What are you worth? (or pricing your VA services!)

I make no apology for the contentious question - I think it's good to think about this carefully and adjust your ideas if they are not serving you well!

In the current economic climate with shops offering sales and discounts to draw customers in to buy, it may seem tempting to drop the price of your services.  My accountant firmly steered me away from such thoughts when I established my limited company in 2006 (after three years as a sole trader). 

He showed me a handy little chart that clearly showed whenever as business owners we cut our prices we then have to attract even more customers just to keep standing still!  A recipe for disaster if we already are busy...unless of course we want to work 7 days a week.

So what do you charge?  Does it reflect what your services are worth or is it simply an indication of the economic fear that seems to abound in the news? (well prior to the MP expenses scandal of course!)

There are a number of things to consider when working out your pricing, and I'll address each below:

What income do you want to generate from your business?

In simple terms, how much money do you want to make?  Now I know it's not very "British" to talk about money, but I think it's time to buck the trend!  One useful way of working out what your hourly rate should be is to work backwards starting with an annual figure.  For example:

If you wish to make £30,000 per annum, first you need to work out how many hours you want to work (remember that these are client billable hours and you MUST set aside time for your own business administration and development - working ON your business as well as IN it).

Start with taking off holiday, say 4 weeks a year.  This leaves you with 48 weeks in which to run your business. To make £30,000 you therefore need to generate £625 per week (£30,000 divided by 48 weeks).

Now you want to work out how many hours you want to work a week (see above for working ON as well as IN your business).  Say you want to work with clients 24 hours per week - divide £625 by 24 (hours) and you come out with £26 - this is your hourly rate.

Valuing the VA Industry

Are you the sole bread-winner for yourself/family or are you running your business for something to do?  Either way, don't undersell yourself, as you not only de-value your own work, but that of all other VAs.  If you are offering full virtual PA services for as little as £15 an hour how does that reflect on the industry as a whole?  (I'll get off my soap-box now!)

VA versus PA - like for like?

Running a VA business it's easy to try and compare what you made at your last job, however it's not truly a like for like comparison.

If your salary was £25,000 per annum you were likely costing your employer 2.5 x that figure - that's a whopping £62,500!  Remember your company has to cover the following costs for each employee:

Tax & NI
Holiday & sick pay
Benefits - pension, profit share etc.
Office space (think of the price of commercial property in London!)
Equipment
Training

It all adds up...

The cost of temporary staff

Again this isn't a great comparison - how many times have you been in an office where you (as a temp) or other temps are sitting around with not enough to do.  Obviously this is not always the case, but compared to a VA who ONLY charges for time spent on client projects, sitting around soon adds up!

I'd suggest VAs always win in cost terms over temporary staff...

What are you worth?

When you value yourself, your skills and what you offer to clients in terms of support you start to really think about how much you are worth.  VAs tend to have many years experience prior to setting up their business so their administrative skills are top notch.  It's all too easy to think that as you are just starting out in business you should therefore cut your prices as you are a "newbie".  Well you may be new at running a business but you are certainly NOT new at being a top level PA!

The danger in offering services too cheap is that when you've been set up a while and are confident about charging new clients a higher rate, you can become irritated with clients that are paying you less for the same services.  It is always useful to review your pricing each year, however it's not a good idea to hike up prices in too big increments!

Be confident about charging your worth right from the beginning - don't worry if other VAs are charging much less - to be honest they unlikely to survive in business in the long run if they are pricing themselves too cheaply.

In summary, charge what you are worth and when clients approach you, stress that cost is not the only factor to take into consideration when choosing to work with a VA.  You are a highly skilled professional who will be adding value to their business, enabling them to do more of what they do best charging their own professional fees.

Comments

[George Williams]

Very handy basic strategy, I'll paste this on my Blog. So many in my industry (Arts/Entertainement) have no clue how to price their services and regular price wars break out each time a new artist appears on the market place. Thanks.

http://spotongeorge.wordpress.com/2009/05/08/under-pricing/