Setting your rates can be one of the most challenging things to do in your VA business.
There is often a confidence issue that rears its ugly head when you are starting out – you think you have no experience, you aren’t sure your rates are even competitive, and you don’t want any clients to say no when you tell them what you charge.
And if you have been in business for a while, you may still struggle to raise your rates when you need to (especially if you started out much too low).
But in order to run a successful VA business – and stay in business – you need to set your rates properly.
Either way, it’s not hard to figure out how to do this.
How Much Do You Need to Earn?
Start by calculating how much you need to bring in every month. Usually we look at replacing the salary at our job. So if you made $40,000 at your job, what was your take-home pay? That’s where you can start if you want to earn the same amount from your VA business. Let’s call it around $2,000 a month.
But then you also have to factor in what you need to pay out in your business.
How Much Do You Need to Pay Out?
Expenses are an important part of business – and tracking them is the first step. You definitely need to allow for your taxes (work with 30% in most areas to make sure you are covered for taxes).
Write out any expenses you will need to allow for in your business – and for easy math, even if you just pay something annually like a web host, divide that amount by 12 to get a monthly amount, so you can do the expenses math properly.
Here is the important part: instead of subtracting these expense dollars from your monthly ‘need to earn’, which is naturally what you think you need to, ADD them to the original $2000 you need to earn.
So if the expenses you will incur are around $300 per month, plus taxes at 30% ($600), you will then need to bring in $2900 a month to make sure your take-home ‘pay’ remains where you need it to be. Make sense?
How Much Can You Work?
Once you know your monthly revenue goal, then figure out how many hours a week you can bill to clients. Make no mistake that most hours are billable to your clients for their work – but as a business owner, you will also have to make sure you save enough time to RUN your business. Admin, marketing, networking, and more have to be factored into your calendar as well – and those costs are not hard billed to clients.
So say you can bill out 5 or 6 hours a day, because the rest of the time you will need to be tending to admin or marketing tasks, then that is 30 hours a week, or 120 hours a month.
$2900 divided by 120 hours = $24.16. So your billable rate has to be at least that in order to meet your revenue and take-home goals.
That’s basically it. You can certainly charge more (don’t charge less than $25 even when starting out. Just don’t!) but now you know that you can get to where you want to go because you have done the math.
When you take the time to do the math around your rates, you will understand where the money will end up when it comes in, and you can make better plans and better decisions.
Set your rates properly from the start (or if you didn’t do it then, do it right now!) and your business will be more stable, more profitable, and you will be much happier!
I’d love to help you set or adjust your pricing. Private coaching is a great option to help you choose your best service offerings, check out your market’s viability and set rates that help you run a profitable business working with great clients. Learn more about private coaching here: www.YourVAMentor.com/services