Your Time is Valuable, and so is Your Money: Here's how I Hire

One of the biggest things that my mentor has taught me over the last three and a half years is the importance of understanding the concept of opportunity cost when it comes to paying and choosing your employees. 

You see, when you spend so much time bending over backwards to compare quotes, read reviews, search for the lowest deal, and find a contractor that will cut your job costs as much as possible, you lose the opportunity to make money in other places.

Your time is valuable. 

Let me say it again. Your time is valuable. In order to understand the concept of opportunity cost when it comes to paying and choosing employees, you must first understand this: You are actively losing money when you spend time trying to re-hire and re-find professionals that you already had relationships with for the sake of saving a few bucks. 

Now that you have to slow down your personal business in order to find another painter, installer, or handyman that's going to install your nest thermostats for you, you also have to recognize that the time you’ve been spending trying to save money has actually time taken away from the chance you had to make money. 

There's an opportunity cost here. For instance, there's a guy I was talking to recently who was trying to find a new, and cheaper, editor and videographer. What he didn’t seem to understand was that the opportunity cost of him trying to negotiate with the editor and videographer as opposed to just being able to hire somebody that's great at what they do and being willing to pay them just a little bit more was immense.

Additionally, there's an opportunity cost that you need to figure out early on if you’re going to try to hire someone new. You need to account for how much money you're going to be losing by choosing to not pay someone a little bit more upfront to do the job correctly right the first time.

When it comes to figuring out the best way to pay and recruit employees, there are three different types of people:

1. First, there's the people that love to get the deal. They love to pay their people so cheaply and so unbelievably low and then they wonder why they have high turnover. 
2. Second, there’s the people that pay their employees and contractors too much. Then, their employees have the audacity to come back and say they want more, all because they were overcompensated in the first place.
3. Finally, there’s the people that meet in the middle and pay their employees the correct amount for the services rendered. These are the people we want to be like!!

Let’s say, for instance, you work in the solar industry and you choose to pay your installers below what the average wage is for solar installation because you want to say that you were able to get a better deal. Do you think that people are going to be incentivized to continue to work for you?

If I had to guess, the answer would be no. You see, if you don't incentivize people to continue to work for you and you spend the majority of your time bending over backwards because you're the “deal guy,” it’s likely that you’ll continue struggling to find the best bang for your buck for the rest of your time in the industry. 

On the other hand, when you pay people too much, you're already going negative because your time is far more valuable than what you are spending on the job. 

I was recently discussing with my friend Oscar, the owner of Pathfinders, about a presentation he gave to a client in Texas. After his presentation, the client looked at him and said they were currently paying X amount of dollars for the work, but they were not satisfied with the amount of work that was being done. Now, even though Oscar’s quote was not even 60% of the other companies’, they were now complaining about his job quote as well.

There's two sides to the opportunity cost problem in finding employees and contractors to get the job done, but both sides are toxic and both are not good grounds to grow a great sustainable and long term business. 

In order to have success, you must find the middle ground. As I’m sure you can imagine, there's a middle ground between not paying people Chinese sweatshop pay and not paying people too much to the point that they want even more. 

You must remember that people only complete the work that they're correctly incentivized to do. If you pay somebody poorly, they're not going to do their best work and they're not going to want to work for you long term. On the other end, if you overcompensate someone, they’re not going to correctly understand what their work is truly worth.

At the end of the day, no matter if somebody's trying to charge you more than what their work is worth or less than what their work is worth, you must make the decision to pay your people correctly and work with companies that pay their crews correctly. Not under paying them and not overpaying them, but recognizing their worth and paying them the perfect amount to avoid all opportunity cost loss in the long run.

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