A founder recently told me that she’d won an opportunity to fly over to Europe and attend a startup event there, and asked if I’d think it’d be a good use of her time. Quick answer: I told her “no” because there was simply no good reason for her or her company to attend that event: the fit was very weak, she didn’t have any plan for European markets and most certainly she won’t raise her seed from the European investors. In fact, I think she also knew that it wouldn’t be a good use of her time because otherwise, knowing how she is committed to her startup and driven for success, I know she wouldn’t have asked in the first place. I think, she just didn’t have a good idea about the value of her time that she could compare the benefit from the opportunity to.
In fact I think most of the founders are just like her. They all know that their time is scarce and valuable but they just don’t know exactly how valuable their time really is. Not knowing the real value of their time, sometimes they end up misusing, over and under-using, and even not-using the ultimately scarce and valuable resource.
Then wouldn’t it be helpful for founders to determine what the best uses of their time are if they knew how much their time is worth? If so, how could they determine how much their time is really worth?
If you’re curious to figure out how valuable your time really is, I’d like you to think about this simple framework below:
[$1HrValueofYourTime] = [$HowMuchYouWantToMake@Exit] / [#HoursYouNeedToPutIn]
This framework simplifies the fact that to a founder the real value will come from monetizing their ownership in their startup at exit and for that they’ll have put in so many hours for a long period of time.
So let’s say your aspiration for your startup is to build a $5bn company. And when your startup goes public at that valuation, let’s assume your ownership is now diluted down to 15% after a serious of financing rounds. If this is the case, the expected value of your ownership in your startup is [$5,000,000,000 x 15%] = $750,000,000 (congratulations!).
Now, to reach that value, how many hours would you have to put in your company? There could be multiple ways in approaching this but I think the base model could be something like [(#years)*(#days/year)*(#hours/day)], and I’d like to suggest [(4years) * (365days) * (20hours)] = 29,200 hours to get that $750mn value out of your hard work at your startup (Yeah, that’s right – 20 hours a day and 365 days a year! So if you’d tell me some bullshxt like “my weekend is sacred,” you really have to think again!).
* In case you’re curious why 4 years, that’s the vesting period. It’s absolutely possible that you’ll stay longer as a founding CEO but my observation and experience from the past ~15 years is that taking a company from $0 to $10mn in revenues and $10mn to $100mn require different skillsets. Therefore for the majority of the cases I think it works much better to bring in someone who has the appropriate skillset to take the company to the next stage and free up the founders to go back and do what they do best – which is to found a great company.
The numbers may vary per your own calculation, but if you’ve followed this model and framework, you’ll get the worth of ~$25,684 per one hour of your time for the next four years. That’s right! Twenty five thousand six hundred and eighty four dollars for one hour of your time!
You may think this whole thing is just a fun and wishful calculation, but that’s not the spirit of this framework (even though this is in fact pretty fun). The spirit of this framework is to give you an idea of how you have to view the value of your time – a founder’s time, because there are just so many distractions that would derail you from staying fully focused if you’re not super cautious about how you spend your time.
You’re absolutely free to come up with your own framework to view the value of your time, but whatever framework you come up with and whatever number you get for the value of your time, I’d bet you’ll realize your time is indeed so much more valuable than you thought. And once you realize this, it is my hope that you’ll also realize that you’re obliged to live an each hour of your time up to that value – each and every second of it, because that’s the very bottomline for every successful entrepreneur.