When starting out in business, it is really easy to agree and want to meet everyone face-to-face for a coffee meeting especially if you work from home. Scheduling a coffee meeting gets you out of the house and potentially enables you to build a stronger connection. I completely understand and have been there, done that. However, those coffee meetings can really add up in both time and money, and I’m not just talking about the latte cost. If your business isn’t as profitable as you’d like it to be, then read on to learn what three factors should always be considered when deciding whether or not to agree to that coffee meeting.
Three Key Factors You Need To Consider:
1) Time – If you are meeting someone in-person versus over the phone, the coffee meeting will probably last at least 45 minutes to an hour.
After hearing Marcey Rader, a productivity and health coach, advise clients that she always takes her initial meeting with a prospect or colleague over the phone, I decided to evaluate the time that I have been spending on coffee meetings. She states that you can usually accomplish everything you need to with a phone call that lasts 15 – 30 minutes, but you are likely to feel obligated to spend more time talking with someone if you drove out of your way for the meeting.
If that’s true and you have an hour long coffee meeting, then your opportunity cost is 30 minutes of time that you could have spent generating income. Therefore, the question you have to ask yourself is, “How much can I earn if I spend half an hour on my business?”
2) Money – Cost for whatever you choose to eat and drink during the coffee meeting
3) Mileage – The 2016 tax reimbursement rate for mileage is $0.54 per mile, so the cost of your coffee meeting is the rate multiplied by the the total number of miles to and from your home office.
Example: If we put some real numbers behind this, let’s see how much it would cost you to do three coffee meetings per week:
- Time – Let’s say you can earn $200 per hour providing your service offerings. By spending an extra 30 minutes at a face-to-face coffee meeting, your opportunity cost in time is 30 minutes and your opportunity cost in money is $100 income x 3 coffee meetings = $300 per week (*Note: If you want to get even more specific, you can also factor in travel time.)
- Money – Let’s assume your latte costs $4.75 each. The out-of-pocket costs are $4.75 latte x 3 coffee meetings = $14.25 per week
- Mileage – If your favorite coffee shop is 7 miles away, then the roundtrip costs you 7 miles x 2 x 3 coffee meetings x $0.54 = $22.68 per week.
The total weekly cost comes to $300 + $14.25 + $22.68 = $336.93 per week
When business owners only look at the day-to-day expenses or weekly expenses, they don’t have an accurate picture of the overall financial implications on their business. I always advise clients to look at everything from the month and 1-year perspective.
Here is the financial impact based on a long-term perspective:
- Time: $300 x 4 weeks = $1,200
- Money: $14.25 x 4 weeks = $57
- Mileage: $22.68 x 4 weeks = $90.72
Total: $1,347.72 per month
$1,347.72 per month x 12 months = $16,172.64 per year
Seeing these numbers, does that make you want to re-evaluate your coffee meetings? It sure had me re-evaluating my business meetings and in the past week, I have successfully had two virtual calls with colleagues who initially wanted to meet in-person. Both calls were completed within 30 minutes. The next time you get a request to meet for coffee, determine if it’s necessary to meet this person face-to-face. If you can have effective meeting with a virtual call, you can put more time and money back into your business…two things that many small business owners value and need to remain profitable.
I’d love to hear from you: How many coffee meetings have you had in the past week? How many in the past month? Knowing what you know now, what would you do differently?
*Tip – Do this now before next tax season – For those coffee meetings that you find worthwhile, be sure to save your receipts for those coffee meetings and track your business mileage for tax deductions! In order to claim the tax deduction for business mileage, you need to keep track of all your business mileage with all the necessary data for your CPA to calculate for tax preparation. Even if you don’t hire a CPA (which I highly recommend that all business owners hire a tax professional), you will need key information in order for the business mileage deduction to pass an IRS audit. If you don’t know what information is needed to claim a deduction for business mileage, be sure to sign-up for the free ebook on this website or at: 3 Strategies To Save Money On Taxes and CPA Fees Before Next Tax Season