Today’s Quote: From the law firm’s perspective, billing by the hour has a certain appeal: it shifts risk from the firm to the client in case the work takes longer than expected. But from a client’s perspective, it doesn’t work so well. It gives lawyers an incentive to overstaff and to over-research cases. – Robert Pozen
Welcome to another episode of the podcast that teaches you how to be a ridiculously good virtual assistant.
Today I am going to share the truth about billing your VA clients by the hour. I’ll tell you why all VAs should be doing it – no matter what their invoice looks like each month.
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Connect with Tracey D’Aviero, VA Coach and Trainer
Episode Notes:
As a business owner, you can choose to bill your VA clients anyway you want.
No one gets to decide how much you charge, how you work, or anything else.
Its totally your choice, and the only thing you really need to do is make sure that whatever you are doing is consistent – and profitable.
You are, after all, in business. And without running a profit, you will not be able to stay in business.
And the money you earn to do work for clients is the thing that keeps your business running. Your revenue.
Today I want to talk about charging your clients hourly – the good, the bad, and what you need to consider if this is a route that you want to go.
Why would you choose to bill your clients hourly? It can seem clearer – work done = time paid.
There really isn’t a simpler way to charge for your time when you operate a service business like a VA business.
But you can also shoot yourself in the foot when you are charging hourly, because of a number of reasons:
For one thing, you can miss time that should have been billed.
If I had a dollar for every time a VA told me they are working hard all day and they are only billing 4 or 5 hours a day to their clients … well, I would be pretty wealthy.
It’s a common issue. You think you are tracking every last minute but you aren’t. You forget to write something down, or you work at a super fast pace because you are busy. Your money earned is lower than the work you have actually done.
When you work faster, you actually make less money.
Not to say that you should be taking your sweet time doing whatever tasks your clients need, but you do need to consider your work pace and keep at a regular one in order to ensure that you are not losing money.
And aside from work pace, the more you do something, naturally the better you get at it – and that also means money coming out of your pocket (even though the client gets the work done).
And in terms of forgetting to record something, there are ways you can track your time, but you are not a robot and you are not an employee so it really is a backward way of kind of running your business.
The bottom line is that it doesn’t matter what the clients want. It’s your business and you need to get yourself and your policies and terms sorted out, and then relay them to your clients.
The way I prefer to teach VAs like you to is to bill your clients by task – which still uses your billable rate and the clock on the wall – just not WHILE you are doing the work for the client.
It’s basically about setting a flat rate per task or service you offer. It is based on the time it takes to get that task done, but it doesn’t involved counting hours.
You take your billable rate x the estimated time to complete the task – ie a newsletter might take 90 minutes, and your billable rate is $40 per hour. That means your newsletter will cost the client $60 each time you do it. Four newsletters a month and you bill your client $240. No surprises.
You definitely need to know how long things take you to do in order to create task pricing like this So you have to do it, practice, and make sure you add in time for things to not go perfectly well each time.
And THEN when you set that time, it’s up to you to make sure it’s right – you have to strive to get that task done within your estimate time.
When you work hourly, you keep track of how much time you work. This can be bad because you can take too long to do something.
Example: Six hour research project from my VA.
Charging by the hour can be accurate but as I mentioned earlier, you can also miss time – and also clients might nickel and dime you if you provide them with detailed billing at the end of the month.
Often if you are billing by the hour clients will want detailed billing.
They need to treat you as a professional and pay you accordingly too
It does make it easier to add on new tasks or services but you can also do that with task billing.
Aside from your clients asking for your detailed records, you need them for yourself because you need to ensure that you are billing them the right amount.
Billing by the minute does not work, it’s impossible to account for every second of time that you work for a client, even if you are using a time tracking software. If you are charging by the hour, bill by an increment of at least 10 or 15 minutes.
Also don’t overcharge your clients … as an added note. ‘Anything I do costs the client an hour.’ That’s just ripping them off.
It just makes more sense to me to track the tasks you do and assign the time it takes to do it, so that’s why I teach it that way.
Some things are black and white like the newsletter, and some things are not.
You need to look at tasks that are open ended like checking email – this is a common service that VAs offer and you can waste a lot of unnecessary time doing it if you don’t manage it properly.
How do I teach you to manage someone’s email? Easy check it a set number of times a day – once, twice, five times, whatever. Charge the client a set amount of time for each ‘check’. If there is a lot of stuff that needs doing on each check, that time will be more than if there isn’t anything to respond to or file or whatever.
Multiply the set time by the number of times you are going to check it every day and then multiply that number times the number of business days in a month (usually 22). There’s your fee for managing the client’s email for the month.
And yes sometimes you will do more work at a check than other times, but it should all work out over the course of the month. If not, you adjust the fee up or down when you have a better idea of how much time you are using to do that task.
For instance, if there is rarely anything to do when you check, maybe you reduce the number of times you are checking – adjusting the bill down.
Alternately if you are spending more time than you estimated on a daily basis, then you will increase the billable time per check.
For most of my clients, who were 6 and 7 figure business coaches, even when they were very busy, I found that 15 to 30 minutes a day was more than enough to handle email for them. Usually 15. Checking twice a day totals 11 hours a month, and it’s usually more than enough to keep on top of it. If you want to book in 20 minutes, then that’s 15 hours per month.
No one needs their email checked every hour, unless they are in the middle of a launch – in which case you will bill them straight hours of time, not check ins anyway.
It makes everything so much easier. You still need to keep track of your time on your end to be sure that your estimate time is accurate, but you remove the minute counting and potential detailed billing issues with the client.
You tell the client that you will bill them 15 hours per month to take care of their email – and that’s it.
Trust is an issue with virtual work – not just for VAs – are you working? how long do things take? did it really take you that long to do xyz? And doing things this way removes the extra stuff that might get in the way of just doing the work for a set rate.
When you start out, hourly billing is usually easiest but as soon as you know how long things will take, you need to shift to a better way.
You can work that into your business by starting each client out monthly and then transitioning 3 months later to a set fee – if you outline this for them from the start, it can be really easy – and you won’t have to worry about not getting their flat rate or task billing quite right from the start.
It’s simply more efficient and easier for everyone to charge by task.
The other thing with charging hourly is often you do the work before you get paid – and sometimes that means that you can get burned by a non paying client which is never ideal.
So it protects your business to get paid upfront and then do the work. Although that can be a difficult transition for some clients and VAs, it’s very common to prepay for everything you get these days and so it’s a good model for everyone.
If you bill afterward you can also surprise your client with a really high bill at the end of the month. Some VAs will keep doing work and tasks and just keep racking up the time, and then client is overwhelmed at the end of the month.
Getting back to today’s quote, you don’t need to overdo it because you are charging by the hour.
If you are billing by the hour, be sure that you still have the client’s budget in mind and that you keep them up to date every week on how much time you have used out of their budget.
Surprises are bad business and not recommended. Just because a client sends you work to do doesn’t mean that they are approving you to spend as much of their money as you want.
Keeping things in check is really important – it is their money after all. Yes you are doing the work, but they get to agree to how to spend their money.
This is a much more common issue than it should be with VAs. You are responsible to be professional and not just be a task taker.
Imagine for yourself if you are expecting to pay a certain amount of money for something, and then the bill comes and it’s more than you expected. And you had no notice. How do you feel about that? You have to think about that, and conduct your VA business accordingly.
Another thing about hourly billing is it is more difficult to raise your rates.
Letting your client do the math is one of the ways that you can get devalued, or treated as less than the expert that you are.
If you tell someone your billable rate if $40/hour, and let them do the math in their head, based on how long they think something will take to do, you could lose the client.
And if you tell them your billable rate is going up by $X/hour, they will do that math all over again.
Your rates are your rates. You can charge whatever you want. Your clients need to know how much it will cost them to work with you.
I always say your client wants to know two things: what you can do for them, and how much it will cost them. So its your job to tell them that.
I’m going to leave it here for today. you get the idea.
Ask about their budget. Work within in.
Figure out your task rates and estimated times. Use those to quote and bill.
YOU make the decisions. How will you bill? What does that look like?
How can you ensure that you are going to get paid properly and on time?
How can you ensure that your client doesn’t get surprised and pays the right amount for the work they get done?
How can you make it easy to fix or adjust your rates regularly if the client’s workload changes?
In short, how can you make things easier for everyone?
Need Some Help?
This is exactly what I help VAs do. As a VA coach and trainer, I help you set yourself up for success, helping you fix whatever is going wrong in your business. When we work together either privately or in a group we talk specifically about your business and you – there is no one stop solution for everyone when it comes to service businesses like VA businesses.
I’ll help you get clarity around your issues, and cheer you on as you walk through the steps to fix them.
I’ve helped hundreds of VAs through their challenges and got them on their way to growing their business and the lifestyle that they dream of.
I’d love to do the same for you.
You can work with me privately, or you can join The Virtual Circle, my mastermind group for Virtual Assistants. Check it out at www.YourVAMentor.com/TVC (the virtual circle) – I bet it’s exactly what you need to start running the VA business you dreamed of.
Reach out to me if you are interested.
That’s all I’ve got for you this week, see you next time!