugal when they are actually wasting money. This is what I refer to as “false savings.” When you engage in behaviors that lead to false savings, you’re doing much more harm than good to your business and it can lead to a situation where your business runs you instead of the other way around. If you want to squeeze more profits out of your business, you have to be aware of the trap of false savings and take measures to avoid it.
What are False Savings?
The best way to describe false savings is to give you an example. Two of my buddies loved a Thai food restaurant that was about ten miles away from the office. Every Wednesday, the two of them would leave work, make the twenty to thirty-minute drive to the restaurant in rush hour traffic, eat for forty-five minutes, then drive back. All in all, they lost almost two hours of productivity. When I suggested they just get food from that restaurant delivered via Grubhub or Uber Eats, they said they didn’t want to pay the delivery fee. The delivery fee was around $8 total and each of these guys were losing about $100-$150 in lost working time by driving to the restaurant. This is false savings.
In the world of entrepreneurs, false savings is usually synonymous with failure to delegate. Doing jobs yourself instead of delegating to others so you’re free to focus on high-level tasks that build your business is a clear path to burnout and delayed growth.
How Much is Your Time Worth?
As we all struggle to create our “new normal”, many of us have to reacquaint ourselves with the value of our time. If you’ve not put a dollar amount to your time, you may not realize exactly how much you’re worth. If you bill by the hour, this is a pretty easy number to come up with. If you don’t, you can look at your salary (or desired salary) and figure out what that translates to if you were getting paid by the hour. For most entrepreneurs, this number will work out to anywhere from $50-$150 per hour. Once you know this number, you can use it to make valuable decisions about delegation.
The Value of Delegation
When you’re trying to get on track with your finances, it can seem counterintuitive to spend extra money on delegation. It’s easy to take on the “I can do it myself” mentality as an entrepreneur. After all, it can be painful to pay someone else part of your hard-earned profits, especially when those profits are pretty hard to come by. However, once you realize how much your time is worth, you’ll realize you’re actually saving money when you pay someone $15 or $20 an hour to file paperwork, or run errands, or, as in the above example, $8 to deliver your food.
So how do you decide what to delegate and what to keep on your plate? Part of the trick is knowing your own strengths and being aware of what you can do that no one else on your team can. Some entrepreneurs resist delegating because they don’t want to give up control and have an “if it’s going to get done right, I have to do it myself” attitude. This is a dangerous way to think as you simply can’t do everything yourself. Will others always do it your way? No, but they can at least get the job done. In the end, only one person can go out there and build the business and that’s you. When you stay focused on this simple fact and realize how much your time is worth, delegation becomes easier and the illusion of false savings evaporates.
Want to learn more about growing your business and making good financial decisions? Take our True Money Mastery course to step up your game.