Whats Your Hourly Rate? Heres How To Increase It
Many Million Dollar Round Table members would estimate their hourly rate to be anywhere from $100 to $200 per hour, some even higher.
Take a few moments and try to calculate your hourly rate. Simply use your annual production, either historical (last year) or this years target. For example, lets use an annual production of $80,000–comfortably qualifying for MDRT.
Next, think about the hours per day you work. For our example well use 8 hours, although MDRT records show many advisors work much longer days.
Finally, think about the number of days per year you work. For our example, well use 200, or putting it another way, about 40 weeks. That is probably about right for someone who never works weekends, never works on public holidays, attends MDRT and one other convention, takes seven weeks holidays and is never ill.
Now multiply your hours per day by your number of days worked to determine the total number of hours you will work in a year. Now, divide the annual production by the number of hours–that is your hourly chargeable rate.
In the example that is $50 per hour–quite a bit lower than the estimated $100-$200 per hour.
And you can see that the example was pretty generous. Anyone doing production of $80,000 a year but working longer hours, or taking less vacation, or being ill once in a while, or working the odd weekend would have a lower figure than $50 per hour.
For many advisors, doing this exercise is very scary. I am sure there are a few people who dont even know how many days they work each year. And there may even be a few who struggle to remember the last time they worked an 8-hour day, or had more than one week off.
And this was a pretty generous example, lets consider something a little more realistic: someone who works a 14 hour day, one day every other weekend, works on a few public holidays and takes just 2 weeks holiday per year. Or in other words 275 days or 3850 hours per year.
If we relate these hours back to our example of $80,000 per year we can see the hourly rate has been reduced from $50 per hour to just over $20 per hour.
If you are working that hard and considering your worth is $100 per hour you should be Top of the Table. But instead, you see that you have been working as a financial services professional yet earning the hourly rate of an administrative clerk.
If you have this problem, and you want to increase your hourly rate, you need to analyze exactly what you are doing every single day. The key to success is having daily goals and targets and meeting them. Break down your goals and targets into small pieces.
Lets work on a figure of $100,000. With $100,000 as an annual target and working 48 weeks per year, this leaves a weekly target of $2,083. If we have an average case size of $500, this means 4 sales. Assume we have 8 client meetings to close the 4 required cases at 1 hour per meeting. This equals just 8 hours from the 40 available in the week in front of clients.
When face-to-face with clients we are worth $260 per hour–that is $2,083 weekly production divided by 8 hours with clients.
The rest of the time we are doing $26, $16 or even $6 per hour work. Someone else could do this work for a lot less than we charge. Stop doing these types of tasks–delegate them to an assistant. If you dont have one, you need to get one.
To determine when we are doing $260 per hour tasks and when we are doing $26 per hour tasks we must track our time carefully.
First, split your diary into months, then weeks, then days, then hours, then 15 minute segments. Break every hour into 15-minute segments, from 8:00 a.m. to 6:00 p.m. This is crucial to your success. Go out and buy 5 new pens: one red, one blue, one green, one yellow, and one black.
As each 15-minute segment of the day passes, color in a segment on your daily planner:
- Red–if you were face to face with clients;
- Blue–if you were prospecting;
- Green–if it was personal or family time;
- Yellow–if you were travelling; and,
- Black–if you were involved in administrative tasks.
At the end of each day, spend 5 minutes calculating the percentage of time you spent in each color.
Most producers, having completed the planner for at least 4 weeks will find more than 50% of their diary is colored black, no more than 20% is red and that there is little green and too much yellow.
How do we increase the red ($260/hour) and the green (personal time) and decrease the blue, yellow and, most importantly, black?
First and most important is how to increase the red time. To increase the amount of time you spend with clients you need to highlight the times when you will be meeting with clients, those should be 11 a.m. and 1 p.m.
What this does for you is goal-set your diary. This means a few things happen.
First we trigger the goal-setting mechanism in our heads to start filling the gaps. All of a sudden you will find the capacity for an extraordinary amount of meetings.