Rates and Billing

Discuss setting rates and find billing resources and information.

Forum Sponsor (Advertise with us)
Reply
 
Thread Tools Display Modes
    #1 (permalink)  
Old 08-31-2011
Senior Member
Company name: The Virtual Office Goddess, LLC
 
Join Date: Aug 2007
Location: Boulder, CO
Posts: 2,953
Send a message via Skype™ to Office Goddess
Contact this virtual assistant on LinkedIn
Default Calculating your rate
I posted this on another thread, but it was in the bookkeeper forum. So, I am re-posting it here for additional input and a larger audience, hopefully to help those who are struggling with how much to charge! I appreciate any input.

* * * * *

Keep in mind, that on top of expenses, you can anticipate (depending on your state) 35-42% of your NET profit will be taken in Federal and State taxes annually.

So the best suggestion is to calc how much you need to live comfortably, then estimate your annual expenses (figure in utilities, marketing costs, supplies, etc.) and then add 42% on top of that. A 40 hr workweek is 2080 hours/year. So for example:

PERSONAL EXPENSES - annual
$14,400 rent/mortgage ($1200/mth)
$4,200 utilities ($350/mth - elec/gas, water, phone, cable/satellite
$10,400 groceries/gas ($200/wk)
$350 prescriptions/dr visit
$1,200 auto insurance/plates/repairs
$1,000 misc

BUSINESS EXPENSES - annual
$1,200 office supplies ($100/mth)
$900 cell phone ($75/mth)
$600 internet ($50/mth)
$100 bus/State filing fees (annual)
$120 post office box (annual)
$1,200 marketing ($100/mth)

= 31,550/yr gross personal expenses
= 4,120/yr gross business expenses

The example above requires that you gross AT LEAST $35,670 to make ends meet. Ideally, you would want at least a 30% profit (10% for savings, 10% tithe, 10% 'fun money') so you now need to gross at least $46,371/yr. But, oh wait! You have to pay TAXES on the profit! Your taxes are approx 42%, but of course the more you earn, the more your taxes! So now you need about 116% profit on top of your expenses ('cuz remember, you can't write off personal expenses) so you now need an income of $77,047/yr.

$77,047 gross profit
less 4,120 bus expenses
equals 72,927 net profit

less 30,629 federal/state taxes
equals 42,298

less 31,550 personal expenses
equals 10,748 (a little over a 30% net profit)

To make the required gross of $77,047/year, at 2080 hours (40 hour workweek) you need to bill $37.04/hour.

*WHEW* Make sense? Obviously, this is a very simplified example and doesn't come close to figuring out accurate expenses. It's just a demonstration of all the financial considerations you need to make when setting rates.
Reply With Quote
    #2 (permalink)  
Old 08-31-2011
Junior Member
Company name: Midwest Virtual Assistance
 
Join Date: Sep 2010
Location: North Dakota
Posts: 261
Find this virtual assistant on Facebook
Default Re: Calculating your rate
Wow! That really helps put things into perspective!
Thanks so much for posting this, as there were things I hadn't taken into account. Though the rate is pretty close to what I have as my hourly rate, your example breakdown is a great resource.

Thanks again for sharing!
Reply With Quote
    #3 (permalink)  
Old 08-31-2011
Senior Member
Company name: The Virtual Office Goddess, LLC
 
Join Date: Aug 2007
Location: Boulder, CO
Posts: 2,953
Send a message via Skype™ to Office Goddess
Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
You are very welcome! The whole "calcing my rates" thing was really a tough one when I started out. I used rate calculators, compared that to the 'going rate' across the country for VA bookkeepers, and then finally just sat down and figured up my actual expenses to finalize my rate structure. I created excel budgets for both personal and business budget calculations, that I can update monthly for actual expenditures. If you would like copies of either one (or both), pm me with your email and I will send them to you.
Reply With Quote
    #4 (permalink)  
Old 08-31-2011
Contributing Member
Company name: Collaborative Business Support Services
 
Join Date: Jun 2011
Location: Virginia Beach, VA
Posts: 221
Default Re: Calculating your rate
Lily, I am speechless with gratitude and amazement. Your "template" can apply to most, if not all situations. Thank you.
Reply With Quote
    #5 (permalink)  
Old 08-31-2011
lillie's Avatar
Contributing Member
Company name: Blue Canary
 
Join Date: Jun 2009
Posts: 184
Follow this virtual assistant on Twitter Find this virtual assistant on Facebook Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
This is a wonderful guide. Some rate calculators leave out the part about taxes, but this shows just how important they are to consider! Thank you for sharing this.
Reply With Quote
    #6 (permalink)  
Old 08-31-2011
Your Virtual Wizard's Avatar
Community Leader
Company name: Your Virtual Wizard
 
Join Date: Sep 2008
Location: Florida-Gulf Coast
Posts: 2,857
Blog Entries: 24
Send a message via AIM to Your Virtual Wizard Send a message via Yahoo to Your Virtual Wizard Send a message via Skype™ to Your Virtual Wizard
Follow this virtual assistant on Twitter Find this virtual assistant on Facebook Contact this virtual assistant on LinkedIn Find this virtual assistant on Google+
Default Re: Calculating your rate
Great post, Lily! Well done! I've liked it to my FB page. (So glad you are back! )

Janine
__________________
Your Virtual Dream Team Need Clients? No Fees! Take Assessment
Reply With Quote
    #7 (permalink)  
Old 09-01-2011
Senior Member
Company name: The Virtual Office Goddess, LLC
 
Join Date: Aug 2007
Location: Boulder, CO
Posts: 2,953
Send a message via Skype™ to Office Goddess
Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
I'm glad this has helped. Figuring out rates can be incredibly confusing and I have often wondered how people manage to survive on really low rates. Probably they don't! I think it's easier to start with a reasonable rate than to try and increase them with ongoing clients... (although, of course, that happens, too!)
Reply With Quote
    #8 (permalink)  
Old 09-06-2011
New Member
Company name: Amy's Virtual Solutions, LLC
 
Join Date: Sep 2011
Location: Tallahassee, FL
Posts: 12
Follow this virtual assistant on Twitter Find this virtual assistant on Facebook Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Helpful post! I had know idea until now how I was calculate my budget.
Reply With Quote
    #9 (permalink)  
Old 09-08-2011
Zjudra Advanced's Avatar
New Member
Company name: Zjudra Advanced
 
Join Date: Feb 2011
Location: Dallas, TX
Posts: 20
Send a message via Yahoo to Zjudra Advanced
Re: Calculating your rate
You are truely your namesake! Thank you'n
Reply With Quote
    #10 (permalink)  
Old 09-08-2011
alcbiz's Avatar
Contributing Member
Company name: ALC Office Services LLC
 
Join Date: Feb 2011
Location: Wichita KS
Posts: 227
Follow this virtual assistant on Twitter Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Originally Posted by Office Goddess View Post
I think it's easier to start with a reasonable rate than to try and increase them with ongoing clients... (although, of course, that happens, too!)
I am planning to review my rates yearly or so; consequently, I have included a phrase in my contract that states rates can be increased with a 30 day notice to client(s) at least once but no more than twice in a one year period.

I almost hope I can manage expenses so I don't have to increase my rates at all. Could that be wishful thinking? LOL!

I do have one question though. I've read that new companies should expect to market their business up to 50% of their time so that billable hours really would be much less than 2,080. Any thoughts on this?
Reply With Quote
    #11 (permalink)  
Old 09-08-2011
Contributing Member
Company name: Collaborative Business Support Services
 
Join Date: Jun 2011
Location: Virginia Beach, VA
Posts: 221
Default Re: Calculating your rate
Originally Posted by alcbiz View Post
I am planning to review my rates yearly or so; consequently, I have included a phrase in my contract that states rates can be increased with a 30 day notice to client(s) at least once but no more than twice in a one year period.

I almost hope I can manage expenses so I don't have to increase my rates at all. Could that be wishful thinking? LOL!

I do have one question though. I've read that new companies should expect to market their business up to 50% of their time so that billable hours really would be much less than 2,080. Any thoughts on this?
I recently read the following, and it seems to be sensible and straight forward:

A normal work week for most jobs is 8 hours a day for 5 days. There are 52 weeks in a year but most workers get a two week vacation. So, 8 X 5 X 50 = 2000 hours worked in a year.
Many companies also give 10 holidays, which brings it down to 8 x 5 x 48 = 1920.
Many companies also give 5 days of sick/personal time per year, which brings it down to 8 x 5 x 47 = 1880.
Finally, if you are calculating how much time people actually spend on their job (as opposed to company meetings, bathroom breaks, surfing the Internet, etc.) a common metric is 80%. Therefore, if you are looking for how many hours you can expect someone to actually be productive in a year, 8 x 5 x 47 x .8 = 1504 hours is a reasonable maximum. This is an important number when you are dealing with billable hours in a consulting environment.
Reply With Quote
    #12 (permalink)  
Old 09-09-2011
Senior Member
Company name: The Virtual Office Goddess, LLC
 
Join Date: Aug 2007
Location: Boulder, CO
Posts: 2,953
Send a message via Skype™ to Office Goddess
Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Great information, Peppy! That definitely changes the calculation, doesn't it?

To make the required gross of $77,047/year, at 1504 hours (per Peppy's above post) you need to bill $51.23/hour - an increase of $14.19/hr over the original calculation.

Example:

Need: $77,047/year to make ends meet
Billable Rate $51.23/hr
Required billable hours: 1,504/yr
47 weeks/yr = 32 billable hours/week required (2 weeks vacation, 10 holidays, 5 sick days)

So - you can still work a 40 hour workweek and cover the income/expense needs (32 hours) and have 8 hours left per week for marketing, networking, etc. If you work more billable hours than that per week and put the extra income aside each month, you have padding for the times you don't have 32 billable hours/week.

FYI - after calculating what I needed to earn, I compared it to the going rate for my 'job title' and ended up charging a higher rate. However, I was then confident that I would be earning enough even if my billable hours weren't as high as I hoped and I knew the minimum hours I had to bill to make ends meet were actually 2% lower than my estimate. On an average year of 1504 work hours, 2% works out to 30 hours of 'lost' billable time; good padding for the lean times.
Reply With Quote
    #13 (permalink)  
Old 09-14-2011
VirtualBarbara's Avatar
Contributing Member
 
Join Date: Sep 2011
Location: Ephrata, PA
Posts: 113
Send a message via Skype™ to VirtualBarbara
Follow this virtual assistant on Twitter Find this virtual assistant on Facebook
Default Re: Calculating your rate
Very helpful post! I will definitely be using this to calculate my rates, so I do not put myself in debt. Thanks!
__________________
~Barbara~
Virtual Barbara
Reply With Quote
    #14 (permalink)  
Old 09-25-2011
Contributing Member
Company name: Virtual Business Services
 
Join Date: Jun 2009
Location: Dunedin, FL
Posts: 51
Follow this virtual assistant on Twitter Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Thanks for posting that! I was just looking for that information today to consider increasing my rates and what I should raise them to.
Reply With Quote
    #15 (permalink)  
Old 09-28-2011
girlfridayresults's Avatar
Contributing Member
Company name: Girl Friday Results
 
Join Date: Sep 2011
Location: Sioux Falls, SD
Posts: 53
Send a message via AIM to girlfridayresults
Follow this virtual assistant on Twitter Find this virtual assistant on Facebook Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
WOW.....I am just starting and the whole "figuring out the hourly" has me in a frenzy. My husband is full time employed, and doing pretty ok. So this is something we hope to BUILD together. But I never considered that GIANT percentage taken by the govt. Thank you so much for that!! (PS....I don't even know how to "PM" yet, took me a second to figure out what that was. But I am very interested in any further number-crunching you have to offer.) Thanks again!
__________________
Girl Friday Results
www.girlfridayresults.com
Reply With Quote
    #16 (permalink)  
Old 09-28-2011
burneyvoa's Avatar
Junior Member
Company name: An Office Extension, LLC
 
Join Date: Mar 2011
Location: Midwest, Ohio
Posts: 393
Blog Entries: 1
Send a message via Skype™ to burneyvoa
Follow this virtual assistant on Twitter Find this virtual assistant on Facebook Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Thanks to you both, Lily and Pepe. I have been having a difficult time figuring this rate thing out. I want to be fair, but not short-change myself in the process. Your posts will be a great help.
Wendy Burney
__________________
http://www.anofcextension.com
EHR implementation/support, Computer software training, Medical Billing and Coding
Reply With Quote
    #17 (permalink)  
Old 09-29-2011
Senior Member
Company name: The Virtual Office Goddess, LLC
 
Join Date: Aug 2007
Location: Boulder, CO
Posts: 2,953
Send a message via Skype™ to Office Goddess
Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Originally Posted by girlfridayresults View Post
(PS....I don't even know how to "PM" yet, took me a second to figure out what that was. But I am very interested in any further number-crunching you have to offer.)
I believe you need to have 25 posts on VAF to be able to pm. Nonetheless, I have a free budget spreadsheet download on my book site. Click on the link below my signature and at the bottom of the page click on "I want the sample" to get the budget spreadsheet.
Reply With Quote
    #18 (permalink)  
Old 10-26-2011
Paulette's Avatar
Junior Member
Company name: Romero Communications
 
Join Date: May 2010
Location: NYC
Posts: 487
Send a message via Skype™ to Paulette
Follow this virtual assistant on Twitter Find this virtual assistant on Facebook Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Thanks for this! I was actually planning on charging what I was making hourly at my fulltime job, but I decided to up it by $5 after this, especially considering that I'm responsible for my own taxes.
Reply With Quote
    #19 (permalink)  
Old 10-26-2011
Senior Member
Company name: The Virtual Office Goddess, LLC
 
Join Date: Aug 2007
Location: Boulder, CO
Posts: 2,953
Send a message via Skype™ to Office Goddess
Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Originally Posted by Paulette View Post
Thanks for this! I was actually planning on charging what I was making hourly at my fulltime job, but I decided to up it by $5 after this, especially considering that I'm responsible for my own taxes.
You must make more than I do at my 9-5, then. I have to charge $20 more/hour as a VA to cover my taxes and (eventually) pay my own health insurance. I decided to start higher rather than trying to up my rates down the road.
Reply With Quote
    #20 (permalink)  
Old 10-31-2011
alcbiz's Avatar
Contributing Member
Company name: ALC Office Services LLC
 
Join Date: Feb 2011
Location: Wichita KS
Posts: 227
Follow this virtual assistant on Twitter Contact this virtual assistant on LinkedIn
Default Re: Calculating your rate
Originally Posted by Paulette View Post
Thanks for this! I was actually planning on charging what I was making hourly at my fulltime job, but I decided to up it by $5 after this, especially considering that I'm responsible for my own taxes.
Will $5 cover advertising, supplies, marketing, etc. plus give you a profit?
Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Going Rate for transcription assistants made simple Rates and Billing 16 09-29-2014 08:42 AM
How to set up rate packages lcmills,inc Rates and Billing 39 08-11-2014 03:29 PM
[Resource] Site For Calculating PayPal Fees Your Virtual Wizard Rates and Billing 7 05-29-2011 05:15 PM
Free Client Workbook - includes calculating billing worksheet - contributed by 'AJ326' VAF Admin Virtual Assistant Contracts 52 11-01-2010 10:04 AM


All times are GMT -7. The time now is 10:20 PM.

Work from Home | Become A Virtual Assistant
Virtual Assistant Phones
Virtual Assistant Directory
How to respond to an RFP
Create a Professional New Client Welcome Packet
Virtual Assistant Survey
Virtual Assistant Forums Advertising

© Virtual Assistant Forums 2016 Content and images protected under copyright law.
Virtual Assistant Forums on Facebook