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Why be a Real Estate Consultant?

 

 

"Show Me the Money:
How to Determine What One Hour of Your Professional Time is Worth!"


While we admit that our industry has never been stellar in placing proper “time value” on the personal services we render, here’s the way we typically (albeit erroneously) calculate what we’re worth per hour.  We take the gross amount we make and divide it by the total number of hours we worked during the year---and it turns out to be a negative number!  How can that be?  Simple.  We’re working too many hours doing things that 1) don’t properly compensate us; 2) should be done by someone working at a lower pay scale; and/or that 3) shouldn’t be handled/accomplished by us (or someone else working for us) at all. 

Using a type of zero-based budgeting approach, the following formula is much more likely to help you “get real” about what one hour of your time is worth:

First:  Divide what you want to make by the number of hours in a year that you want to work:  For example, if you want to make $100,000 per year by working no more than forty-hours per week for fifty weeks (2000 hours) that would equal $50 per hour ($100,000 divided by 2000 = $50/hour).  We’ll call this your net hourly professional fee.

Second:  Multiply the net hourly fee by either two or three.  Use “two times” if your expenses were 50% or less of your gross.  Use “three times” the net hourly fee if your expenses exceeded 50% of your gross.  For example, if your expenses were 48%, your gross hourly fee is $150 per hour ($50 x 3 = $150).

But what’s the rationale behind multiplying the net hourly by two or three?  In a nutshell, it’s to compensate for not just your professional fee/talent and profit, but for the cost of doing business (your overhead) plus down-time, vacation time, and miscellaneous situations when you can’t be productive. Much in the same way a wholesale product is marked up two or more times cost to bring profit in a retail arena, your net hourly becomes your gross hourly to cover costs plus profit for your services.   You’re safe using two times your net hourly if your expenses are low; but need to kick it up to three times the net hourly to cover higher expenses.


If you’d like to learn more about profitability and fee-for-services, sign up to take the C-CREC® designation here.


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