Monday, December 16, 2013

What is your value? It's probably not what you think!

How much are you worth?  Do you know how to determine YOUR value?

One of the biggest challenges I've had since trying to be a business owner is trying to determine how much I really am worth.

I take a look at many other business owners.  Truthfully, one reason is that I am nosy, but the biggest reason is I try to see if I can find a method THEY are using that I can apply to myself.

Most of us do not know our own value.

Truthfully, I am not sure that many of us really use a lot of science on determining our value.

I've seen people shoot for the moon...and occasionally getting what they seek.  Most of the time, these people have high rates but few job prospects.

I've seen people UNDERSELL themselves...and they seem either (a) to have a lot of work and not be happy or strangely (b) not have very much work.

Of the people and companies that ask for a lot and successfully obtain clients to pay that much, I notice that they already were surrounded by friends who have a lot of money or previous contacts who are part of businesses that are accustomed to paying higher rates.  Actually, this is a good plan IF you are a part of one of these groups, but obviously not everyone is.

How can you determine your value?

Honestly, I see three (3) ways to determine your value:
1. Labor Market Salary Survey Reports
2. Amount of Money Generated by You
3. Amount of Money Someone Else Makes from Free Time Generated by You

There might be others, but as I blend a combination of my observations and my own independent thoughts, these are the three legitimate ways I see to determine value.

1. Labor Market Salary Survey Reports

This is--by far--my least favorite method to determine value of the three.

However, at the very least, if there is demand for you or what you offer, you are silly if you do not take what the market offers you.

I have a few problems with using Labor Market Salary Survey reports to determine your value.  First, many people lie on those surveys.  Even when nobody is looking, many people still have a need to look good to a stranger, even one they will never see, much less meet.  My second issue with these surveys is that Person A can have the same Job Title and Person B, but each person's job is entirely different.  The comparison is not apples-to-apples.

My biggest problem with using salary surveys to determine your value is that most people do not know their own value, and they definitely do not have any idea how much genuine value you provide for the company.  Most employees and bosses of companies are too far from the books to gain a true understanding of their value.  The determined values are almost (if not entirely) arbitrary.

Even if YOU know your value, far too many people responding to the salary survey do NOT know their value.  Therefore, the figures are skewed.

2. Amount of Money Generated by You

Identifying the amount of money you generate is the most obvious way to determine your value--conceptually.

If this figure is accessible, this requires no further explanation.

The problem--for most of us--is that we are not exactly sure how much money we generate.  (See explanation within #1 Labor Market Salary Survey Reports)

For this method to determine our true value to be effective (and real), we need to know three (3) things:
A. Amount of Sales We Generate
B. Amount of Cost (or Returns) We Save
C. Amount of Profit (after the paying for the overhead to get or save that money)

Not everyone has a true view of these things, either within their own company or their client companies they are serving.

The biggest problem, though, is that most of us provide value INDIRECTLY--not directly.

So how else might we provide value?

3. Amount of Money Someone Else Makes from Free Time Generated by You

This valuation method is used least often but probably applies to the most people.

What do I mean by this?

I will use an example to explain this.

If you are a sales person, and you're really good at selling, then how do you make your money?  You make it by spending time doing SELLING ACTIVITIES.

The problem is that most sales work involves paperwork and other essential but distracting duties.

For this example, let's assume the salesperson generates around $200/appointment when he is in the field.

Therefore, an 8-hour day should produce, at least, $1,600; however, it does not.  Why not?

Here is the typical day for THIS salesman:

8:00 AM - Make Cold Calls - Try to Get Appointments
9:00 AM - Travel to 1st Appointment
9:30 AM - Arrive at First Sales Appointment
10:00 AM - Leave 1st Appointment - Travel to 2nd Appointment
11:00 AM - Arrive 2nd Appointment
11:30 AM - Leave 2nd Appointment - Return Calls
12:30 PM - Travel to 3rd Appointment
2:00 PM - Arrive 3rd Appointment
2:30 PM -  Leave 3rd Appointment - Return Calls
3:30 PM - Return to Office and Process Orders
7:30 PM - Leave Office

This salesman spent almost 12 hours working but only generated $600--from three (3) sales--which is not a bad day, but he is leaving money on the table.


Only PART of his day is spent selling.  It looks like he got distracted with...
a. time spent setting appointments
b. time for traveling (most efficient route?)
c. time returning calls

Since the salesperson in this example has a potential of generating $1,600 from 8 sales/day--within 8 hours no less instead of nearly 12 hours, we can see that he will be more efficient if he pays someone  to
a. Appointment Setter - Call to make appointments
b. Route Maker - Someone to chart the most efficient routes
c. Receptionist/Administrative Assistant - Someone to handle "easier" calls
d. Driver - allowing him to return calls while traveling to the next appointment

I see two jobs: Administrative Assistant who also sets appointments and a Driver.

Collectively, their value to this salesperson is $1,000/day.  Of course, the salesperson will not pay out that entire amount (nor should he), but it helps to understand the value you are HELPING to create, even if you only indirectly create that value.

How do these people create value?  They free up time for this salesperson to do what generates money, which in this case is selling.

He could pay each person $200/day (around $52,000/year), which in most parts of the US, this is really good pay for these positions, and our salesperson nets $1,200/day in 8 hours instead of $600/day in 12 hours.  They DOUBLED his value, even AFTER paying them!

Most people forget to try identifying their value this way, but it really is a great way to determine how much we are worth.

Do you have any other ideas or notice anything I missed?  How do YOU determine your value (or the value someone else provides)?

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