It’s hard to believe, but I’ve been working from home full-time since the fall of 2016, running my virtual assistant business as my main focus and source of income. I spent several weeks before this transition crunching the numbers and thinking about how best to make that happen. Prior to working from home full-time, my virtual assistant business was run on simple straight hourly work, with a flat rate for all services. But, part of my plan to be able to work from home included switching from straight hourly to monthly retainer packages.
The straight hourly work was fine up until that point. I’d been in business for about a year, and I’d always felt that it was the easiest way to serve my clients without worrying about billing cycles or which services should maybe cost more than others because they’re more tedious, intensive, or whatever. I didn’t have to worry about which clients were on certain pricing structures versus others. However, I was also working a full-time job, and my VA business was a side hustle, so I wasn’t reliant on income from it to pay for my living expenses. When I thought more realistically about working from home full-time, it became clear that straight hourly work was not going to cut it as far as income was concerned.
Why? Well, as I said, my straight hourly pricing structure didn’t run on any particular billing cycle(s). I just sent clients another invoice for however many hours they wanted as they were getting close to running out of hours from their last invoice. There’s no real income security in that structure, because you don’t really know when money is going to be coming in. On one hand, clients may feel good about having you work x amount of time per week on their services or projects, which gives you an idea of when the hours might run out. Or, on the other hand, you may finish up one project for them, and then they don’t give you another one for a few weeks (or months, even). You just can’t be sure how it will play out with straight hourly. As I learned more about monthly retainer packages, it became clear to me that that was the way I needed to go.
What Are Monthly Retainer Packages?
This is a pricing structure that you can use to invoice clients for a set number of hours on a specified billing cycle. Regardless of whether clients want a retainer package or straight hourly, I have a minimum of five hours per invoice. When clients choose a retainer package, I ask them to decide on a number of hours they’d like to purchase every month. Often, I give input on what I think would be sufficient based on the service(s) they want me to do. As an aside, I also allow clients to request to increase or decrease the number of hours they’re buying each month, as long as they give me enough notice before the next invoice, and I create an amendment to their contract stating the change in hours and when it will go into effect.
When it comes to billing cycles, I have two of them to try to simulate two “paychecks” per month. Those cycles are the 1st-1st and the 15th-15th, and I invoice clients five business days before the 1st and the 15th, with the due date being those dates. One last note about how I personally run my retainer packages is that if clients have any unused time at the end of the month, it rolls over into the next month (to be added on top of however many hours they buy for their retainer), and then they have six months to use up that leftover time before it expires. However, I personally count up the number of work days each month for each client and divide the number of hours purchased by that number of work days to try to prevent unused time at the end of the month.
How I Transitioned Clients to Retainer Packages
This was a fairly simple process, really, once I figured out how to do it. It just so happened that when I decided to make the transition to working from home full-time, I’d very recently signed a few new clients. I didn’t think it was fair to send them one invoice at my old rate and their next invoice at my new rate. So, here’s what I did:
- I emailed each client explaining the transition I was about to make and the addition of retainers to my pricing structures. I also, obviously, explained how the retainers would work.
- I asked each client to respond with a decision about whether they’d like to go onto a retainer or if they’d like to stay straight hourly. To be transparent, I did 1) raise my rates but also 2) priced my retainers less than straight hourly to incentivize clients to choose that, since guaranteed income every single month was (and is) my ultimate goal. That being said, the great majority of my clients chose the retainer.
- I looked over my client list at that time and split it approximately in half, because about half of my clients had been working with me at least a few months, so those were the clients who got transitioned onto the retainer and the new pricing (because I increased my rates at the same time – although the retainer price was cheaper than my new rate for straight hourly, it was still an increase from what I charged previously) starting on a specific date. Then, I gave the other half of my clients – the newer ones – an additional month and transitioned them at that time. Because of when I notified clients about these changes, some clients had about six weeks to prepare for the adjustment, while the rest had about 10 weeks.
- I would also like to encourage you to learn from my mistake: Don’t let your clients know if other clients will be transitioned to new pricing later than others. Because my niche is fairly small, and a lot of people within it know each other, I was trying to be transparent and dispel any rumors or gossip that might have arisen by letting my clients know that I was phasing these changes in for clients in two batches, but I did receive push-back on that from one client. In retrospect, I just shouldn’t have let any of them know that there were going to be two phases of the transition, and it very likely would have been fine.
And really, that was that! I can’t remember for sure now, as it’s been so long ago, but I may have lost a client or two in the transition – clients who couldn’t afford the rate increase. And, for me, that was okay because I’d started a wait list for my services by that point and already had a pretty sizable number of people on it. I’m still using these two pricing structures today for clients who I’ve retained for this kind of work (even though I’m now focusing on editing services), and it’s still true that all but one of these clients do monthly retainer packages. It’s such a relief to have that guaranteed income coming in twice per month, and it helps me stay on top of my systems and processes, including budgeting for both business and personal expenses!
If you’re a virtual assistant or other service-based business owner trying to figure out how to price your services, I hope this mini-tutorial helps!
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This post was most recently updated in March 2019.