There are three ways that virtual assistants bill for their work. By the hour, by retainer or per project. In this post, I am going to talk about the pros and cons of each so you can figure out which payment method to use for your virtual assistant business.
By The Hour
Billing by the hour is the most popular pricing structure for VAs and for clients. It's easily understood and widely accepted. One of the hardest thing for a business owner to give up is control of their work to a newly hired virtual assistant. A by the hour payment structure gives both client and VA the ability to test the waters out to see if they are compatible working together.
There are only 24 hours in a day which means that if you're getting paid by the hour, your earning potential is limited to how many hours a day you can work. Even if you raise your rates, you're still limiting your earning potential.
That's not a long-term scalable business strategy. Another drawback to an hourly rate pricing structure is that the VA is penalized for doing great work in a timely manner.
If you complete a task in 20 minutes because you're an expert in a particular software or skill and someone else takes 1 hour to do the same task, you lose.
And finally, one of the biggest issues with pricing by the hour is that you can't plan revenue expectations. If your work is dependent on how many hours you work, each month will look different giving you a lack of confidence in your financial planning.
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Billing by retainer means you're getting paid for complete work. That is, you have set expectations and know approximately what you'll be working on each month so you can estimate (more or less) your time investment in your clients business.
Take for example the virtual assistant that charges $1,000/month. On average she/he works 20 hours a week (more or less). Some weeks will be less, some more, but the retainer rate remains fixed.
This pricing structure gives you financial peace of mind because you know what's coming in each month. Your client shouldn't care how much time it takes you to finish work, the focus is on doing great work quickly and efficiently.
Another benefit from working on retainer is something you can sell your client. When a client retains you on an ongoing basis, the client gets high priority over other clients who hire you for hourly projects.
Retainer clients can expect to have their project requests answered quickly and reserved time on your calendar to work on their projects.
Clients who pay you hourly need to be fit in around your retainer clients. Retainer clients = more attention, hourly clients = less priority. That is not to say that hourly clients don't get a high level of respect, they just can't bank on the fact that you'll drop everything to work on their projects when they need you.
Retainers can be dangerous if they are not thought out properly. When coming up for a dollar amount for your retainer you need to make sure you have considered the projects you're working on and the time needed to complete these projects.
The last thing you want your client to do is come back at the end of the month and ask you why you only worked 40 hours when the retainer is for 60 hours and have them ask for a refund of unused hours.
The way most virtual assistants get around this is by offering to roll over unused hours to next month. The problem with this is that you can't plan your workload month to month when hours are carried over.
Let's say you have a retainer client for 20 hours, and he/she uses only 10 hours and you carry over the remaining 10 hours. The following month this client has a total of 30 hours, instead of the regular 20 hours. That might cause disruptions in your ability to meet deadlines due to the added workload.
That's why virtual assistants need to make a decision about their retainer policies and include clear language on how they handle retainers going under or over budget. Will you carry over unused hours? Will you refund unused hours? Will you expire unused hours and not allow them to be carried over. All of this needs to be laid out in black and white before you begin working with a new client.
Don't assume just because you're working on retainer that you don't have to track your time.
Many clients want to have a monthly report of how you've spent your time on their projects. It's important to track all of your time into your project management system so you show your client what you've worked on and how long it took because if your hours are regularly coming up under budget, your client may feel like they are being cheated.
On the other hand, you'll want to make sure you're letting your client know if you're over budget on hours so if it becomes a regular occurrence you can adjust the retainer accordingly to your benefit.
By The Project
When you charge by the project, the only thing limiting you is the speed by which you work. Take longer, earn less, work faster, earn more. Charging by the project is great when you are an expert at something and know exactly how much time it will take you to complete said project.
For example, if a client wants you create a presentation they don't care if it takes you one hour or ten, they want the finished product, the presentation.
So if you charge $100 for a presentation and it takes you two hours to complete, you've got yourself a nice equivalent hourly rate of $50 an hour.
Working by the project encourages virtual assistants to become more efficient and more knowledgeable about certain areas of focus which in turn helps them earn much more.
There aren't a lot of negatives to charging by the project so I'll try to focus on why a virtual assistant should stay away from this pricing structure to prevent serious screw ups which would cost you time and money and potentially damage your reputation.
I mentioned that when you charge by the project you're able to accurately estimate how much time it takes you to complete the project (give or take).
For a presentation specialist, it might take two hours to complete a presentation but if you're not a specialist it might take you 10 hours to complete.
At $100 for the project, you're making a mere $10 an hour. Worse, it might take you longer (gasp!) and then your equivalent hourly rate would be less.
There is no right or wrong answer when it comes to pricing your virtual assistant services. You have to choose a pricing structure that is right for you at the current stage of your business and your level of experience.
Remember, figuring out your rates and pricing structure is difficult for even the most experienced freelancers so you're not alone.
What pricing model makes the most sense for you?
Please leave me a comment below and let me know what pricing model you're using and why.