Approximately 70% of freelancers cite “income instability” as a challenge. One major cause of this instability is the inability to accurately track profitability for each project. Individual business owners face similar challenges in many cases.
Many people have experienced finding that “it took longer than expected, and the project was actually unprofitable.” Continuing to take on projects without visibility into profitability creates a vicious cycle of working hard but never achieving stable income.
By implementing time tracking, you can accurately understand the profit margin for each project and establish appropriate pricing. This article explains the specific business value of time tracking for individual business owners and practical methods to improve profitability and stabilize income.
Three Profitability Challenges Faced by Individual Business Owners
To understand why time tracking is necessary, let’s first clarify the practical challenges individual business owners face.
Lack of Visibility into Project Profitability
The main reason many individual business owners feel that “it took longer than expected” is that they don’t record their working hours.
For example, suppose you estimated “3 days to complete” for a web design project, but it actually took 5 days. In this case, even with revenue of $3,000, your hourly rate drops to 60% of what you expected, potentially resulting in an actual loss.
Without recording working hours, you won’t even notice this “time overrun.” As a result, you repeat the same mistakes, and time passes without any improvement in profitability.
Inability to Set Appropriate Prices
Without past data, estimates rely on “intuition” or “market sense.” This situation leads to two problems:
The problem of charging too little: Without knowing actual working hours, you misjudge the necessary time and end up accepting projects at rates that aren’t worth your time on an hourly basis.
The problem of losing projects by charging too much: Conversely, you may quote too high out of uncertainty and lose to competitors.
Without being aware of your hourly rate, you can’t properly evaluate your labor value and cannot set appropriate prices.
Inability to Track Time Usage
Not knowing how much time you spend on each task leads to the following problems:
- Can’t identify inefficient work: Starting the same tasks from scratch every time
- Time consumed by low-profitability work: Unable to focus on high-revenue work that should be prioritized
- Can’t optimize time allocation: Unable to judge how much time to allocate to what
Time tracking solves these challenges. The next section explains the basics of time tracking.
What is Time Tracking | Basics for Individual Business Owners
This section clarifies the definition of time tracking and what it means for individual business owners.
Definition of Time Tracking
Man-hours (or labor hours) are units of work volume expressed as “working time × number of people.”
Formula: Man-hours = Working time × Number of people
For individual business owners, since “number of people = 1,” time tracking mainly means “recording and analyzing working time.”
Units are expressed as “person-hours” or “person-days.” For example, if one person works 8 hours, it equals “8 person-hours” or “1 person-day.”
Differences Between Corporate and Individual Business Owner Time Tracking
Time tracking is performed by both companies and individual business owners, but the purposes differ.
| Comparison Item | Corporate Time Tracking | Individual Business Owner Time Tracking |
|---|---|---|
| Main Purpose | Team management, workforce optimization | Profitability tracking, appropriate pricing calculation |
| Management Target | Multiple members’ working time | Only own working time |
| Key Metrics | Project progress, budget achievement rate | Hourly rate, profit margin by project |
For individual business owners, time tracking is “a tool to visualize your business with numbers and improve profitability.”
What Individual Business Owners Achieve Through Time Tracking
The purposes of time tracking for individual business owners can be summarized into three points:
- ① Profitability Visualization: Clarify which projects generate profit and which are unprofitable
- ② Appropriate Pricing Calculation: Predict necessary working time from past data and create accurate estimates
- ③ Time Efficiency Improvement: Identify inefficient work and allocate time to high-profitability tasks
The next section explains the specific business value obtained by achieving these objectives.
Four Business Values Individual Business Owners Gain from Time Tracking
This section presents the concrete results that time tracking brings to individual business owners’ businesses.
Accurately Track Profit Margin by Project
Time tracking allows you to calculate labor costs from actual working time.
Calculation Method: Profit = Revenue – Expenses – Labor Costs (Hourly Rate × Working Time)
For example, for a web design project with $3,000 revenue and 60 hours of actual work (assuming $50/hour):
- Labor costs: $50 × 60 hours = $3,000
- Profit: $3,000 – $0 (expenses) – $3,000 = $0
This example reveals that a project that appeared profitable was actually zero profit when considering labor costs.
By understanding the “true profitability” of each project, you can judge which types of projects to prioritize and which to decline.
Improve Estimate Accuracy and Prevent Losses
Calculating average working time from past data dramatically improves estimate accuracy.
For example, if you accumulate data showing “LP creation averages 20 hours” and “banner creation averages 3 hours,” you can make the following calculations when estimating new projects:
Estimate Calculation Example:
- LP creation: 20 hours × $50/hour = $1,000
- 3 banners: 3 hours × 3 pieces × $50/hour = $450
- Total: $1,450 (minimum price)
You can establish a judgment criterion not to accept projects below this minimum price, avoiding unprofitable projects in advance.
Also, when negotiating prices with clients, you can show evidence that “this work takes an average of 20 hours,” increasing persuasiveness.
Set Prices with Hourly Rate Awareness
Clarifying your hourly rate prevents “charging too little.”
Hourly Rate Calculation Method: Hourly Rate = Total Income ÷ Total Working Time
For example, if you want to earn $4,000/month and your monthly working hours are 160, you need $25/hour. However, including non-billable time (sales, administrative work, etc.), actual billable hours are often around 100 hours, requiring acceptance of projects at $40/hour or more.
Having this standard creates a clear pricing axis: “I want to secure at least $40/hour.”
Identify High-Profitability Projects
By comparing hourly rates by project, you can identify which types of projects have high profitability.
Comparison Example:
- Project A (LP creation): $1,500 revenue ÷ 20 hours = $75/hour
- Project B (Banner creation): $200 revenue ÷ 5 hours = $40/hour
- Project C (Consulting): $1,000 revenue ÷ 8 hours = $125/hour
This analysis reveals that consulting projects have the highest profitability.
Based on this data, the following strategic decisions become possible:
- Prioritize consulting projects
- Raise prices for banner projects or decline them
- Maintain current approach for LP creation
This enables data-based business decisions rather than gut feelings.
Practical Steps to Improve Profitability with Time Tracking
This section explains concrete practical methods for time tracking in four steps.
Step 1 | Record Working Time by Project
First, divide tasks by project and record working time.
Recording Points:
- Record by project unit (don’t mix multiple projects)
- Record by task (design, coding, revisions, etc.)
- Rough 5-minute increments are OK (don’t aim for perfection)
Recording Example:
- Project: Company A LP Creation
- Design draft creation: 8 hours
- Revision response: 4 hours
- Coding: 6 hours
- Total: 18 hours
The recording method can be anything – dedicated tools, Excel, paper notes. What matters is “continuing.”
Step 2 | Calculate Hourly Rate
From recorded data, calculate your hourly rate.
Calculation Method: Hourly Rate = Total Income ÷ Total Working Time
Example:
- Monthly total income: $5,000
- Monthly total working time: 120 hours
- Hourly rate: $5,000 ÷ 120 hours = $41.67
Also set a “desired hourly rate.” For example, having a goal of “I want to secure at least $50/hour” creates a pricing standard.
Step 3 | Analyze Project Profit Margin
Calculate profit margin for each project and evaluate profitability.
Calculation Method: Profit Margin = (Revenue – Expenses – Labor Costs) ÷ Revenue × 100
Example:
- Project A: $2,000 revenue, 30 hours work, assuming $50/hour
- Labor costs: $50 × 30 hours = $1,500
- Profit: $2,000 – $0 – $1,500 = $500
- Profit margin: $500 ÷ $2,000 × 100 = 25%
This analysis allows objective judgment of which projects have high profitability.
Step 4 | Reflect in Estimates
Create estimates based on past data.
Estimate Creation Procedure: 1. Check average working time: Reference data showing “LP creation averages 20 hours” 2. Multiply by hourly rate: 20 hours × $50/hour = $1,000 3. Add buffer: +20% for unexpected revisions ($1,200) 4. Final estimate: Quote $1,200 or more
This process allows you to accept projects at appropriate prices while preventing losses.
How to Choose Time Tracking Tools Suitable for Individual Business Owners
This section explains criteria for choosing tools when starting time tracking.
Three Selection Criteria Individual Business Owners Should Prioritize
When choosing tools, individual business owners should prioritize these three points:
① Simple and Easy to Use (Easy to Continue)
Complex tools may be fun at first but hard to continue. Choose tools with intuitive operation and minimal recording effort.
For time tracking, “continuing daily” is most important. Therefore, prioritize simplicity and ease of use over feature richness.
② Smartphone-PC Synchronization Available (Record Anywhere)
Choose tools that can synchronize smartphone apps and PCs so you can record while out.
Many people think “I’ll record it all later” but forget, so an environment where you can record immediately after finishing work is important.
③ Free or Low Cost (Individual Business Owner Budget)
For individual business owners, we recommend starting with free plans.
Many tools offer basic features for free, so try them first and consider paid plans as needed.
Detailed Guide on Choosing Sustainable Tools
For a detailed guide on choosing sustainable time tracking tools and 5 recommended tools, please see this article.
The parent article covers:
- Three reasons time tracking doesn’t continue
- Concrete ways to choose sustainable tools
- Comparison of 5 recommended tools for individual business owners
- Practical techniques for habit formation
doup | Easy-to-Continue Time Tracking Tool
From a time tracking specialist’s perspective, doup is a tool we can recommend to individual business owners.
doup is an integrated task management and time tracking tool that emphasizes “design for easy continuation.” It allows simple operation to record working time, with automatic project-based aggregation.
The free plan includes substantial basic features, making it suitable for individual business owners starting time tracking.
Three Tips for Continuing Time Tracking
This section presents practical advice for making time tracking a habit.
Don’t Aim for Perfection
The most important thing about time tracking is “continuing.” Therefore, not aiming for perfection is crucial.
Rough 5-minute increment records are sufficient. If you record 70%, that’s enough data to understand trends.
Even if you have days when you “forgot to record today,” don’t blame yourself and restart the next day.
Fix Recording Timing
To make recording a habit, fixing the timing is effective.
Recommended Timings:
- Record previous day’s work every morning at 9 AM
- Record immediately after finishing work
- Record every evening at 6 PM
Find timing that matches your rhythm and make it routine.
Weekly Review
Set aside 10 minutes weekly to review recorded data.
Review Points:
- Which projects did I spend time on this week?
- What work took longer than expected?
- How should I allocate time next week?
This review maintains time tracking motivation and leads to actual business improvement.
Frequently Asked Questions
Answers to common questions about individual business owner time tracking.
Q1: Do individual business owners really need time tracking?
If you want to accurately track profitability and set appropriate prices, yes. It’s especially effective for individual business owners handling multiple projects. Being aware of hourly rates prevents charging too little.
Q2: What’s the difference between time tracking and attendance management?
Attendance management records working hours (what time you worked from/to), while time tracking records time by work content (how much time spent on which project). Individual business owners can track profitability through time tracking.
Q3: Can I use Excel?
Possible, but input effort and aggregation burden increase. Dedicated tools make recording easier with automatic aggregation, making them more efficient and easier to continue. We recommend trying free tools first.
Q4: How long until I see results?
In many cases, you start seeing time usage patterns in 1 month and feel profitability improvement effects in 3 months. Estimate accuracy begins improving from the 2nd month.
Q5: Are free tools sufficient?
For individual use, free plans are sufficient. Many tools offer basic time tracking features for free. Start free and consider paid plans as needed.
Q6: What if I forget to record?
Don’t aim for perfection – 70% recording is OK. Not blaming yourself for recording gaps is the secret to continuation. No problem if you restart the next day.
Q7: Are there differences between freelancers and individual business owners?
While there are tax differences (business registration, etc.), there are no major differences in time tracking methods or purposes. Both need profitability tracking and appropriate pricing.
Q8: Are there disadvantages to time tracking?
Recording takes time. However, with simple tools, it takes less than 5 minutes per day. This 5-minute investment can improve monthly profitability by thousands of dollars, so cost-effectiveness is quite high.
Summary
For individual business owners, time tracking is an essential tool to visualize profitability and achieve appropriate pricing.
By accurately tracking profit margin by project, you can avoid unprofitable projects and focus on high-profitability ones. Improved estimate accuracy prevents “it took longer than expected” failures.
The first step in starting time tracking is choosing a simple, sustainable tool. Try it for one week first. Don’t aim for perfection – 70% recording is sufficient.