James Schramko here. Today, I want to talk about a subtle distinction when it comes to using effective hourly rate as a way for finding out how productive you are.
You may have heard me talk about effective hourly rate. That is the amount of income you’re generating less the costs divided by the number of hours that were worked to get it. That is your effective hourly rate. It’s a great tool to know what things you should be working on.
A very important aspect to this and I just want to reinforce this today, is it’s worth doing your effective hourly rate per product. And it’s also worth doing it within your organization so per team member so you have each team member work on their effective hourly rate per product line.
And when you do this you realize that the averages can be misleading. I mean, certainly, you can take a whole month’s income subtract the costs and put your hours. That is your net effective hourly rate but there will be pockets of very high effective hourly rate within your product lines if you have more than one or two services.
In my case, I had an SEO business, a website development business, a coaching business, an affiliate income. And some of the effective hourly rates for the divisions were stratospherically different. So they all average out but if you can eliminate some of the low effective hourly rates and replace them with higher effective hourly rate activities, your entire profit will actually go up.
And you will make more and work less, which is the name of my book available on Amazon and Audible. Hope you can grab a copy and I look forward to getting your feedback about this.
So remember, when it comes to effective hourly rate, use it per product line and you’ll see that’s a great way to improve your business.