Learn Your Net Profit Per Hour, or You Make Less Than You Think You Do

If you_re like us and really only make $10_hour sometimes, that iPhone costs you 100 hours, or two-and-a-half weeks in the office.-2

I’m very fortunate to have built an unconventional wedding photography business. I also work a day job at a liquor store. Having run my own business for 11 years though, I’ve learned to see my regular work life as a business too. In both, there were tons of expenses that chipped away at my bottom line. The same is true for where and how you work, regardless of what job you have. Think you make your hourly wage per hour, and that’s all there is? Think again. Here’s why you make less than you think you do.

Through mostly luck, my wedding photography is a dream job. I now charge $2,995 for a typical 8-hour wedding. When I add on the extra time I put in for prep, delivery, client meetings, driving time, accounting and so on, I’m looking at about a 20-hour investment per client. I have a great second shooter, and I pay a very efficient editor to handle 90% of the post-production. Typically, the editor takes $400, my second shooter takes $400, and there’s $200 or so that goes into other expenses, like batteries, gas, or buying drinks for clients. I walk away from each wedding with about $2,000. I’ve been operating this way for years. It took a $15,000 photography diploma and $30,000 in gear to get to this point, but that’s another story. Right now, my photography business is – in my mind – very effective at turning time into cash. My net profit per hour is $100 on the books, and a little less after accounting for taxes. Read this: “Many times it’s a ‘slap in the face’ when you calculate this number for the first time. We calculated it in a Courage to be Profitable class last week, and the highest net profit per hour was $3.60. The lowest was less than $1.” What gives?

Well, those were conventional businesses with considerable overhead, taking up space 24 hours a day. I have none of that. Those business students figured out their businesses’ profitability for the first time. You should figure out your profitability too. Here are some numbers from my day job, for easy comparison. In theory, I make $14/hour at the liquor store. In reality, I don’t.

Taxes are obvious, so let’s factor that in. Every day I go to work, I burn gas. Plugging some numbers into this gas calculator meant every day I go to work and back, I lose $2. Okay, not a big deal. What about car maintenance? What about making sure I had the right clothes and shoes for work? I spent $55 on work-appropriate shoes earlier this month. What about all the times I eat out because of work? I get $8 dinners instead of frugally eating in twice a week. Getting even crazier, what about my unbilled hours? Let’s add my commuting time too. Suddenly, my true net profit per hour was closer to $10/hour, and I’m probably forgetting something. This guy ran his numbers from his “$20 an hour” job too, and found it was now “less than $10 an hour”. Read his story.

People sometimes calculate purchases by comparing it directly with their hourly wage. “Oh, I make $20/hour, so this $1,000 iPhone is worth 50 hours of my time.” Nope! If you’re like us and really only make $10/hour sometimes, that new iPhone costs you 100 hours, or two-and-a-half weeks in the office. That $9.26 beer you just bought? Yeah, that’s about an hour. Couldn’t resist seeing “Venom” in theatres with your date and springing for popcorn too? That’s three hours. A new, low-end 4K TV? That’s a 40-hour workweek. After figuring out your net profit per hour, being frugal is the only course of action that makes sense.

Never forget to include the cost of doing business.

A final note: I have $21,000 buzzing away in investments right now with a rough return of 7%, or $1,470/year. Isn’t that kinda like adding 147 hours of day job work to my bottom line? People work, what, 2,000 hours a year? Hunh.

Will you work harder, or let your money work for you?

*****

For an extreme sport, you could copy those business students and calculate your net profit per hour based on 24 hours instead of just when you work. If you do this, please share. We’re very curious.

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