By Tina Hilton of Clerical Advantage

A while ago I did a post concerning whether or not a new VA should charge less. Regardless of whether they should have to or not, many of them do. But unfortunately they are doing so out of a lack of understanding about setting their business rates, rather than because they feel being new means costing less.
What do I mean by that?
I’ve notice that many new VA’s are charging in the $20 to $25 per hour range. When I see this, I wonder just what formula they used to determine that.  Sadly, I think few of them actually use any type of formula.  I believe that they look at $20 or $25 an hour as a great hourly pay. And granted, if an employer offered you that it would be pretty respectable. Yet, for someone running their own business, it’s very low. And it makes me wonder.
I wonder if :

• They are taking into consideration that they need to pay their own taxes.  That’s a hefty 15.3% of income. You can find a calculator here that will help you see how much you would owe in self employment taxes based on an actual or estimated income amount. For example, if you made 24,000 this year with your virtual assistant business you would owe $3,391 in taxes on that income. And don’t forget that there will be state and possibly local taxes as well.  A wise person once told me to figure on at least 30% of my income to go toward paying taxes.
• Are they covering the cost of any business licensing or registering that their state or local authorities might require?
• Are they taking business expenses into account?  Think of what you need to pay for to keep your business running. Supplies like paper, ink cartridges and other items your office requires, the cost of a separate phone line or web based system as well as any long distance charges you might incur, cost of postage for clients and your own marketing, hardware like printers, scanners and computers, software, Internet charges, charges for online applications like project management, e-mail marketing such as MailChimp or Aweber,  fees associated with memberships, fees associated with payment/credit card processing. are just some of the items I can think of that you should be taking into consideration when setting your rates.
• Have they considered the cost of starting and maintaining a website/blogsite? Purchasing your own domain name is something I strongly suggest a new virtual assistant do. First, even if they can’t afford to purchase hosting immediately, they can get e-mail hosting and will have a professional looking e-mail address that looks something like yourname@yourbusinessname.com.  As your business grows you will likely want to add a hosting package that you’ll need to pay for and also consider the cost of designing and building your site.
• Are they thinking about publications, classes and books they will undoubtedly want to purchase to help them learn how to grow a successful business.

Although most of the items listed above can be considered for tax deductions, a virtual assistant still has to pay them throughout the year. If you have set your rates based only on either what is considered a good employee rate of pay or just on what you yourself are looking to make for income you’re going to find yourself either falling very short of what  you need or needing to take on more clients than you can comfortably handle.  Doing the latter means that you’ll find yourself working long hours, more days a week than you anticipated and you can say goodbye to the flexible schedule and more free time that you saw as a benefit of working from a home office. Plus you also risk not being able to provide quality services due to being overwhelmed.

If you’re a new virtual assistant just setting your rates, make sure you take all of your costs and expenses into consideration. If you’ve already established your business and are finding that you can’t seem to make enough money, perhaps it’s time you sat down and figured out just how much you need to charge and raise your rates. I know that there is no way I could have a successful business were I only charging $25 an hour.
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If you’re a new or aspiring VA have you checked out the free “10 Step Guide to Starting a Virtual Assistance Business” ?

If you have questions concerning virtual assistance or have an interest in working with a virtual assistant you can contact Tina Hilton or visit her business website for Clerical Advantage.