Regularly on the VA forums, and sometimes via direct email, I see this question from new VAs. They have worked out what services they are going to provide, have begun seeking ways to network and find new clients but then when they get asked ‘how much?’ they get stuck.
That’s ok, we’ve all been there in some form or another.
What did I do when I was treading this same path 15 years ago? I looked at what I was earning the previous year in a corporate job.
I knew that if I was going to make this business work and not have to go back to a ‘job’ then my goal would have to be to earn a similar income. I was aware that I would have more taxable expenses and because I was now working at home I’d have less travel expenses and wouldn’t have to keep buying new clothes or even lunch. So I could probably get away with earning a bit less per week and still be ok.
I created a budget for the type of income I would need weekly and used that as a guide for what I could not go below. Then I created a spreadsheet and looked at what my projected annual income would be. From there I counted up the amount of public holidays and leave days I was entitled to. I deducted this from the number of working days in a year and then broke that down to the number of working hours. I then divided this figure into the annual income to come out with a base charge rate for my business and rounded up to the nearest dollar, or more likely the nearest $5 or $10. Periodically I review this and increase it as my expenses increase.
This is just a very simplified way of doing it. I have a formula in my book “How To Become a Virtual Assistant” that is more detailed in Section 4 on “How Do I Charge and Where Are the Clients?”
After going through that formula and setting your rates, it’s probably a good idea to do a bit of market research in your area to find out what the ‘going rate’ is for similar services nearby. It’s important that you don’t set rates that are too low as this can cause damage to your business and the industry. Make sure you read my article about this from a couple of weeks ago.
How much to charge, setting rates, virtual assistant business
Michelle says
Unfortunately, Office Administration jobs here pay very poorly, so it’s hard to walk the line between making sure the industry is properly represented with their quality of work properly compensated for and charging what I am used to being paid. It makes me feel like I’m charging so much, just because there’s no jobs here that would pay even close to what Virtual Assistants are worth.
It’s difficult to make that shift, for me, and not undercut my (our!) services out of habit.
Thank you for the informative post!
Karalyn says
What we need to emphasize is the lack of overhead costs they have when using us. We use our own equipment — they don’t need to have an extra work station setting largely unused, just to have a place for a temp when they need one. They don’t pay for the time I spend checking email or running to the bathroom. They don’t pay for my insurance or vacation. And they don’t pay me for hours spent occupying a desk when they have no work for me.
I consistently hear from overseas VAs asking me to outsource my work to them — they will do my work for $5-8 per hour — but at what cost? If the quality of the work is lacking, I’ve gained nothing. As a paralegal I often review medical records in legal cases. I am still amazed at the incredibly bad medical transcription I see in these files — obviously the work was done where language was an issue. And just as obviously, the doctors never checked the work product afterwards (or filled in the blanks). I find this extremely worrisome from a nursing viewpoint as well as from the VA perspective.
Nearly a year ago I wrote “If You Pay Peanuts, You Get Monkeys.” Since I am still receiving emails on this article, you might find it helpful .(http://cardinalpointva.typepad.com/inside_out/2007/04/if_you_pay_pean.html)
I think you need to be very careful not to underprice yourself. Network and advertise on a national level. If you have experience and if you provide a truly excellent work product, you can feel secure in setting your rates at a level sufficient to support yourself. And finally, consider this: If something is priced too cheaply, it seldom receives respect. If you want to be respected for the work you do and the product you provide, you need to price it appropriately. Charging incredibly low rates often sends a message that your work is not up to par — instead of selling them on the valuable services you provide. Good luck.
Heidi Richards Mooney says
Looks like this is a universal subject and a dilemma many independent business owners struggle with.
I agree with Karalyn about the importance of not underpricing your services.
When first starting out, many service pros give their time away to get business and it is a good strategy, but when you have been around awhile I think it is better to “reward” clients for their support and referrals by offering an additional service or a one-time discount.
Have a great day… and then some.
Heidi
Karalyn says
Heidi:
I agree — the problem with giving time away or underpricing it in the beginning is at some point you need to raise your prices. That is often hard to do with your “original” customers at that point. I prefer to start them out at the rate I need to survive and then either give them an extra hour now and then or offer them a discount for bringing in work during certain hours, days or months when business is slower.
Karalyn