One of the hardest things to decide when you become a Virtual Assistant is how to set your rates. 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:
Charging by the hour
If you charge by the hour then you can only earn 8x your hourly rate. Plus not every hour you work is billable – you have your own admin to sort out, documents to familiarise yourself with, phone calls to take and make, and systems and docs to set up.
The unbillable hour can really add up.
The other downside to charging by the hour is that you’ll become quicker and better as you go along so you’ll actually end up being paid less the better you get.
And you don’t want that.
Remember the extras:
Don’t think that a high hourly rate means you’re making more than you did working in a full-time job. When you worked for a company you also received:
- Holiday pay
- Sick pay
- Maternity leave
- National Insurance and tax was sorted for you
- 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
- Training and network meetings
- Guaranteed hours
And now you won’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.
Here are the different ways you can charge:
How much to 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 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 dependant 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.
Do not go below £25 an hour in the UK and $30 an hour in the States.
Why £25 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!”
Charging by the project
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.
Which is the business model all freelancers strive to achieve!
It’s worth noting that project rates are always depended 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
If it’s a task you’ve done many times before then you should know how long it’ll take you. If you don’t then you might have to give a rough estimate then allow for a contingency budget depending on the scope. Have this as a clause in your T&Cs though and make sure this is clear from the start.
The key is to make sure you have a full understanding of the scope of the project. Send the client an email summarising the task as you see it (“I understand the task to be X, Y, Z etc”) then quote accordingly. Make sure you BOTH agree on what the task is and what you’re billing them for.
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 by the project is how you make the most money.
Charging a retainer
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 usually charged in advance for the month ahead not the month just gone.
So, if you charge the client £100 for four hours work at £25 per hour, they know they can use the four hours over the month and you know you’re definitely getting £100.
Some VAs offer a discount if the client books a certain amount of hours but this isn’t that common in other freelance industries. This is because the client is paying to retain your time – so bill them for the hours they’ve agreed whether they use them all or not.
Because the client is paying to guarantee your availability, feeling guilty that you’re invoicing them for hours they didn’t use is futile because it’s how retainers work – it’s actually the entire point of them!
Think of a retainer in the same way as 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 are paying for.
Nor would Netflix offer to roll over your payment if you decided not to watch any shows that month.
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 to 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 to set your rates
You’re not here to convince someone to hire you and, if you don’t think you are good at what you do, then you have no business being a VA.
- Do you think you’re good at what you do?
- Have you worked hard to gain your skills and experience?
- Do you think your skills are valuable in terms of saving or making people money or giving them more time?
- Are a lot of other VAs offering this service or are you a specialist in this area?
Then charge for what you’re worth.
You are a modern businesswoman. You’re not a little secretary or an office junior and you provide a skilled service. In fact, by doing what you do best, your client is freed up to get on with what they do best – which is usually making money for their business.
Don’t price yourself too low
It’s VERY 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 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 have a 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.
Market yourself as being someone who knows their industry inside out and demonstrate this with testimonials and case studies so a potential client can see you’re really good at what you do and can be confident you’re worth the money.
However you decide to price yourself (I use a combination of all three methods) make sure that everyone knows what’s what, you’re getting paid what you’re worth, the client is getting a top rate service, and remember to review your charges and services each year.
Resources and action
- Download my free Hourly Rate Calculator worksheet to work out what your hourly rate should be.
- Watch the interview I held with a pricing specialist on how Virtual Assistants can improve their pricing strategy and mindset. There’s loads of actionable advice that will make an immediate difference to your income.
- Buy the Society of Virtual Assistant’s annual UK survey. (And don’t forget to charge it to your expenses!)
- Consider investing in my pricing course and learn how to make more money without working more hours. Not only do I show you how to break through the hourly rate trap by charging project and package rates, but I also break down the psychology behind pricing and introduce you to many next-level pricing concepts you may not even be aware of.
- Watch this fantastic video called How We Sell: Men vs Women – then stop doing it!