This weeks newsletter gets into how we value our time and money.
Hour Wise. Day Foolish.
In 2017, one of my clients was being sued.
My client’s contract with her customer was pretty explicit around refunds, but her customer sued her anyway.
My advice to my client was that she should pay back the $8,600 and move on. She was a solo operator of a growing business and quite busy.
She would take a hit on her cash flow, but even if she counter-sued and won, lawyer fees and time lost would easily outweigh any positive verdict.
For my client, it became a matter of principle. The project was over 50% complete, and she wouldn’t back down.
After 50 + hours of effort and $5,000 in legal fees, she settled and paid back 50% of the initial fee.
This may be an extreme example and, in retrospect, what she should have done is quite clear.
However, when I think about how I managed my firm, I see similarities. When I was in the moment, decisions were not so clear.
In my firm, I was assertive, almost aggressive, with outstanding receivables. In one case, I was not going to let a $800 invoice go unpaid. I was determined to get the money at the cost of my time.
When I sold my firm, the $800 was still unpaid. If the bad debt I recorded for that invoice included all the time I poured into thinking about and chasing that invoice, it would’ve been over $5,000.
At times, I was vigilant about how I spent my billable hours, but lost sight of the end goal and would waste days of time.
During university, I was very intentional about taking business people to lunch.
I would ask for advice about business and my career.
One of the lunches I remember best was with a man named Tony. He was easily worth $10M at the time, and he entertained my and my friend’s request for lunch.
During the lunch, one thing stood out:
He took action immediately in our conversation.
During our conversation, we asked about buying real estate. Tony mentioned he knew the owner of a house for sale near the university, which would be a good fit for what we were describing.
Mid-sentence, he grabbed his phone and called the house owner. The owner picked up, and after a quick exchange, we found out the sale price, and he was willing to talk to us.
When we asked about business, he emailed his assistant while at the table to send us some information about a business broker he used.
Tony maximized the time we had with him. He didn’t put anything on a to-do list to finish later that he could finish in the moment.
I could see he valued action above everything.
When lunch was over, he returned to his day without having to follow up with us. Everything that could be done was finalized in the moment.
I don’t remember much about the conversation, but those things have stuck with me for 15 years.
How Tony managed and viewed his time during our lunch was worth more than any advice he could have given.
Time Is Money
While working as a pipeline layer one summer, I had a foreman who yelled a lot.
He would shout, ‘Time is Money’. This was his whip to make us work faster.
As an employee, I used to think ‘Time is Money’ meant that we needed to do things quickly and move on to the next thing.
Unfortunately, I carried that definition into launching my firm.
After struggling a bit, I realized that it didn’t mean working faster, but that money and time were the same when trying to complete something.
They’re interchangeable. Both are used to get something done.
However, we typically hold money as our most important resource, so we spend our time first.
I can honestly say that my firm struggled more when I held the view that money was more important than my time.
If you don’t remember anything else from this week’s newsletter, remember this:
As a small firm owner, your firm directly reflects how we operate personally. We can’t master our firm until we master our time.
It’s no secret I feel that hourly billing is an ineffective way to communicate and charge value.
I also think that firms that charge hourly undervalue their time. They assign a fixed value to time and negate the exponential value from invested time.
You can tell a lot about a firm’s trajectory by how the the owner talks about their time and focus.
When someone asks what my hourly rate is now, I usually hesitate and say I don’t really have an hourly rate. I try to maintain my rate at least $1,500 by doing high-value, high-leverage tasks that compound my time investment.
Where To Save Time
I found that I wasted more time in a few spots in my firm.
When it comes to making a decision, we tend to waste time. And the higher the dollar value of the decision, the more time we waste.
I am not suggesting that we drop the diligence when making decisions, but that we don’t think that more time deciding will lead to better decisions.
When we know we have a decision coming up, identify the following:
- The absolute deal-breaking variables
- The need to have variables
- The nice to have variables
- The indifferent variables
Spending time upfront saves 5X on the back end of the decision process.
Most of the time, when we’re stuck on a decision, we don’t need more time; we need more information.
When we extend the time in making decisions, we slow down the forward growth of the whole firm. No other impactful decisions get made because we are concentrating on that one decision.
Invoicing + Billing
This is one of the biggest time-wasting tasks in any firm. Hands down. Even if you have an admin that does the billing, it can suck massive amounts of time from your collective team.
Don’t be shy about communicating fees and billing arrangements for your clients.
Extending payment terms turns you into a bank. If the client is not prepared to pay the current interest rate, then they need to pay upfront or at least give you the means to take payment from them.
Get comfortable sending receipts instead of invoices at the end of engagements.
Dropping time sheets
Just like hourly billing, timesheets put the ‘time worked’ as the value metric.
Teams get caught ensuring their timesheet won’t raise questions instead of meeting the deadlines of the tasks and engagements.
We reinforce the wrong behavior with timesheets.
The time and effort to complete, review, tabulate and follow up on timesheets is incredible.
When we want team members to improve with their timesheets, we focus on speed – doing things faster.
When we want team members to improve with workload and meeting deadlines, we focus on approach – doing things differently.
I hope this week helped you examine how we use time when working on our firms.
Build The Firm You Want.