I was amazed at your example figures because they were pretty much my monthly expenses! You did all the work for me! Thank you so much!

I'm also wondering how many people simply charge a flat rate and how many have a tiered pricing structure based on the type of work requested.

Great information - When you are doing a business all the information you can get is truly appreciated!

Originally Posted by Office Goddess

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.

Lily - thanks for breaking the information out so clearly. I know it's difficult to consider all the ins and outs like this when setting up a rate structure. It is so easy to just say I will charge $20 an hour - that sounds good - and not be able to make ends meet because the ends keep getting snipped off by extra expenses not budgeted I would love to get you templates and will PM you for them. Thanks again.

Where can one look at "going rates" or rate comparisons across the country and/or for specializations?

Cindi

This is fantastic! Thank you! This is so helpful to me as I've just quit my JOB to start doing this full time. I've been a VA part time for over seven years - I finally took the leap!

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Nichole Holm
Optima Business Solutions, LLC.

Not sure if this is too much of a question specifically about rates and I'm not sure where to ask this but . . . Calculating what a VA NEEDS to make seems to be somewhat different from what the market may bare. In other words, I've seen many, many, job openings posted in my area for temps and part-time administrative support people making $9, 10, or $11 an hour. Going even as high as $14 an hour is rare. Employers don't have to pay part time people benefits. I can't justify a higher rate by saying clients can save by not having to pay benefits. So how can I expect to get $25 or $30 an hour if clients can hire part-time people and pay $9?

You ask a good question, Gravics (Please be sure to fill out your VAF profile completely so we know what your real name is! Thanks.)

If I took a job in the for $10 an hour as an administrative support person for a temp agency, the agency is actually charging their client say, $25+ an hour to obtain my services. The difference between the $10 I would make and the $25+ the agency charges their clients is not only the profit the agency needs but it includes all the admin costs to process my paycheck. They have to pay someone not only to do the accounting, but they must pay someone to market my skills to their own client so that the job could be available.

There are many benefits to a client to working with a VA directly. Among one of those benefits is that the middle man or the agency is not involved. I do all my own marketing, my own taxes, process my own invoices, etc., and those costs of doing business are built into my rate. So I can charge my own fee.

Additionally, the client obtains specialized skills that can command the higher VA rates. If someone is strictly admin, that rate may be lower than someone who may have technical skills...who can design a website, a set up a blog, offer writing skills, code something, etc. A temp agency won't hire a web designer for $10 an hour because those skills are in demand and someone can make so much more on their own.

I wouldn't compare what the market will bear to what a VA charges because it is like comparing apples to oranges.

And while temp agencies do not have to pay benefits, they do have to pay social security. And they have to pay someone to process and pay all other taxes required.

Working with a VA is billed start to finish, from X time to X time sometimes by the minute and sometimes by 15 min increments. Working for an agency means a 15 minute break, bathroom time, water cooler time, coffee breaks, etc. which is rarely held accountable 'on the job'. VAs don't charge for the down time. If my system goes down, I don't charge the client for that.

Janine

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Originally Posted by Your Virtual Wizard

You ask a good question, Gravics (Please be sure to fill out your VAF profile completely so we know what your real name is! Thanks.) If I took a job in the for $10 an hour as an administrative support person for a temp agency, the agency is actually charging their client say, $25+ an hour to obtain my services. The difference between the $10 I would make and the $25+ the agency charges their clients is not only the profit the agency needs but it includes all the admin costs to process my paycheck. They have to pay someone not only to do the accounting, but they must pay someone to market my skills to their own client so that the job could be available. There are many benefits to a client to working with a VA directly. Among one of those benefits is that the middle man or the agency is not involved. I do all my own marketing, my own taxes, process my own invoices, etc., and those costs of doing business are built into my rate. So I can charge my own fee. Additionally, the client obtains specialized skills that can command the higher VA rates. If someone is strictly admin, that rate may be lower than someone who may have technical skills...who can design a website, a set up a blog, offer writing skills, code something, etc. A temp agency won't hire a web designer for $10 an hour because those skills are in demand and someone can make so much more on their own. I wouldn't compare what the market will bear to what a VA charges because it is like comparing apples to oranges. And while temp agencies do not have to pay benefits, they do have to pay social security. And they have to pay someone to process and pay all other taxes required. Working with a VA is billed start to finish, from X time to X time sometimes by the minute and sometimes by 15 min increments. Working for an agency means a 15 minute break, bathroom time, water cooler time, coffee breaks, etc. which is rarely held accountable 'on the job'. VAs don't charge for the down time. If my system goes down, I don't charge the client for that. Janine

Thanks for the reply. That certainly makes sense if a client were using a temp agency. However, the lower range jobs I have seen advertised are for part-time employment directly with an employer and for contract positions directly with an employer and no agency involved. Particularly where the part-time positions are concerned, how can I command a higher hourly rate. I have had to work for employers where I am considered contracted and expected to pay my own social security, taxes etc.

The same explanation I gave to you is the same for an employer and for an agency.

They have to pay people to hire you. They have an HR department. They pay for the equipment you use on the job, for the heat, for the office space, for the maintenance and so on..VAs foot the bill for all of that ourselves. The advantage as I said is that we bill only for the time we use and VAs are specialists in their field.

I can't speak for the contracted positions you took for low rate. That's not something I have not seen.

Janine

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Thank you very much Janine. That give me a level of assurance that I was looking for. I appreciate your answer.

Vickie