One of the hardest things to decide when you become a Virtual Assistant is how to price your services. If you charge by the hour then you’ll never earn more than there are hours in the day, which is why it’s better to get a client on a retainer or charge a project rate. “But how does that work and how do I do that?!” I hear you cry. Well let’s look at those options in more detail.
If you charge by the hour then you’re limited by the number of working hours in a day. However, not every hour is billable. There’s your own admin to sort out, documents to familiarise yourself with, email to write and reply to, phone calls to take and make, marketing to do, accounts to balance and 1000 other bits and bobs.
I read once that there is actually only around 5 billable hours in a day.
The other downside to charging by the hour is that you become faster over time – which means you’ll actually end up being paid less money the better you get.
Remember the extras
And don’t forget that when you worked for a company you also received:
- Holiday pay
- Sick pay
- Maternity leave
- Petrol and mileage
- All your equipment including desk, stationery, phone storage space etc
- Utilities including broadband, phone lines, water, heating, electricity and rent
- Free coffee and tea
- Tax and national insurance being dealt with for you
- Free skills training
- Guaranteed hours
- Job security
And now you don’t.
So when you’re working out how much to charge remember that you’ll be at home using water, heating, broadband, your phone and electricity. You’ll also be buying all your own stationery and paying for all the extras yourself. Yes, you can put a lot of it on your expenses, but it still adds up.
Psychologically, this works better on many levels because you can charge more and still keep the client happy because you’re providing value.
Clients always think tasks take you less time to complete than they actually do, so if you give them a total price for the entire project (incorporating time spent on the task plus all the extras like email and phone correspondence etc) then they know how much it will cost them and you know how much you’re getting paid.
They aren’t quibbling over your timeframe as only you know how long the project will take you. Remember that you’ll be faster and better the longer you’re a VA so tasks won’t take you as long to complete and you’ll earn more money for working fewer hours.
This is the business model all freelancers strive to achieve!
It’s worth noting that project rates are always dependent on the task. So I would quote my hourly rate on my website but then say retainers and project rates were available upon discussion.
This way the client had a rough ballpark figure of my prices but we could have a chat and come to an agreement if they wanted a project price.
How to know how long a project will take
There are a few ways to estimate how long a task will take although if it’s a task you’ve done many times before then you should know how long it’ll take you.
One example is to run a mock version yourself and time it. Or you could ask the client for a sample of data. That way you have something to start with and you can multiply it to scale.
Add an extra 33% to the time you estimate because tasks always take longer than you think.
The most important thing is to make sure you have a full understanding of the scope of the project, so send the client an email summarising the task as you see it (“I understand the task to be X, Y, Z etc”) and then quote accordingly.
I would always say something like “this quote is based on the perimeters of the brief provided. If the brief should change then so will the quote.”
You need to BOTH agree on what the task is and what you will be billing them for.
If you have provided a rough estimate then allow for a contingency budget depending on the scope. Have this as a clause in your T&Cs and make sure this is clear from the start.
You will occasionally get it wrong and end up undercharging but then you know for next time and you most certainly will never make that mistake again!
Charging per project is how you will make the most money.
A retainer is a great option when you have a client who needs bitty things done. Some clients need tasks done here and there and, if you charge by the hour, it often won’t add up to much.
The great thing about retainers is that the client knows what they get for their money and what their invoice will be, and you know how much money you’ll be getting each month whether they use up their allotted hours or not.
Plus retainers are always charged in advance for the month ahead, not the month just gone.
So, if you charge the client for ten hours of work at £27 per hour, they know they have secured ten hours of your time and won’t have to worry you won’t have availability for their tasks, and you know you’re definitely getting £270 at the beginning of the month.
Discounts on block bookings
Some VAs offer a discount if the client books a certain amount of hours but this isn’t that common in other freelance industries. I think it’s just another example of VAs trying to be ‘helpful’ which translates as giving their time away for free!
Personally, I don’t think discounts are a good idea because every hour you’re working at a discounted rate is an hour you could be working at your full rate for another client. Clients are paying to retain your time, remember; they just want the security of knowing you will always have time for their tasks.
If a client wants to hire you for your specific skills and experience they will be more than happy to pay your going rate.
Rolling over hours
Your client is paying to retain your time and guarantee your availability so you should bill them for the hours they’ve requested whether they use them or not.
Some VAs feel ‘guilty’ about this but you’re a professional business owner and this is actually how retainers work – it’s actually the entire point of them and how you make your money.
Just remind the client how many hours they’ve used up. It’s not your job to Mother them.
It might help to think of a retainer in the same way as you would a gym membership.
If you only go to the gym twice in one month (or not at all) the gym is not going to offer to roll your subscription over because you didn’t use the facilities you signed up for.
Nor would Netflix offer to roll over your payment if you decided not to watch any shows that month.
Also, if you allow a client to roll over their hours you will never know how many hours you will be working that month which means you can’t plan your time, you’ll lose money and your life will be chaos.
Minimum retainer hours
Some VAs only offer a minimum number of retainer hours. When asked, the more experienced VA in my VA Handbookers Facebook group said ten was the minimum number and for these reasons:
“My min is 10hrs a month. I used to offer 5 but they never move up from 5 and also, 5 hr people are quite hard work! You just can’t make a big enough impact in 5 hrs.”
“My minimum 10 hours. It takes time to really dig in and get to know a client and their business, and less than that in an entire month does end up feeling like you’re always playing catch-up and “Oh yeah there’s this other thing, but it will have to wait…” And yes, the ones who are on very small packages often end up being the most high-maintenance.”
“I used to do 5-hour packages but soon got rid of them as they were a real pain. I don’t take people on retainers unless they need at least 10 hours.”
How to suggest a retainer
Your goal is to get a client on a retainer but only give them this option once you’ve been working together for a while and have proved your worth to them. Neither of you knows if you like working together yet – you don’t want to get saddled with a bad client and they don’t even know if you’re good at your job yet.
A client will rarely sign up for a retainer before they’ve spent some time working with you.
The main thing about selling anything to anyone is that you always have to outline what’s in it for them and not you. So you could say something like:
“Hey, we’ve been working together for a few months now, I love working with you and I know you’re happy with my work as well; your tasks always seem to take around x hours so why don’t we set up a monthly retainer instead of billing by the hour.
This way you’ll always know how much your invoice is going to be, but more importantly, you’ll be secure in the knowledge that I actually have the time put aside for your tasks.
My business is growing quite quickly and I want to make sure I always have availability for you.”
How much should you charge?
According to the Society of Virtual Assistant’s annual survey, the average rate for a VA in the UK is around £27 an hour. My Facebook group members inform me that the average hourly rate in the States is between $30 and $60 depending on expertise and experience.
I charge £30 an hour (I specialise in social media analysis and other techie services) but clients are usually given project rates due to the nature of their tasks. So I might quote £x for setting up a 10-email newsletter sequence but the quote will vary depending on the task because no two projects are exactly the same.
Remember that you will need to add a minimum of 25% (I’d err on the safe side and go with 30%) to your rates to cover tax and other expenses. So if you were thinking about charging £22 an hour then multiply £22 by 1.25 and quote around £27 an hour.
Asa rule of thumb, do not go below £25 an hour in the UK and $30 an hour in the States.
Why £27 an hour?
Below is a post by one of the members of my VA Handbookers Facebook group on how she worked out her hourly rate. It’s a really popular post and one we refer back to time and time again.
“I’ve seen a lot of posts recently about people considering offering a discount, lower rate, free trials etc so I did a little exercise to work out how much it really costs for me to be a VA. This is quite a long thread but hopefully worth it if you’re doubting your hourly rate.
Start with the basics per hour:
- Minimum UK wage = £8.72 (wait I come back to this**)
- Business insurance = 3p (due to the type of work I do I took out personal indemnity insurance)
- National insurance = 15p (self employed contributions)
- Tax = £1.74 (20% of minimum wage)
- Simplified Working from Home Allowance = 22p (based on HMRC self-employment guidelines)
Total = £10.86 per hour
** I’d like to be earning more than minimum wage so £15 an hour seems fair and if I got a new job I’d be looking for a pay increase. Plus, I do have 14 years of experience.
So, new hourly rate = £15
But hang on – I don’t want to work 35 hours a week anymore. Okay, 5 hours a day seems fair enough. Hmmmm… £15 per hour x 35 hours = £525. Divide that by 25 hours = £21
Right, new hourly rate = £21
But wait! I need to make a profit as it’s a business after all. So, what’s a healthy profit margin? Google says 25% so £21 divided by 4 = £5.25. That makes the new rate £26.25
New hourly rate = £26.25
Ooops, I forgot to add admin, website costs, and training and there’s bound to be other annual costs I’ve not included so let’s round it up to £27.
Well, what do you know, £27 per hour is a good rate!
Final hourly rate = £27
I used some science and a few estimates but it’s roughly about right. But importantly, no longer will I be justifying my hourly charge in my head!”
Mindset is key when it comes to pricing
Imagine if you wanted to hire an Accountant or a Web Developer and when you spoke to them they seemed to lack confidence in their skills and were apologetic about their rates.
You’d be worried.
Now, this sounds harsh but if you don’t think you are good at what you do, then you’re going to struggle to run your own business.
You are a professional business owner and it’s important to come across as confident in your abilities and your fees – even if you’re new and don’t feel that way inside. This is why I always recommend that you start out by offering what you know.
If you do this then you’ll know how to do the tasks, you’ll know what to charge, you’ll know who to approach and you’ll know how to market your services.
If you offer or take on tasks that you have no idea how to do when you start out, the opposite of the above will be true. Plus, if you mess up your confidence will take a beating, and you’ll start to question whether you’ve made the right decision.
Don’t price yourself too low
It’s important that you position yourself well and a client can see that you’re good at what you do. If you’re really cheap people may think your work will be of poor quality and that you don’t value what you do.
So they won’t either.
People who are looking for a cheap deal will always go for the lower rate anyway so don’t try to compete with other VAs on price because there will always be someone cheaper than you and you do not want to be in a race to the bottom.
If you go in too low then it will be much harder to raise your prices later.
It’s also worth knowing that the previous average UK hourly rate of £25 an hour was set after the last recession because the cheaper VAs couldn’t afford to stay in business.
It’s much better to pitch yourself as having a speciality and charge accordingly.
It’s a fact that many people won’t understand or appreciate the value of what you do, but there are plenty of people on the planet who will.
You shouldn’t waste your time on someone who just wants the cheapest price instead, you need to focus your efforts on finding clients who are looking for a fantastic service and who are happy to pay for it. This is why you should focus on leveraging your niche.
Show your value and worth
You cannot underestimate the value clients place on you being reliable, consistent, easy to work with, great at communicating, a brilliant problem solver, and able to understand and anticipate their needs. They WILL pay good money for these qualities because they are actually hard to find.
You’d think every VA would deliver these things but they do not.
Many VAs communicate poorly with their clients, don’t update them on the status of their tasks, use personal problems as an excuse for missing deadlines, leave their clients in the lurch and mess them about.
So market yourself as being someone who is reliable, is good at what they do and knows what they’re doing. You can back this up with testimonials and case studies.
If you’re confident that you’re worth the money then your clients will be as well.
Be mindful of freebies
Sometimes you may want to ‘be kind’ to clients and end up massively overservicing them and giving away time for free. While a small amount is understandable, it can easily add up. For instance:
Imagine you charge £27 an hour and you give one client a free 15-minute catch-up call each week. That means you’re giving away one hour a month – which equals £324 a year.
And that’s just one client for just 15 minutes a week.
So again, while how you manage your clients is up to you, please be aware that time is money… your money.
While you will probably use a combination of pricing methods the most important thing is to be clear about how much you charge and to be confident with your pricing decisions.
Make sure your client always receives a top rate service (but don’t overservice them), they always know what they’re being charged for (and when and how) and be sure to review your rates each year.
Want to make more money without working more hours?
My pricing course shows you how to break through the hourly rate trap by charging project and package rates. I also explain the psychology of pricing and introduce you to pricing tricks you may not even be aware of.