How to Set Your Rates as a Virtual Assistant
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When you first launch your Virtual Assistant business, there are 1,000 different questions to answer. It’s an exciting time, but, let’s be honest. It can be craaaazy confusing too, right?
So let’s tackle one of the BIG questions I get asked often. You know you’re thinking it, too…
How much should I charge for my services?
Most VA’s just starting out have a very difficult time choosing a rate, because they feel like they don’t have the skills and experience to charge the price that they need to make their business succeed.
That’s why I’m going to break it all apart for you. I’ll show you how self-employment taxes need to be factored into your rate, how to determine what your starting rate should be based off of your hours/ availability and personal financial needs, and the difference between the various types of packages and pricing for your business.
Watch the video training on how to set your rates:
LET’S FACTOR FOR TAXES
Before you start setting your rates as a VA, it’s important to understand what your tax responsibilities will be.
As a Virtual Assistant, you will be considered an Independent Contractor. This means that you are contracted to perform services for others, without having the legal status of an employee.
The great news? As an Independent Contractor, you choose how, when, and where to work – for as much or little time as you want!
The not so great news? All the work that an HR department would handle for you as far as paying employment taxes, you get to do solo as an Independent Contractor. This means saving for and paying quarterly taxes and submitting all the necessary paperwork required to do so.
Something to soften the blow – as an Independent Contractor, you’ll have the advantage of deducting any necessary expenses needed to operate and grow your biz from your taxes.
Some deductions that may apply to you are:
• Education expenses, including enrollment in the SavvySystem
• Website Development
• Website Hosting
• Computer Purchase
• Advertising Expenses
• Subscriptions to software programs (i.e. Canva, Hoostsuite, Freshbooks)
• Business Cards
• Rent and Utilities for home office space (if used only for your business)
• Office equipment and expenses
• Professional Consulting Expenses
• Business Travel Expenses
• Freelancing Expenses (when you subcontract out your work)
Let me go ahead and throw this out there.
From the beginning – record EVERYTHING.
There’s nothing worse than coming around to tax time and realizing that your invoices and receipts are all over the place, and missing out on deductions because you weren’t organized enough in the first place.
As an independent contractor, you’ll need to save back 30-35% of your gross income to pay quarterly taxes. If you don’t pay quarterly, you’ll likely be hit with late fees when you pay your yearly taxes.
As always, it’s best to talk with a tax professional regarding your individual situation. If you’re looking for someone to discuss the details of your tax requirements as a Virtual Assistant, I recommend chatting with Amy Northard. She specializes in accounting for creative entrepreneurs and her advice is legit!
When it comes to factoring your rate with consideration of your taxes, we’re going to assume that you’ll need to save back 30% of your monthly income for taxes.
HOW MUCH DO YOU NEED?
If you are planning to have your Virtual Assistant business be your main source of income, it’s a good idea to determine your rates by working backward from what you need to make.
So, let’s say you make $4,000 (gross income) in a month from your VA Services. Now – you’ll want to save about 30% back for taxes.
You made $4,000 last month? You’ll save around $1400 for taxes, leaving you with about $2,600 remaining.
Need to take home $4,000 each month to cover your bills, fees and expenses?
You’ll need to bring in about $5715 for that month in gross profit.
Remember – in this article we are talking about coming up with an ideal hourly rate for you. To really grow your business and skyrocket into making 5k-10k months and beyond, you’ll eventually start subcontracting some of the work that you do and targeting high-end clients with specialized services. The purpose of this particular article is simply to determine your base VA rate and monthly budget.
HOW MUCH TIME DO YOU HAVE?
Being an entrepreneur is not easy.
It’s not something that you can just do in your “spare time” (especially if you are looking for full-time income!).
In the beginning, you’ll have to HUSTLE to get clients. You will put in countless hours, wake up early, and stay up late to make the sale.
Brew up another pot of coffee… ‘cause there are some late nights in your future.
If you have 3 hours to commit per week to start your own business, go ahead and stop reading.
I know things are busy. I know your life is hectic. But I challenge you, don’t FIND time in your schedule.
Go ahead and decide how many hours you are going to commit to running your business. I suggest making 5 hours per week (at the bare minimum) JUST for building and advertising your business when you first startup. Then, you will have to decide how many “workable hours” you have on top of that.
You may have to get a babysitter one day a week. You may have to wake up 2 hours early. You may have to work during nap time instead of watching the Bachelorette.
How many workable hours will you have during your week, if you schedule your time well?
I challenge you – go ahead and block out your time in your planner or calendar. Decide on the hours you are going to work on your biz and let that time be non-negotiable for change.
LET’S DETERMINE YOUR RATE
So – you’ve figured out how much to need to gross per month when factoring in taxes to meet your monthly budgeting needs.
You’ve also planned out how many workable hours you will have each week to meet your goals.
Now, we will use this information to determine your rate.
Let’s say you can commit 40 total hours per week to your business. We will subtract 5 hours for you to work on developing and marketing your business. Now, you have 35 workable hours per week. That’s roughly 120 hours per month that you can be making money in your business.
We will use this simple formula to discover the rate you should be charging:
$5715 Gross Income Needed / 140 Hours = $40.82 per hour
Maybe you’re only able to work part-time on your VA business. We can also work backward to find out how much you could make starting out as a VA.
Let’s meet Jane.
Jane has 20 hours per week to commit to working on her business.
She’s going to spend 5 hours per week developing her business and marketing her services.
That means she has 15 hours to commit to working for clients. That’s about 60 hours per month.
She is just starting out, so a rate she feels comfortable charging is $27 per hour, at least for her first clients.
60 Hours Per Month x $27 per Hour = $1620 Gross Income
Let’s subtract the 30% you’ll need to save back for taxes.
$1620 x .3 = $486 to save. That leaves you with $1,134 net income for the month!
LET’S TALK VARIANCES
At this point, your brain may be racing. Let’s chat about what may be running through your head:
I can’t charge that kind of money!
Yes. Yes you can. You have experience and skills that people are willing to pay for! When you factor taxes and expenses for running your business, the take-home rate must be enough for you to live off of!
Here’s what you’ll find. If you offer your services at $10 an hour, you’ll get treated accordingly. People won’t respect your time as much and will want to get the best “bang for their buck”.
Repeat to yourself: “I am not a discount service”.
What’s even the going rate for specific skills?
If you have general Admin, Design, or Marketing Skills (data entry, social media posting, simple graphics, basic calendar management, etc) the going rate is $25 – $40 per hour.
If you have Advanced Skills (Creating graphics, WordPress Edits, Writing Optimized Content, Course Creation, etc.) you can easily charge $30 – $50 per hour.
If you have Specialized Skills (Web Design, SEO, Building Landing Pages, Social Media Strategy, Infusionsoft, etc) your rates should be no lower than $50 per hour. You can go up from there as needed.
I have no idea where to start my rates!
If you are going back and forth on deciding where to start your rates for general admin work, take this advice.
Start out at $25 per hour and sign your first client.
Then, with each new client, sign your rates $2.50 more.
For your second client, you’ll charge $27.50 per hour. Your third, $30 per hour and so on.
Your skill and comfort are growing, so your rates should too.
Once you determine your hourly rate, you can decide how you will package your services. Let’s look at the various ways you can package your services as a VA, so you can decide which is best for you.
Hourly Rate Pricing
Hourly rate pricing is where you set a particular hourly price for your services, keep track of your time, and bill your client after the work has been completed. Some clients prefer this method, as they know they are only paying for hours that were worked specifically for them. The downfall – you won’t have guaranteed income each month, as some months your clients may utilize your services for 20 hours and some months they may only utilize 2 hours.
Project Based Packages
A Project-Based Package can be used when a client has a one-time project to complete, and you will charge them a flat rate fee for the project. This is best done by approximating how much time it will take you to complete the project and charging at least your decided hourly rate, multiplied by that projected amount of time. This type of pricing is often used for large-scale projects, like a web design, course creation, or social media overhaul package. Often, the VA will collect half of the funds up-front and the other half after the project has been completed. One issue you may run into with this type of packaging is an inadequate estimate of time needed to complete a certain project or service.
A retainer is a monthly package for those who need reoccurring help in their business. For example, a client will pre-pay for 20 hours of services rendered per month on a recurring basis. As a VA, you will still need to provide details of how your time was spent each month. This is a great option for VA’s who would like more security and the ability to project monthly earnings. Plus, you will be paid up-front, which means that you won’t have to deal with unpaid invoices for work already completed!
Usable Hours Packages
With this type of pricing method, your client will pay for a certain amount of hours, to be used at their discretion. These hours are not renewed on a monthly basis. You will keep a record of the hours you have used and, once all hours have been used up, the client can choose to purchase another package of hours or not. It may be helpful to you as a VA to put an expiration on the hours after purchase (example: hours must be utilized within 6 months or a year after purchase).
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