TBBVA 003: Virtual Assistant Money Talk! Your Client Payment Options

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Tweetables:

If we only charge what we feel comfortable with, we end up with lower rates. #vatip Gotta Tweet!

You are invoicing your clients as a business owner, not turning in a timesheet. #vatip Gotta Tweet!

Stand strong in whatever your payment type is. #vatip Gotta Tweet!

In Words:

Hello and welcome. You’re listening to episode number three.

What a week it has been! If you are not following my Facebook page, I encourage you to do this after you are done listening to the podcast. There was a discussion that started on Monday about VAs and whether or not we should be providing our resumes to clients.

I’m not going to tell you what it’s all about. I’m just going to encourage you to head to Facebook. I’ll be sure to include the link in the show notes so you can click on that. Be sure and like the page as well so you don’t miss anything. Engage on the page. Tell me hi, hello, whatever you want to say. Let me know how you feel about VAs and resumes on that post. I want to hear from you.

This is episode number three and we are talking about our rates and how hourly rates will kill your motivation and your business.

Before we dive into that, I want to let you know a little secret about the show. I don’t do any editing on myself. So once the recording starts, it starts and I just go. That’s how it works, so even though I got a little tongue-tied, it’s okay.

This to me is our private conversation. We’re like at Panera Bread together and we’re having this conversation about the business of being a virtual assistant. It’s very casual, it’s relaxed, and that’s how I want it to be here on the podcast. It’s not polished, not edited. We add our intro and outro, and there you have it.

Topic is hourly rates and how does it kill your motivation and your business. Well, I am so glad you asked. Now, there are basically three types. We’re going to discuss three types of payment options for you and your VA business.

One is the one we’re all familiar with and that’s charging by the hour. That’s exchanging our time for hour, so number one is charging hourly.

Number two, I call it select, and this is where a client buys a block of time. Say they buy five hours from you, ten hours, and that’s all they buy. It’s not a retainer situation where they are retaining you ongoing from one month to the next. This is just for a select amount of time.

You can also have packages that fall under select. Some people have a rate, and let’s just say it’s $199. I’ll be just throwing out numbers. The numbers I’m throwing out today are not to give you advice or basis on what to charge for your services. Since I don’t know the specifics of your business, your experience, etcetera, I won’t be able to give exact numbers for you. We’ll save that for our coaching program as we progress during the year. For those that will be participating in that, I’ll be able to help individuals that way with pricing.

I’m just throwing out numbers today. Let’s say it’s $199 and a client can pick two or three services based on that amount, and when those services are done, they’re done. You can do a package like that.

The other option, number three, is a flat rate. I’m going to go ahead and tell you, the flat rate is my favorite of all the options. It’s similar to a package because they’re picking what services they want, but you’re giving them a flat rate. You’re going to find out shortly why that is my favorite payment method.

Now, let me tell you about hourly. I used to charge hourly when I first started, and hey, most VAs when you first start out, especially from Elance, when you first start out it’s going to be hourly, and it’s okay. I almost want everybody to experience what it’s like to charge hourly and then you’ll be very clear on why it demotivates you and can kill your business, because if you’re not motivated, you’re not motivated to get more clients, to do the work, etcetera, etcetera. But when you first start, you charge by the hour.

I can remember charging by the hour when I first started, and in this particular case I was doing weekly newsletters. My client’s newsletters, they weren’t very long. They didn’t involve a lot of HTML. There was a set format from one week to the next. In fact, she would send it to me in the text version and include the HTML. So really I was double-checking, making sure that the HTML was right, double-checking links, things like that.

But it would take me no time to do her newsletter and it was an hourly rate. I was charging her every month and every month I hated calculating. It just made me sick because it would take me no time to do her newsletters. I can remember an invoice being like for $11 for the month, and she was doing mostly once a week newsletters, sometimes twice, but for the most part once a week. But the invoice was $11.

I mean, let’s think about that – $11. Are you really excited to do her newsletter for the next month? Probably not, but you know, it’s a client. You need a client. You need her testimonial, her referral, so you do it.

But like I said, that $11 was like, really, what in the world? Because the thing is, even before you start working on someone’s project, you’re thinking about it, you’re getting everything together, you’re checking your email for it, you’re doing testing, all these different things, and all of that should be calculated.

But even still, if you’re efficient at what you do – and over time you will be. When you first start, it’s going to take you longer because you’re new, you’re figuring it out. But the more you’ve done it, you’re going to figure out some efficient ways to do it, even if it’s just a different way to copy and paste, to learn HTML, how to put the code in so you’re not copying and pasting paragraph by paragraph. If you’re putting it in AWeber, you’ll learn some simple HTML so that you can get it in there.

You’ll learn some efficiencies, so if you’re charging hourly, your time goes down and that sucks. Right? We don’t want that.

Let’s talk about advantages and disadvantages, and I’ve already started on some of the disadvantages for hourly rate because like I said, it’s my least favorite. Now, I will tell you there are times when I do charge hourly, having said all that about hourly rate.

In the case of troubleshooting, I don’t always know how long it’s going to take to fix an issue. It’s like when you take your car to the shop and they need to look under the hood. They may be able to see the obvious, what they can see what their eye, but they won’t know all the full damages until they start taking some parts out, or they get underneath the hood. Then they’re able to give you a full estimate as to what’s going on and how long it’s going to take.

That’s how it works for troubleshooting websites. In that case, I do charge hourly, but that’s the only time. For other services, I don’t charge hourly anymore.

Advantages and disadvantages – now, if we’re talking about an hourly rate, the advantages are it’s easy to calculate. If your rate is $25 an hour, that’s easy to calculate and it’s easy to track. You can use a timer to track your time. My favorite is paymo.biz and they have a tracker. They have an app for your phone, one for the computer.

I always prefer the app for my phone just because sometimes I would forget the app on the computer and then you have to edit the time and all that stuff. But if the phone is there, then I can see the timer going. It’s just easier. But it gives you both options, so paymo.biz to track your time. I know some people like FreshBooks. Try different things. See what works the best for you.

Those are the advantages for hourly rate. We’ve got easy to calculate, easy to track.

Disadvantages for hourly rate – you have to track it. The only way you’re going to get paid is if you know how long it took you to do something, so it has to be tracked.

I’ve already said this before, if you’re good at what you do, you start becoming efficient and you learn some shortcuts, then you’re getting paid less money because you’re able to do things in a more efficient way. Now, in some instances, that is good, especially if it’s taking you eight hours to do a newsletter, which it shouldn’t. If it’s taking you eight hours to do a newsletter and you get it down to an hour, then yes, that’s good, and we’ll talk about that. That’s on the list of disadvantages. That is when your invoice would get questioned, if it took you eight hours to do one newsletter.

You have clients coming to you that have done a lot of this themselves and are experiencing the fact that they need to outsource this thing because it’s taking them too long and they’ve got other things they need to do, so they’ve called on you to handle it for them.

I’ll stay with the newsletter scenario. If they’ve done it themselves and they know how long it takes them, not being experienced, kind of fumbling around, and it takes you longer than it took them, then yes, they’re going to question that time. They’re doing to question your invoice.

Let’s say it takes you two hours, not one hour, then it’s like you’re being rewarded for being slow. Like your time may not signal a fire alarm for your client, but you’re being rewarded for being slow. What happens further down the road when it’s taking you 11 minutes compared to two hours? Then it’s like, well, what were you doing before? Big questions come up. Even if you learn a better, more efficient way, it’s not going to be such a huge gap.

We don’t always charge what – and I hate to use “charge what we’re worth” because we’re priceless. We’re priceless, so I hate using the word charge what you’re worth. We charge lower than what we should be charging, and because a lot of times we tend to charge lower, we’re starting out behind the eight ball already because the rate is low. Then if we’re really good at what we do and it doesn’t take us long, now we get that – let’s go by that $11. It sucks.

Those are some disadvantages to flat rate, some on us, some on the client.

Now, that block of time I talked about where a client pays a certain amount for five hours. Let’s say they pay $125 for five hours of your time, and let’s say you give them a timeframe. They’ve got 60 days or 30 days to use that time. Okay, a little different from hourly.

The advantage is that’s it’s easy to calculate when you’re first creating it for your website, you can easily calculate how you want to do a block of 5, a block of 10, a block of 15. And it is easy to track because you do want to know how long it’s taking you so you’ll know whether the package has ended, the block of time is over, or they still have some time left.

The other advantage is that you’re getting paid up front. Unlike the hourly where you have to do the work to see how much it is so you can create an invoice, with this, all that is done up front. You already know how many hours. You already know how much for those hours. They pay you up front to initiate their project. Those are the advantages with the block of time.

The disadvantages – similar to the hourly is that because it is still based on hour, you’re doing five hours, you’re counting on the client to give you enough work to fill up those five hours. What happens if they don’t fill up the five hours and they only have two hours worth of work, or what they thought would be five hours only takes you one hour, then what do you do? Do they get a refund? Do they have the remaining of the time?

Let’s say the time expires. Thirty days is up and they use two hours. What happens then? Do they lose the three hours that they had with you? How does that work? And if they lose that, how do you maintain the relationship so they don’t feel like they’re wasting their time or their money in working with you?

You can still find yourself in the same situation where you’re making less money, but you’re doing more because you’re efficient at what you do. You do such a great job, but it doesn’t fit that time.

Oh, and this is something. Let’s say because you are efficient at what you do, client thought it was going to take you five hours, it only takes you two. Not because they didn’t have enough work. They have plenty of work to give you. They gave you all they had. They had a lot of work. They gave it all to you, but it only took you two hours. What happens then?

This is where it comes down to you have to show some integrity in your business and let your client know how many hours it took, or do you just tell them, oh, time expired. You used up all your five hours. Something you have to decide, every VA business is different.

That’s where the time could be questioned as well. Now, they know they gave you a stack of work that would take five hours; you probably aren’t going to be questioned about it. But if they only gave you a few things and you both weren’t sure whether it would take five hours or three. If you’re saying it took you six or it’s going to take you over, that’s going to be questioned. Okay.

All right. Let’s go to my favorite type, which is the flat rate, and the flat rate is based on what they want you to do. You can group things like social media, newsletter, whatever it is that you do.

You can group services because clients will come to you wanting several different things.

Or if they want one thing like my client that I just did the monthly newsletter, then you could have a set recurring flat rate for monthly newsletter service. If that’s on your website and a client wants a newsletter but they also want social media and you do that, then you would create a special recurring invoice for them for that custom package for the newsletter and social media.

Flat rate – the advantage with that is it’s flexible. It’s open. It’s not rigid. They can add different things. Of course, that increases the price as they want more things, and if it’s more frequent. Similar to the select, that whole block of time, you get the upfront payment.

Another advantage – there’s no calculation. Now, I’ve got no calculation, but if they’re getting several different things, you are going to calculate the several different things. So there’s a calculation, but it makes it much more simple because you don’t have to depend on hours. It doesn’t matter how long it takes you.

There’s no tracking required, so you don’t have to keep up with it. It’s good to keep up with how long it takes you to do things for your own personal information, but you’re not providing that information to your client, so no tracking required.

Flat rate gives you a chance to charge an amount that I won’t say you feel comfortable with because I want you not to feel comfortable with what you’re charging. Now, if we charge what we’ll feel comfortable with, that’s where we start getting into the lower rates.

The best way to avoid the lower rates is to charge something that we don’t feel comfortable with.

Sometimes it’s just a matter of taking it up $2 or $3 or $5, whatever the case may be. That’s totally up to you. When you’re doing flat rate, you are no longer swapping time for money. There’s a flat rate for your service based on what your client needs are.

Now, I’ve got a short list of disadvantages for flat rate, and I don’t know if that’s because I just prefer it over all the other ones or what. I don’t know. You be the judge of that.

A disadvantage is that you could still not charge enough, but when I tell you you’ll know right away if you didn’t charge enough. Let’s say it’s a one-off project and you complete the project, you’ve gotten paid for it. You’ll know right away or after that project is over, you’ll know whether or not you should have charged more, and those are lessons that we learn for the next time. Not for that time, but for the next time, and it’s okay, I mean, we have to get our feet wet in some kind of way to know what’s an uncomfortable rate for us, uncomfortable on the higher end versus uncomfortable on the lower end.

This is another disadvantage to the flat rate, you may run into clients who are used to an hourly rate. It’s okay if that’s what they’re used to, but they’re coming to you as a business owner and if you charge a flat rate, you’ll just have to let them know you don’t charge hourly. You charge a flat rate.

When you’re thinking about your VA business, I want you to think about how we treat our doctors and how we treat our accountants.

My accountant, she does my tax return stuff. I keep track of the bookkeeping during the year and all that stuff, but I provide that information to her. She in turn provides me with our tax returns. She does the tax returns for my husband and I, she does the tax returns for the business, and she sends me an invoice when she sends me the tax returns.

Now, I’m responsible for payment of our taxes if we owe anything after that or, you know, I’ll the refund, whichever way it works. But the responsibility, of course, is not on her to send the payment in. We do that. But she sends an invoice. I don’t go back and say, “Beth, well, how long did it take you to do this?” You know, I don’t question her invoice. She knows what she’s doing. I have outsourced to her because she’s a professional. She knows what she’s doing.

What I’m pointing to is your mindset about your rates, your invoices, and charging your clients. You are not an employee.

You’re not turning in a timesheet when you turn in your invoice. You are turning in an invoice. You are a professional just like your accountant is, and be strong in what your rate is. Be strong in what your rate is. If you’re charging they pay you up front, be strong in that. They pay you up front.

When you go to the doctor, some doctors you have to pay your copay up front, like before you see the doctor, you pay. Or if you’re self-pay, you pay up front. Some doctors are like that, or before they let you out of the office, you pay. You know, we don’t question it. Whatever it is, even though we may have spent 15 minutes, if it’s $158, we pay, no question why.

Why do we view them differently than how we view our own business? Are they more professional than we are? Do we think it’s because they’ve been schooled more than we have? Why is that?

Let’s talk about your hairstylist, if you go to your hair salon. Say you’re going to get your hair cut or you’re going to get your hair blow-dried. What is it, Drybar? I think it’s Drybar. I’ve been reading about that. It sounds like a neat business where you go in and get your hair blow-dried into a style. It just seems really neat. Anyway, I think that’s all they do is the dry and it’s called Drybar or something like that.

Anyway, you go in there, you know, you go somewhere like that or the nail salon, we don’t question what their rates are. Their rates are whatever their rates are. We pay, and they don’t have a problem with their rates. So it’s how we present. Whatever we put off, that’s what our clients are going to interpret from us.

Stand strong in whatever your payment type is.

Yes, hourly rates will kill your motivation and your business. If you’re efficient at what you do, you’ve done it for a while, I’m going to strongly suggest you charge a flat rate. I’m going to strongly suggest that you don’t charge block times, for all the other issues that could pop up as a result of this block time.

If there’s not enough time, I mean, sometimes I can be a softy. If somebody got a block of five hours and they got sick, I mean, it’s not their fault they got sick. Okay, we’ll extend it to February. They aren’t ready yet, okay, we’ll extend it to March. So see, it puts you in a weird position.

Flat rate doesn’t do that. They pay it up front for the newsletter service, the social media service, the bookkeeping service, the transcription service, the graphics service, whatever it is you do. They paid you up front. They’re ready to go.

So you stand strong in whatever your payment method is that you choose. Be aware of the advantages and disadvantages to all of the different payment types. Like I said, I’m just strongly kind of gently pushing you to the flat rate.

Now, if you’re just getting started and you’re just submitting your proposals on Elance, they already have it laid out for you. It’s either flat rate or hourly. You can choose not to bid for the hourly projects. I don’t recommend you do that on Elance.

The whole point in the job boards like Elance and oDesk, is to get some experience, to build your portfolio, to meet clients, to be in a position where you can ask for testimonials and get feedback on your work, to get your feet wet to see if you even like being a virtual assistant.

I’ve had people get started and realize, uh, this is not what I wanted to do, and that’s perfectly fine because you don’t want to get all in and have a website and roster of clients and you hate what you do. You don’t want that, not at all. You should be enjoying what you do. You should be paid for what you do. You should feel good about what you do, feel good about the rates that you charge.

Don’t set yourself up so that you fail in your business because of the payment type that you chose.

Now, if you will do me a favor and rate the podcast, we are on iTunes and Stitcher. If you will give us a review on whichever platform you prefer, iTunes or Stitcher, give us a review. That would be great. Your feedback, I certainly appreciate it. It helps me to improve the show. I’ll be honest. I’m not caught up on rankings in iTunes or Stitcher.

I really want to hear from you. I want to see your reviews. I want to hear your comments. I want to know that the show is helping you do a better job in your business as a virtual assistant.

Again, don’t forget to head on over to Facebook to like the page. Check out the discussion on virtual assistants and resumes.

Thanks so much. I want you to tune in next time, so you have a wonderful and fabulous day.

Thanks so much for tuning in. If you like what you heard, stay tuned. We’ll be back. Tell me what’s going on with you. Come on over the Facebook page: facebook.com/tiffanyparsonbiz, or if you prefer a little shorter message, come on over to Twitter: @tiffanydparson.

See you next time.

Image courtesy of Aweber, modifications courtesy of moi!