Value Your Time - and Judgement!

The primary cost in a bootstrapped technology startup is the labor of the founders. I define labor as the focused time applied to the business. Accounting for labor is ill-understood by most founders. If one treats time as cheap, the focus is on “going to the wall” for one’s business, which leads to lots of activity. 

The typical mindset is that nights and weekends are extra: one can invade them without cost. I have also seen “creating” time from sleeping less. More upsetting to me personally is the decision to sacrifice time with one’s loved ones. And perhaps co-related with the above, I often see people abandoning the activities that support mental health. 

We all do this a little on the margin, so forgive yourself when you see yourself on that list. But this time is far from “created” - it’s spending life experience or health. And we should account for that.

How expensive is this time? There are three schools of thought. 

The school of thought I see most often is, how much do you need for your lifestyle? When I ask, “what’s your nut,” I hear numbers between $40k and $80k. After just a bit of probing, I find that this answer is the sum of housing and food costs. Usually, it under-counts those expenses. For many, this is the intended meaning behind “getting to ramen.” 

Often I hear them say “zero.” Sometimes this is because they are relying on a non-labor source of capital for income. These can include spouse’s income, savings, or taking on debt. One should account for these funding sources. Otherwise, one cannot make good decisions about allocating resources in the future.

Second, and a path I encourage for “do you want to do this,” one evaluate one’s market value. If you should be a founder, you can command over $200k in salary in the open market. Many founders are closer to a million than this number. 

Here is my formula for this opportunity cost. Divide your market salary (that of your day job or most recent employment) by 1,000. (This comes from ~2,000 working hours/year + 100% overhead tax.) for a reasonable hourly rate. So if you are a $250,000/year person, your direct cost of time is $250/hour. 

A third school comes from Slicing Pie - what would a startup pay its founder in cash if it had a board with outside equity investors? The answer has a surprisingly narrow band - between $100k and $150k. Since most founders can demand more than that on the open market, most are at the high end of this range. The proper basis of placement is the market value formula above. If your market value is over $150k, it stands to reason your Slicing Pie value is at the ceiling. 

Slicing Pie also encourages booking your time at 2x the market value of your salary for decision-making. If this is a 10-hour project, it should be worth $1,500 (150000/1000 x 10) in equity value for the company. If it is not creating that value, it’s not economically viable. 

In my many conversations, I advocate for Slicing Pie as a pre-seed accounting tool. This labor accounting is helpful to understand where one should focus time, money, and resources. The overall framework is excellent for looking at the contribution of marginal efforts to creating equity value. If the returns are not high enough, one should not do it. 

“Grit” is sometimes defined as stick-to-it-iveness. Grit justifies doing everything for the business. “Let’s goooooo!” But like all blunt instruments, grit stops thoughtful decision-making. One needs to account and figure out what is worth doing based on the costs. Can one drive out costs? Is there an 80/20 to the efforts on the business? We should seek a decision crucible that brings the best decisions out.

And finally, it helps identify the best way to fund one’s business: make more money. One builds runway and improves survival odds earning income. Acquiring consulting and keeping day job work just a little longer drives toward “default alive.” 

Your time is an important asset - but not the key one. Your judgment on how to allocate your time is the fulcrum for all leverage in the business. Hopefully, these tools help you put that judgment to work. Persevere not through stubbornness but with wisdom and self-knowledge. 

Photo by Aron Visuals on Unsplash