Transtutors time value of money advanced

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Time value of money advanced

Subtitle: What is money, anyway?
Topics: Time can be equated to money , but also conflates lots of hidden costs.
What are hidden costs?
How can we estimate how much money a given amount of time is worth?
What is money?
How much labour or resources does money represent?
How can we calculate these for best effect?

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  • 1. Time Value of MoneyTime Value of Money22ndndEditionEditionfb.com/transtutorsTwitter: @transtutorsTweet with webinar attendees: #TTinarGoogle + : http://goo.gl/qWnDUFor any problems or feedback email us at marketing@transtutors.comOur website link: www.transtutors.comBy C Patel#TTinar @transtutors
  • 2. #TTinar @transtutorsIndexTime value of moneySubtitle: What is money, anyway?Topics: Time can be equated to money,but also conflates lots of hidden costs.What are hidden costs?How can we estimate how much moneya given amount of time is worth?What is money?How much labour or resources does moneyrepresent?How can we calculate these for best effect?
  • 3. #TTinar @transtutorsSummaryThis session will look at the two most importantthings within a business – time, and money. It willinvestigate how to calculate the business costs andadvantages of time and capital, and look in particularat what can be done in places where a clearmeasure cannot be made.
  • 4. #TTinar @transtutorsIntroductionTime is usually a zero-sum or negative-sumresource, and must be treated very carefully –gaining more money is always possible, but gainingmore time is not, making the time factor (andadditional costs that accrue if you go over time, orcome too close to a deadline).
  • 5. #TTinar @transtutorsWhat is time?Non-renewableNegative sumFactor in all resource calculationsMost influential multiplierMostly non-fixed and non-fixable
  • 6. #TTinar @transtutorsWhat does that mean?You cannot gain new timeYou are always losing timeAll calculations should include a time componentTime is there basic multiplier for any aspect of yourbusiness (known cost x estimated time = overallcost)Very few situations exist where specific time isknown.
  • 7. #TTinar @transtutorsWhat is money?Neutral sumCreates identity valueAllows equivalence between objectsCan be used to represent all resourcesCannot be used to acquire all resources
  • 8. #TTinar @transtutorsWhat does that mean?You can gain or lose money over timeYou can use money to represent other thingsYou can use money to compare different thingsYou can always create an equivalent dollar value forresourcesYou cannot always buy resources with money (e.g.credibility, time, impact).
  • 9. #TTinar @transtutorsHidden costsThere are many hidden costs, but time is the onemost people ignore. Imagine that you are the CEOof a startup. You probably work many more hoursthan you are being paid for, as do your staff.This is a hidden cost.
  • 10. #TTinar @transtutorsTime conflates hidden costsAlthough you can measure things in terms of money,monetary values tend to either ignore or subsumehidden costs.This means focusing on cost alone will mean youare not seeing the bigger picture
  • 11. #TTinar @transtutorsWhat are hidden costs?TransportLabourRequired correctionsOverview/reset timeUnexpected interruptions or failuresUnexpected additional costs and timeTraining & replacement periods
  • 12. #TTinar @transtutorsWhy are hidden costs a problem?Hidden costs are easy to ignore, but the momentyou scale up or expand in any way they must beproperly assessed.For example, in a startup, everyone’s time is worthmore, since people tend to work much harder andcommit more strongly. This means that as you grow,time will equal LESS output per member.
  • 13. The Problem of ProjectionThe hard truth is that NO economic projection canbe accurate except in very constrainedcircumstances. Whatever method you use forestimating time and equivalent cost, it will NEVER becompletely accurateMany businesses use fancy computation measuresand complex economic measures to hide the fact thattheir projections and reports are just estimates.
  • 14. How to be realisticFirst of all, know the difference between time andmoney, and measure how much of each you willneed for a given task or project separately.Give a boundary for all measures. This willcomplicate graphs, but give a much clearer andmore realistic estimate.
  • 15. #TTinar @transtutorsYou can equate time to...By labour valueBy product valueBy equivalent costMarket value (e.g. industry standard pay scales)
  • 16. #TTinar @transtutorsbe aware of…Different people’s time is worth different amounts atdifferent times, based on their: experienceengagementinterestother difficult to quantify attributes.
  • 17. #TTinar @transtutorsWhat can you do to improve yourestimates?Know exactly what your resources, expectations,proximate and eventual objectives are.Know how everything works from the very bottom –because of the nature of multipliers, this is the placewhere small mistakes can have the most seriouslong-term impact
  • 18. #TTinar @transtutorsimprove your estimates IIUnderstand your dynamics. The estimates you usetoday will not be good in six months, or a year, andthe way your business works will change over time.Avoid time dependencies wherever possible. Thisincludes anything whose value could changesignificantly over time, such as foreign currencyrates. If you must use them, then create markethedges to back up your data.
  • 19. When does time = money?there is a set labour valuethere is a set product valuetime is critical to the trade (i.e. stock trades,currency trades)it is unlikely that your market will change over the givenperiodit is unlikely that labour or resource cost will change.
  • 20. time ≠ money when…Given factors are likely to change significantly over timeYou are not 100% certain of how long an activity will takeYou are not 100% certain of the success rate of anactivityYou are trying to create a flexible plan
  • 21. When does money = time?When your activity can be duplicated elsewhere – non-proprietary, non-secret&When you have relatively required low labour expertise
  • 22. Be clearIf you try to hide the fact that there are estimatedvariables within your calculations, it will make youlook bad to those who know how to read thenumbers, who are the main people you want toconvince.Show that you have done as much work to reducethe error rates within your calculations
  • 23. Be as precise as you canBy using variable measures, you can show that you havea much more sturdy and adaptable plan.If there are too many unknowns, do not createspeculative reports – it will be obvious that you are notbeing realisticLead with your strengths, and be clear about yourweaknesses.Give reasons for the numbers and methods that you areusing. ‘Because everyone does it’ is NOT ACCEPTABLE.
  • 24. #TTinar @transtutorsConclusionsFinding the right way to measure and estimate time is the failing ofmany businesses.Time can get you money, but money can only get you time in limitedsituations.ALWAYS add in error margins for time. In extremis, you can alwaysfind more money, but you can almost never find more time.Remember that time is a factor in ALL business operations – evenreplacing a temp has a time (and therefore productivity) cost.
  • 25. #TTinar @transtutorsConclusions IIMake your calculations realistic, and explain yourvariables.Be as clear as you can about what you know., and reviseyour estimates and projections as new data comes in.Pick your models carefully, and always give reasons. Ifpossible, estimate using more than one model andpresent results drawn from all sources.
  • 26. #TTinar @transtutorsThank YouThank YouLike us on: http://www.facebook.com/transtutorsLike us on: @transtutorsTweet with webinar attendees: #TTinarLike us on http://goo.gl/qWnDUFor any problems or feedback: email usmarketing@transtutors.com