How did you arrive at your rates for your VA business? If you didn’t do any calculations, you need to read this.
Setting your rates is one of the most important things you need to do properly in your Virtual Assistant business.
Rates that are too low will cut into your profitability, and might even put you out of business.
Rates that are too high can also keep you from getting clients, if you aren’t looking in the right place, or if you can’t articulate the value you are bringing to clients.
If you have not done the ‘math’ to set your rates, it’s time to look at that.
Here’s how you need to do this:
What Do You Need to Bring In?
You need to begin by thinking about how much money you need to bring in to your household each month, to contribute in the way that you would at a corporate job, or in the way that you want to. For instance, if you need to bring in $1,000 or $2,000 or even $5,000 a month, start with that number. Whether it’s mortgage payments, grocery bills or vacation money, getting a clear idea of what you want to be able to earn money to pay for is essential in setting your rates properly.
Account For Expenses
In order for you to make sure you account for all of your expenses in your business, you need to figure that into your ‘net’ amount above. What I mean by that is that if you need to pay $2500 to your mortgage each month, you have to bring in more than that to have the $2500 clear, just like when you are working in a job. Your gross salary has deductions on it and you receive your net pay. In your business it’s the same thing. All of the money that comes into the business is not yours. You have to pay taxes and expenses out of what comes in, so you have to work that in. Typically you should add on about about 30% for business expenses. So, your $2500 plus 30% is $3250. That means you now have to bring in $3250 to clear $2500.
How Much Will You Work?
The next step is to determine how many hours a week you have available to do client work. A full VA business will typically bill out around 30 hours a week (120 hours/month), with another 8 to 10 to be allotted for administration of the business. Don’t forget that time, especially because it’s not billable, but it still has to be factored into your overall time. And you don’t have to bill out the maximum when you are starting out.
Doing the Math
The final step is to do the math. Take your gross revenue and divide it by the hours you will work to get your billable rate. In this example, $3250 divided by 120 hours will be $27 per hour. That means you need to bill $27 per hour to earn what you want, working the number of hours you want.
Did this exercise surprise you at all? How do your rates compare – and what about the total revenue and working hours each week? Are yours higher or lower?
In order to ensure that you will be able to stay in business for a long time, and that you will happy with the clients you bring on board, taking the time to set your rates properly is an important exercise.
And of course anytime your monthly revenue needs to change, or your billable hours change, or your expenses change, you can redo this calculation and make a change!
If you need to figure out how much your billable rate should be, download my free Rate Calculation Package and figure it out! It will show you the variety of ways you can bring revenue into your VA business so you can make sure you are charging the right amount starting now!