Wednesday, 18 May 2022 | The Latest Buzz for the Appraisal Industry

# Have You Ever Calculated Your Hourly Rate?

One of the most important math calculations in an entrepreneurs toolbox is knowing what the value of an hour is worth. We tend to call this calculation ‘dollars per hour,’ as in, “I just billed out \$200 per hour,” or “I make \$100 per hour.” We hear and see this fairly frequently in forums where appraisers are talking about bidding on work and how much one should aim for when deciding how much to bid on an appraisal order. One of the first thing we start coaching appraisers on when it comes to their financial picture is to know what their ‘dollars per hour’ looks like, realistically.

For example, if you billed out and received \$100,000 in revenue last year, to solve for your dollars per hour you’d need to do 3 more calculations: subtract how much it cost you to deliver that \$100,000, then subtract your tax on the remainder, and finally, divide that number by the total number of hours it took you to produce that \$100,000. So, \$100,000 minus \$15,000 in costs (this is just a hypothetical number, yours might be more or less) leaves you with \$85,000. Then you subtract what you had to pay in taxes on the \$85,000, lets say its 20%. 20% of \$85,000 is another \$17,000. Subtract \$17,000 from \$85,000 and you’re left with \$68,000, which is yours to keep. You billed out and received \$100,000, but really only pocketed \$68,000. Now, we have to figure out what it cost you in terms of your time to truly earn that \$68,000. Most people work an average of 50 hours per week to earn their income. But we know appraisers are far from average! They tend to push the outer limits of hours worked, especially in these extremely fruitful times of being spoiled for choice when it comes to lending and private appraisal work. The average appraiser is working 60-65 hours per week or more. If we multiply 60 hours per week times 50 weeks (because, of course, you’re taking some time off to rest, right?), that equals 3000 hours. Now we get to divide our income of \$68,000 by 3000 hours, which ends up being around \$23 per hour.

Surprised? Most appraisers I speak with and coach think they earn \$50 to \$200 per hour because they use the appraisal fee divided by the hours they worked to complete the appraisal as their basis. They forget about expenses, and they forget about taxes. What they also tend to forget about is all of the hours they spend doing very low value work like driving, errands, staring at the computer screen, taking comp pictures, data entry, time on social media, cleaning the office, and a bunch of other low dollar tasks. Not only do all of those little low value things eat away at your dollar per hour, they keep you from seeing the extremely high dollar opportunities, like your \$1000, \$5000, and \$10,000 hours! That’s right! You may not know it at the moment, but you actually do have brilliant moments where you are in the flow, or doing something super valuable, and you don’t even know it. Most entrepreneurs earning \$100,000 to \$200,000 per year spend the bulk of their time on \$10 and \$20 per hour tasks, some time on \$100 per hour tasks, and, occasionally, on \$1000 and \$5000 per hour tasks, often without knowing it.

So, what makes something a \$1000, \$5000, or \$10,000 hour? That’s exactly what you have to figure out! If you’ve ever met an avid bird watcher, you’ll know that they can spot and identify birds that the average per can’t even see. How? Because they familiarize themselves with the various indigenous bird species, where they live, how they act, what they sound like, and so on. They develop an eye and an ear for each of the different birds in the environment. We have to learn to be avid trackers in our environment. Not necessarily to identify birds in the trees or chipmunk tracks through the tomato garden, but instead to identify the activities that lead to our most valuable efforts and highest value activities, even if those activities only last for 5, 10, or 20 minutes at a time. Without doing this exercise, we tend to miss and blow off lots of the \$5000 per hour activities because they tend to disguise themselves as busy work, or even drudgery! You may not like talking on the phone, but taking a 10 minute call from an angry client that saves \$500 worth of business is a \$3000 hour! \$500 in 10 minutes is 1/6th of an hour. \$500 times six equals \$3000. Although you didn’t earn \$3000 that hour, its only because you didn’t have six \$500 ten-minute calls. However, when you start to recognize how valuable that ten-minute call was in your day, you’ll start to figure out how to turn more ten-minute increments into higher dollar activities.

Learning how to identify your most valuable activities, and then recognize that they can occur in minutes and not necessarily hours, will lead to more \$10,000 per hour activities and more opportunities to offload the low value activities to somebody else.

To listen to a deeper explanation of the \$10,000 hour concept and download a handy worksheet, go to www.realvaluecoach.com/10000-hour/

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#### Responses

1. Blaine, interesting, but most people do not figure their hourly rate that way. Even people who are employees do not consider their salary or hourly rate based on their after tax amount. We all have expenses and we all pay taxes – depending on how one is set up (LLC., S-Corp, etc…) And the expenses and taxes change from year to year. I prefer to factor in my travel and inspection time and determine how many hours I spend on each assignment. That way I can truly see what I am making per hour for my time – prior to expenses and taxes. Interesting take though.

1. Thanks for reading the article Ed! Regardless of whether or not you include your expenses and taxes in your hourly rate or not, the point of the article is to find the tasks and activities within your day that contribute the most to your bottom line, and which activities erode your bottom line.

All the best to you!

2021 promises to be a big year for the appraisal profession. The coronavirus pandemic forced appraisers to quickly adapt, and we had to tackle a