[Question] Going rates

I have the good fortune of getting all my clients from referrals. The problem is they all discuss rates, so I seem to get locked into a rate that is already too low and I don't feel I can raise rates within the first year of a new relationship. Does anyone have a good way to handle this?

The new year is a good time to make a change. Just write a letter to all your clients and tell them your new rates as of Jan 1. Actually, if you offer them a pre-pay option, you can get them to pay for 10-12 hours at the old rate before the rates go up, which will be very nice for your end of year cash flow :-).

I really like the idea of quoting a bundled rate versus an hourly rate... I think it implies a better value to the consumer... a little more bang for the buck...

I really like this forum - great info!

I wanted to add bookkeeping to my list of services despite my inexperience. I am SO glad I read this forum first. I got a sense that its not nearly as simple as I thought. I'm going to continue reading through the Virtual Bookkeepers forums to get more info.

Question: Would purchasing a Bookkeeping book and studying it be adequate enough or should I consider attending a training class and/or getting a certificate?


Thank you all,

Chaley

Chaley,
Bookkeeping is not as easy as it sounds. I have over 25 years experience in the bookkeeping field and I still have to call a friend who is a CPA for advice sometimes. I think it takes more than just reading a book or taking a few classes to be a bookkeeper. Don't get me wrong, it is always good to have some general knowledge of things we aren't a master at! I have a general knowledge of how a web site is set up but I wouldn't never offer those services to a client. I am a bookkeeper and not a web designer! But I can tell that client if those services are a business expense. I hope I didn't offend you at all, that is not my intention. I wish you well in whatever you do. Happy Holidays!
Pam

Thank you so much Pam and I wasn't offended at all. I need to know the facts before I dive into anything and you provided just that. I think it's best for me AND my business if I leave the Bookkeeping to the experts. Thank you again!


Chaley

Much too low. I charge 3 times your rate without any problems. I'm in Windsor - about 5 hours south of you - and I find that locally - heck even Eastern Canada in general, I have a hard time finding clients. Canadian mindset? Local economy? I'm not sure.

Once again, this is very valuable information. I am glad to have joined, I am finding lots of answers that I need to get on my way.

The rate depends on how much your expenses are. What you target to be your annual income and then you can divide it by around 2000 to reach your hourly rate. Some VA can also add the admin expenses on top of it.

Please visit our site http://smebackoffice.com for more information

The rate depends on how much your expenses are. What you target to be your annual income and then you can divide it by around 2000 to reach your hourly rate. Some VA can also add the admin expenses on top of it.

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.