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.
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/
Posted by: George Williams | 05 October 2009 at 04:06 PM