How to work out what an hour of your time actually costs

Short answer: for most owners the right number is not your salary divided by your hours. It is what the business loses when that hour goes on admin instead of on the work only you can do.

Why the number matters more than the tool

Every "is this worth it?" question in a small business comes down to hours multiplied by a rate. Get the rate wrong by half and you will either reject things that would have paid handsomely, or buy things that never could. It is the single most load-bearing figure in the whole exercise, and most people have never written it down.

Method one: the chargeable rate (for anyone who bills time)

If you sell hours — consultant, electrician, bookkeeper, solicitor — start with what a client pays for your hour, then adjust for utilisation. If you bill £75 an hour but only half your working week is billable, an hour taken from your admin pile is not automatically worth £75, because you might not have sold it anyway.

The test is whether you are turning work away or working evenings. If you are, your chargeable rate is close to the real cost of an admin hour, because every hour reclaimed converts into billable work or into your own time back. If you have slack capacity, use method two instead.

Method two: the replacement cost

Ask what it would cost to have someone else do that specific job properly. Not a notional salary — an actual rate for the actual task: a part-time bookkeeper, an agency, a day rate. This is the honest floor for anything you could in principle delegate, and it is usually the right number for jobs like data entry or inbox triage.

If you would pay £22 an hour for someone competent to do it, then an hour of it is costing you at least £22 whether or not money changes hands.

Method three: the owner opportunity rate

For the business owner there is a third, larger figure: what the business earns when you do the thing only you can do. Quoting the job. Having the supplier conversation. Closing the sale. In many small businesses this is several times the replacement rate, which is why owner admin is so expensive and so invisible.

It is harder to pin down, so be conservative. If an hour of selling reliably produces a quote and roughly one in three quotes converts at a known margin, you can estimate it. If you cannot estimate it, use method one or two and accept that you are understating the case.

Three ways people get it wrong

Using drawings divided by hours. What you choose to take out of the business says nothing about what your hour produces. Owners who do this routinely value their time at less than their own staff.

Forgetting the on-costs. For a staff hour, the cost is not the hourly wage. Employer costs, holiday and the rest sit on top. Check the current position on gov.uk rather than relying on a figure in an article.

Counting the same hour twice. If you save two hours and spend one of them checking the output, you saved one. Net, always.

Write it down and use it

Pick one method, pick one number, round it down, and write it on a sticky note. From then on, every subscription, tool and automation question has an arithmetic answer rather than an argument. It is the same discipline as costing a job properly before quoting it — the approach behind what manual trade pricing really costs.

Our AI Tools Report asks you for that figure directly, because it refuses to pretend it knows what your time is worth. Everything in the financial-impact slide is then built from your number, over 46 working weeks, rounded down, with the sum shown. Ten minutes of questions, £59.99 inc VAT, report in your inbox within minutes — and if your hourly figure is genuinely low and your admin load light, the report will show you a small number rather than a flattering one.

Questions, or want a tool we don't have yet? Email hello@grafto.co.uk — a real person replies.