maxopedia

I'm sitting on the 31st floor of the Citicorp building in Chicago looking out over the Metra train tracks snaking out of Ogilvy station. The Boeing building seems so close I can just reach out and touch it. Unfortunately, I won't be in this c-suite office for long. It's pretty nice even though I share it with two other people.

I'm worried about my future - I don't want to work for anyone else in my entire life ever, unless I'm receiving as much value as I'm giving out. Currently, I don't feel I am in one of those situations.

It's simple math, really. I work as a data warehouse consultant for Hewlett-Packard. Depending on how my company negotiates billable consultant rates, I cost the client company $75-125 per hour. Meeting my billable hours goal consists of billing to a client approximately 80% of my time in a given year. Total hours available in a year = 40 * 52 = 2080, so I need to bill ~1600 hours per year, generating $120k of revenue. This is a very conservative number. More likely, I will bill 2000 hours for the year at an average bill rate of $100 = $200k in revenue generated. If I'm one of those schmucks that likes to kill themselves to make other people rich, I could easily be generating revenue for my company in excess of $200k.

I am paid $56k a year gross salary. After company match to 401k, medical benefits free money, and my bonus, my total compensation is approx. $63k a year. Even using very conservative numbers, I am giving them a 100% return on their payroll investment.

Granted, this does not include the compensation I receive in terms of life experience, although I believe I am now in a cycle of diminishing returns as far as that goes.

The only reason that the job I have now is worth it to me is that I am receiving much more value for my time than I would likely receive working for someone else. I graduated from college with a psychology degree, but I have an engineer's salary. However, this is faulty thinking, because selling my time is no way to get ahead, unless I'm selling it at exorbitant rates (anyone want to hire me for $100/hour to do ETL design/development?) that allow me to quickly build investment income. This is still not a very good situation - even if I could receive $100 an hour for my work, I'm not sure I would accept it. Perhaps a day or two here and there to get some guaranteed income, but always selling your time for fixed amounts of money is a bad idea.

Think about it this way; you could work for 10 years selling your time for $100 an hour. If you sold 2080 of your hours in a year, you'd make $208k for that year. Now imagine if you instead only directly sold half of your time in a given year, and invested the other half of your time into a business. In the first case, you've grossed an assured $2.08 million, while in the other you grossed $1.04 million over the same 10 year period, while investing $1.04 million worth of your time into your business.

If you could invest a million dollars into a sound, reliable business, don't you think you'd end up making more than if you simply sold your time for that $1.04 million? Obviously there's no guarantee here, but you're investing in a chance to kick that $100 rate to the ground. If your business starts bringing in twice as much money as selling your time, don't think it's time to raise your bill rate?