Where Does Your Time Go?

Over the past few years I’ve noticed an alarming trend – many web developers don’t track their time effectively. Of course there are lots of experienced web designers and programmers who are terrific at logging and tracking their activities. But a surprising percentage track their time using incomplete or inaccurate methods, or don’t track their time at all.

Why is this so important? The answer is simple. If you can track your time effectively, you can measure your profits effectively. After all, your biggest asset as a human being is your time, and you have made a decision to use that time to generate money. If you had a job, you’d be ‘trading’ your time for a pre-determined amount of money. However, your decision to go into business for yourself means that there’s really no limit to how much profit you can make in a single hour. Why not measure this ‘hourly profit’ and make sure that it’s increasing as your business grows?

Even if you already know your hourly rate, it’s very useful to understand how much you profited on each particular project. By tracking your time and expenses carefully, you can determine the actual profits after marketing and operational expenses and your time. Once you have a clear understanding of how profitable your projects really are, you’ll make better decisions overall. You might even find that bigger projects aren’t always better.

For example, take the following three hypothetical projects:

Project 1: Total project value $5000, total expenses $600, total time you invested (including sales, administrative, legal, and the actual work!) 50 hours.

Project 2: Total project value $8000, total expenses $900, total time you invested 90 hours.

Project 3: Total project value $10,000, total expenses $1,900, total time you invested 113 hours.

Imagine that you could fill all of your available time with a never-ending supply of projects – would you want them to match project 1, 2 or 3?

The answer is simple because you know how many hours it will take to service each project, and subsequently you can determine your hourly profit for each. By calculating the total project value (the gross) less expenses (the net) then dividing by the hours you invested, we can determine the actual hourly rate for our efforts.

It comes out like this:

Project 1: $88/hr

Project 2: $78/hr

Project 3: $71/hr

Big difference! If you chose project type 1 over project type 3, you would make much more profit over time because you could handle more projects at the higher rate, despite the lower per-project value.

Given the choice, I’d accept two projects like #1 instead of one project like #3. The total project value is the same ($10,000) but the profit would be over $700 more. The best part is that your increased profit will be earned in less time! It would take 100 hours to handle two projects like #2, and 113 hours to handle project #3. As you can see, calculating the hourly rate gives you better decision making power, and that’s good business.

This is just one example of the value of accurate time tracking. It’s also incredibly useful to understand your hourly profits when formulating your project proposals, prioritizing your work schedule, deciding which clients to pursue, or figuring out what work to outsource and which to keep in-house.

Once you start tracking your time accurately, the results might surprise you! Many developers are shocked to find that their larger projects are actually the least profitable when using the hourly-profit method of comparison. Other developers will learn that their internal estimation of how long an average project takes was off by 50%-100% (this is very common).

Almost all developers will benefit, though, from a clear understanding about which tasks and projects make them the absolute maximum profit – you might even change your business model as a result.

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  • http://www.crunch42.com/ crunch42

    I agree that timing yourself is useful. It helps me see the areas where I need to be more efficient, or perhaps outsource. I use a piece of software called Studiometry to track time for me. It also converts my timesheets into invoices.

  • buziboy

    Sounds about right, Dave. The bigger projects are the time suckers, since the complexity of the project often bogs you down, and the profitability gets lost in red ink. I also find that the clients rarely take advantage of the power I give their application–not because it was over their head (I strive not to make that mistake), but simply because they are too busy. I plan to be a little slower in suggesting big solutions, and switch to a more KISS approach and focus on billing for actual time spent. I gauge the client’s manpower more carefully now, and ask more questions about maintenance plans (custom CMS, or simply somebody with Dreamweaver?).
    I’m also building myself a timecard system, and am starting to work on making sure I have at least “x” hours of billable time each day, instead of letting my perfectionism get in the way. In those cases, I’m up all night on my own dime to overbuild something for the sake of wowing the client and helping my resume. Nice intention, but not a profitable one.

  • dev_cw

    I agree 100% and I have been trying to establish a good time recording system. There are some programs that help do this but I found them more time consuming to deal with in real time. What I have been using recently is a notepad (pen and paper) and keeping notes on my time per project/task and summing it up at the end of the day. Not the most high tech method but it is working for now (more or less that is, it gets tricky when I am working on consecutive projects and doing phone support).

    What do you think is the best way to track your time? Do you use a tracking program? Is the time management tied into your project management system?

  • http://www.eleytech.com beley

    Glad to see they found someone for the business blog! I look forward to reading your posts Dave…

  • Kailash Badu

    Indeed, Dave. But just a thought; what about those clients who turn out to be paying a bit lesser per hour fees but are actually your long term clients, who bring you a host of quality projects overtime, are very amiable and fun to work with, and with whom you want to maintain a consistent relationship. Would it be alright to gauge their relative value with the mathematics you laid out in your post?

  • http://www.revmedia.com dhecker

    Thats an excellent point, Kailash. There are so many different things that make a client ‘good or bad’. A low-paying client can be very attractive if they offer steady, ongoing work. I suppose the point of this entry was that at the very least, we should all be able to measure the value of a client as an hourly rate. There are other factors, though!

  • http://www.brendancullen.com brendan22

    I tried using pen & paper but I’m not organized enough to keep it up. I’ve been using Khronos (http://khronos.us/) for the past few weeks and it’s perfect. Super simple, intuitive interface and out of the way.

    I definately recommend checking it out if you’re a mac user

  • Devils Advocate

    Trouble is everyone and his cat is a web designer today. The law of supply and demand drives prices down in any industry. Obviously there are clients out there who will pay a premium price for a premium service but it’s tough out there.

  • http://www.redflystudios.com Cianuro

    It is tough out there. But sell your value. Most of our clients don’t want a cheap design or project done. They want it done right.

    Regarding time management, Last year I made a choice to limit my working day to 9 hours, 5 days a week. I was working 70 hour weeks and pulling all nighters a few days in a row! Since I started managing my time and tasks (Thanks to David Allen for his masterpiece “Getting things Done”) my productivity improved by over 200% and so too did my income. Working less for more pay? Yes please!

    I still use pen and paper to manage my time.

  • DEVlady

    Thanks for pointing out Studiometry. I looks promising. So far, I’ve been using slimtimer.com to track my time spent on projects.

  • http://gostats.com gostats

    I just keep a log of my time in my head… let’s see over the past week it looked like this:
    work, eat, work, sleep, work,… etc.
    :P

    *on a more serious note*
    I should point out to everyone: a common incorrect idea with regards to effective per hour rate is that it is only worth being the only factor if you have other things to do with your time. For example, doing a 1 hour project for $88 and twidling your thumbs for another 9 hours is worse than doing a 10 hours project for $800.

  • http://www.revmedia.com dhecker

    That’s definitely correct, which is why the example assumes an unlimited stream of like projects. Of course, until you have a ‘full plate’ this kind of example doesn’t apply.

  • http://www.shmookler.com shmookler

    It’s interesting how many web developers lack professional process models in their work. Not tracking time and managing time poorly are just some examples of this.

  • http://www.sitepoint.com efarmboy

    This also assumes, you have back to back smaller projects and no beach time betweeen projects. Generally, you will also consider larger projects at lower hourly/daily rate since it is contiguous time.

    Other considerations are:
    > Cost of pre-sales and if the work is for a larger client, you are far more profitable if there is little pre-sales
    > The larger project may have included new features/modules that will be re-used later and thus you spent more time then initially scoped but will pay dividents later.

  • kungfukenny

    Just a slight twist on an interesting topic, as I’m sure theres quite a few people here who are in my position where they work within a non web design company dedicating lots of time to the company website.

    At my day job I track the whole working day on excel this enables me to spot where my ‘black holes’ are, as most of the time I have to work to deadlines on the website and if these deadlines aren’t met I need to show the partners why, this also helps if I find something that keeps cropping up in my working day that either I can streamline or delegate to someone else within the company.

    I also use ‘Lean’ to manage my time better, this started as a manufacturing tool but I now use it for website work, basically this is a way of working where you eliminate re-occuring problems and manage your time better. Lean can get quite deep but it’s well worth looking into as I now use it for private web projects and well, if you can deliver to a client on time or ahead of schedule without any problems thats one happy client.

  • webdevsince1995

    For the past 8 months or so I’ve been using complete time tracking to track my time. Great tool. You can track your time in a spreadsheet (which I was doing previously) but it gets quite tedious. Since using a software tool I’ve been recording my time to a finer level. I found that for most small to medium projects I spend about 20% of the time discussing things with the customer, 30% on the design and layout and 50% coding functionality (PHP). Another bonus of tracking your time is that you learn to quote more accurately.

  • okeee

    Wow, arithmetic. I agree that more per hour is a good thing. Hey, I should write for SP!

  • SableFlat

    Regarding time tracking:

    I like TraxTime. It uses a punch-in, punch-out interface and does all the calculations for you. I have it set up for every client. For clients with multiple projects, I have it further divided. There is a “Memo” capability which lets you indicate exactly what you are doing on the project, with as much detail as you want.

    When ready to create an invoice, you create a Report (any combination of projects, dates, and subtotaling) and export as a csv file to open in Excel and further manipulate (combine projects, subtotal, etc.).

    I find that I can do much more accurate billing. Previously, I had written down what I was doing in a calendar the divided up the day into 15-minute blocks. And, it also nicely accomodates interruptions! Just punch out of the current project, punch in to the crisis project, and then punch out and get back to the previous project.

    The price is very reasonable to get more accurate billing!

  • truculent charly

    journyx.com has free timesheet software for this

  • cody

    this is a good site