One of the questions we are asked most frequently is ‘How much should I charge?’, and it’s always a source of much debate! We’ve had run-ins and fall outs with all kinds of people about what VAs should and shouldn’t charge, but at the end of the day, there is one thing that we want to ensure people do when it comes to their hourly rate, and that is to make sure it covers their essential and non-negotiable business expenses AND leaves enough for a reasonable take-home figure.
At first glance, business expenses for VAs and Digital Freelancers might seem low, but that’s not necessarily the case. Yes, we might not need to pay hefty commuting costs or rent for office space, but there are still a number of other essential outgoings, including:
– Insurance (Professional Indemnity, Public Liability, Cyber Insurance, etc.) – this is ESSENTIAL! Don’t start work without it, else you run the risk of hefty court fees. Protect yourself and your customers by making sure that you have the appropriate insurance in place at an appropriate level.
– Hardware and Software costs – there are so many paid-for tools out there that can help make you work more productively and efficiently, so consider whether or not you need to upgrade from ‘free’ to ‘paid for’ versions of software. Some tools also require special ‘professional’ licenses if you are using them for work, so be sure to read the small print to ensure that you don’t end up with an unexpected bill! Putting money aside for replacing or repairing your office equipment – be it your computer, printer, work phone, etc. – is also a good idea to help reduce the risk of large, unexpected bills that you haven’t budgeted for.
– Professional memberships and fees – whether you are a member of the Chartered Institute of Marketing or a networking group, or are paying fees to the Information Commissioner’s Office as a Data Handler/Processor, you need to make sure that these fees are covered by the income from your business.
– Tax, National Insurance, VAT (if applicable) and Pension Contributions – remember, these aren’t going to pay themselves! Work out how much you need to pay, or seek advice from an experienced accountant to make sure you don’t get hit with an unexpected bill from HMRC!
In order to calculate a baseline hourly rate, it’s worth tallying up all of the costs above (as well as any other business expenses you have that aren’t covered in the list) and working out your essential business outgoings on an annual and monthly basis. From this, you can estimate the number of hours you’ll be paid for each week (I know this can vary significantly, so it’s worth being conservative with this figure!) and then calculating your estimated income vs. expenditure level based on different hourly rates (i.e. £25ph, £30ph, £35ph, etc.) to see what difference this makes to your take home, and whether or not your preferred level provides enough to meet your living expenses.
Once you’ve set your hourly rate, don’t fret if you do need to increase it – you aren’t tied to it indefinitely! If you find that you need to increase your rate, you can. Our recommendation is to give clients plenty of notice of this change (and be prepared for some resistance! You may lose a few clients as a result of this), and to ensure that you are working in accordance with your terms of business document if that sets out certain conditions for rate increases.
There are a number of things to consider when establishing your hourly rate, but please make sure that it translates into a fair take home for you after you have paid out your essential business expenses. It might seem like a good idea to offer a bargain basement price to appeal to as many customers as possible, but if you’re working every hour under the sun and still struggling to make ends meet, you’re not really building a sustainable and long-lasting business.