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  August 27, 2010
How Much is Your Time Worth?

 
Last week I was sitting at my desk when the phone rang.  It was an old college friend of mine who I hadn’t spoken to in some time.  After some idle chit-chat, he asked me politely if his college son could call me to set an appointment in order to come and meet with me.
 
I told my friend to have his son give me a call so we can compare calendars and set a time that would be convenient for the both of us. 
 
After hanging up the phone, I wondered why my friend’s son would like to meet with me.  Perhaps he was looking for some career counseling or perhaps an internship.
 
A few hours later the young man called me to set up an appointment.  He was very polite and eager to meet.  When I inquired about the nature of his visit, he explained that he had something he was very excited about and would rather present the idea to me in person.  I asked him a few more basic questions about the general agenda of the meeting but his answers were elusive. 
 
We set up a time to meet the following week.
 
I hung up the phone and in doing so, one clear thought came into my head...multi-level marketing.
 
Sure enough, when the young man came to my office, my suspicions were confirmed.  He was very enthusiastic about the company he represented and the opportunities that lay ahead for those willing to only work an "extra 10 hours per week".  I explained to him that I already had a vehicle to seek my fortunes (OptiFuse) so I wasn’t the least bit interested in the "opportunity" that he presented.
 
He was undaunted with my rejections but finally accepted the fact that he was drilling a dry hole trying to enlist me into his selling pyramid.  Finally I said to him, "look...I am a giant proponent of the entrepreneurial spirit...I’d be happy to be one of your retail customers...but I’m not the least bit interested in becoming a distributor...even if it means I can buy the products at "wholesale" instead of retail".
 
He finally got the message and presented his catalog of products with me so he can make a sale.
 
The above story isn’t meant to disrespect MLM companies.  There are a select few MLM companies that are reputable and maintain good quality products.  In fact, when I was about the same age as the young man who came to see me, I was trying my hand at selling Amway as a MLM opportunity (only I didn’t have my father calling his old friends to set up appointments for me).
 
My stint with Amway was my first experience with formalized sales training and my first understanding about the value of entrepreneurship.  I still recall a valuable lesson I learned about earning money.  A lesson I remember vividly and still hold dear to this day.
 
The valuable lesson I learned is this:
 
There are only three ways to earn money...
 
1)     You can sell your time
2)     You can lend / leverage your money
3)     You can leverage your time
 
The operative word here is to "earn" money.  Winning the lottery and/or inheriting money don’t count.
 
Selling your time
 
Everyone who works is selling their time whether it is by the hour, a monthly salary, or commissioned sales.  You don’t need to be employed by someone else to sell you time.  Many sole proprietors and small business owners sell their time.  All professionals, such as doctors, lawyers, engineers, auto mechanics, computer technicians and such are all time-sellers. 
 
The hourly rate is generally dependent upon the scarcity of the knowledge and the willingness of a time-buyer to pay that rate.  Neurosurgeons still get paid by the hour or by the job (albeit generally at a rate many times higher than a typical factory assembler).
 
The more you can do, the greater knowledge you have, the more experiences that you bring, the more skills that you possess...the greater the amount of money you can sell you time for.  Especially if there are only a very few other people who have similar skills (for example...a highly skilled neurosurgeon might command $4,000.00 per hour whereas a typical pediatrician might bill at $200.00 per hour...because the neurosurgeon has extremely specialized skills with few competitors).
 
This idea is the same whether or not you’re performing a service or providing a product.  If you’re the one doing the work...then you’re selling your time.
 
The main idea with time selling is that if you go away...so does you income.
 
There is only 168 hours in each week.  So there are finite limitations in regards to how much time your are able to sell.
 
Lending / leveraging your money
 
If you have money, you can then lend your money to someone who will pay you interest for the use of your money. 
 
The trick here is that you first need money to lend.  If you are a bank, then you can borrow money at a lower rate (from depositors or the Federal Reserve Bank) and then lend it out at a higher rate.  Most people are not banks, however. 
 
There is also risk with lending money.  If you lend money, you may not be paid back and you will lose the money you lent (I have the urge to write something political about banks not having these same risks...but I will resist the temptation).
 
The relative of lending money is leveraging money.  This is where a small percentage of the purchase price of an asset is paid to the seller and if the asset appreciates, then the return on the investment is much greater.
 
For example, if someone purchases a $100,000 condo with only 10% down to the seller ($10,000) and the condo appreciates in value by just 10%, then the return of the investment is a whopping 100% on that $10,000 investment.  A 10% appreciation equals 100% return on investment in this example.
 
As we’ve all learned in the most recent housing bubble burst, leverage can also move in the opposite direction causing the entire $10,000 cash payment to be lost should the market drop by only 10%.
 
Leveraging your time
 
The concept of time leverage is a bit more subtle than money leveraging.  This is the very concept being sold by multi-level marketing companies as a way to create wealth.  
 
The concept is basically selling your time for one price and subcontracting the actual labor to someone else at a lower price.  In doing this, you are no longer selling your time but rather someone else’s time and making a profit on this exchange.  The important distinction between time leverage and selling time is that you’re not doing the actual work...someone else is.  
 
For Example, you can agree to fix someone’s computer problems for $100.00 per hour and then send a technician to do the actual repairs at a cost of $40.00 per hour allowing you to keep the remaining $60.00 per hour.
 
The real leverage comes when you can multiply the amount of people who are doing the actual work.  The 168 hour per week limitation no longer exists as you can continue to hire as many people as you have work for.
 
So many entrepreneurial operations are really just a sole proprietor selling their time to their clients, such as a CPA or IT consultant.  If that person becomes incapacitated in some fashion, then the income to that business and/or person stops.  If the business runs independently from the entrepreneur, then it is a timed-leveraged business and can continue with or without the entrepreneur.

Now, I’m fully aware that these above definitions are painted with a pretty broad stroke as there are many shades of gray and plenty of overlap but in the end, my experience has shown me that these are basically the three true ways of earning money.
 
I don’t look at my history with MLM companies as a waste of my time.  On the contrary, I look back at those experiences as a way to further my education and learn new skills...perhaps just like going to college. Sometimes it doesn’t matter what you put in but rather what you get out that truly important.

Time is your most valuable asset.

Thank you for spending some of your valuable time to join me.  I hope you find my weekly blog entertaining and informational. Life can be a fun ride...I’m glad you’re on the adventure with me...
 
...and thank you so much for supporting OptiFuse where we know your time is important and valuable...



Jim Kalb
President
OptiFuse
jimk@optifuse.com

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