Some students I counsel are skeptical when I advise them that they can and should be earning more money.
If you want to earn more money, it is helpful to understand how and why employers pay employees. Understanding this will dramatically improve your earning power. Here are three main ways employees are compensated:
1.) Hourly. This is the most common and first (and usually only) way most of my students think about being paid. When I tell them they can easily earn $25+ an hour they say “Nobody is paying that.” Correction: (Almost) Nobody pays that per hour. Hourly work is the lowest common denominator – we all have an hour. It’s not based on skill or productivity. There’s nothing wrong with being paid hourly, just understand that both your hours and the dollar per hour the employer can justify are limited.
2.) Piece Work. Many jobs pay by the job, not by the hour. For example, you may be paid $100 to clean a house that should take 5 hours. That’s $20 an hour work. If you can do it in 4 hours, you just received a 25% pay raise. If you’re looking for part time work, finding work that pays by the job instead of the hour is a great way to dramatically boost your income.
3.) Value Added. The highest paying jobs pay by the amount of value you can add. A simple version of this is someone who works on commission. If I sell 3 cars instead of 1 car on a Tuesday, my hourly income is 3x higher. The employer is happy to pay me because they are earning more money. I have ‘added more value’ then I cost my employer. More jobs than you think use this model. It’s “knowing where to hit”. This is why Zig taught “You will get all you want in life, if you help enough other people get what they want.”
There are lots of other ways to make money (buying and selling stuff, investing, etc.), but those are three models employers use in determining what compensation structure to offer.
Here are some random thoughts on these compensation plans:
- Pastors should insist on positioning themselves as ‘Piece Work’ and ‘Value Add’, never on hourly. Your Sunday sermon is ‘Piece Work’. It needs to be ready to go by Sunday at 8am. If you can train and discipline yourself to prepare it in 10 hours instead of 20, you should then go home to raise your kids, play golf, or spend time in spiritual renewal. The reality is that being able to prepare it in 10 hours instead of 20 is a unique value you bring, and you need to capture that value for yourself. If you raise a healthier family, the church will benefit from that so the value is mutually beneficial. This isn’t just true of sermon prep, it’s also true of staff meetings, budget committees, dealing with people who complain, etc.
- When it comes to adding value, there is a huge mark up. Pastors that are educated, good leaders, and have excellent communication skills are going to command a significant premium. Rick Warren has sold over 25 million books, and while he has been blessed with lots of skills, gifts, and opportunities from his maker, he isn’t lucky. The same is true for a local electrician like my friend Tim. Tim is compensated far more than many others in his field because being honest and dependable has a huge premium in his field.
- The great news is that the ways you can add value are truly limitless. Find the areas that have the highest return on your time. It might be recruiting new kids to the youth group. It might be solving problems without requiring direction. Studies show that food servers that use their name and smile can earn $2.00 more per tip.
- Part time income is really well suited for piece work and value add. If you worked in retail you might make $10 an hour. 10 hours a week would be $100. But you could make several times that if you were a piano teacher or math tutor charging $40 an hour. It would require you to put together flyers and facebook posts to spread the word. The actual time you spend teaching piano is somewhat valuable, but the time you spend finding new clients is extremely valuable. Finding new clients will pay you $100-$200 an hour. No matter what job you have, figure out what part of that job is the most valuable and do it more.
- To truly understand value, we need to understand the stories people tell themselves. Teaching little Suzy the piano probably isn’t the highest value you bring. As a parent I want to believe that I am opening up the world of music to my kids. Broadening their horizons and teaching them the arts. The REAL value you bring isn’t teaching the piano its confirming my story to myself that I’m a good parent.
- You don’t need to be self-employed for this to work. If I cleaned houses, I might go to my boss and ask “What’s the value of a new customer?” If they hired our company once a month for an average of three years and the company made a profit of $100 each visit a new customer would be worth $3,600 to the company. Would the company pay me $500 to find them a new customer? Of course. Then I would put up flyers on the bulletin board at church, let friends know I was looking for new customers. I may have started as a house keeper, but now I have a side hustle.
- Most people that don’t believe they can make a lot more money don’t understand where they can add true value. A piano teacher is somewhat valuable. But if the teacher asks for referrals every week at the end of the lesson, that 1-2 minutes is worth hundreds of dollars per hour.
- If you have the capacity for 10 students and you have 15 willing to take lessons, you can raise your rate from $40 to $50 (or $20-$35 or $55-$65). You will lose a couple students, but still have 10 willing to pay the extra. You didn’t earn a 25% raise for being a great teacher (though you may and should be), you earned that by finding more clients. No matter what job or field, figure out where the value is added to the organization.
- I’m not convinced driving for Uber or Lyft is a good job. It wears out my car (my factory), my income is limited by the hours I can work, and there are very few ways I can add additional value.
- I watched “The Big Short” last night and was reminded that nobody understands “Value Add” like financial professionals. Hedge fund managers build it right into their agreements (2 and 20) so there isn’t any ambiguity when it comes time to get paid.
- Perhaps the most important skill you can build is learning how to explain to the client what exactly is the value you add and why that is important and worth it to them.
- The heart of all jobs is solving a problem. The highest paid people are able to communicate “I understand your problem” and “I can help you”. It’s really empathy. That will get you the job, following through and delivering on and above your promise will keep the job or keep the customer coming back.