As a virtual assistant (VA) or social media manager (SMM), like many other flexible work arrangements, you have a choice to make about how to price your services. Two of the most common options are hourly pricing and retainer pricing. At first glance, both options seem to offer many benefits to you as the service provider. To help you choose between them, we’ll walk through a more detailed definition and the pros and cons of each option. Let’s dive in!
Hourly pricing is exactly as it sounds! You set your hourly rate, track your hours as you work, then bill your client for the total number of hours on a regular basis (often biweekly or monthly). This type of pricing is what you’re likely more used to if you worked hourly for a company, versus getting paid by salary.
Hourly billing is often chosen for its simplicity. It’s easy for you to track the time you spend working as a VA or an SMM, and it makes sense to pass along the costs for that time to your client. This structure ensures that you always get paid for the time you’re putting into your work!
It’s also a great option for newer clients when you want to have an “out” if the relationship isn’t as ideal as you’d hoped. By billing hourly, you can see how it goes with a new client and decline new tasks if you decide it’s not a good fit.
The most common frustration with this system is that it attaches a lot of value to the amount of time you’re putting into work. Clients sometimes dislike this system because some service providers will deliberately fluff their time to increase their pay. And for service providers, this system can become a huge headache when clients question whether a project should have taken that amount of time or not.
One way around this is to estimate the number of hours that you expect a project to take up-front, but this can still be frustrating on both sides of the arrangement if the estimate isn’t perfectly accurate.
Another con is that your income is unpredictable. With hourly pricing, you may have some months that are especially busy and profitable while others are slower. This can make budgeting (and time management) more difficult because of the fluctuation!
Retainer pricing works differently. Clients will essentially book your time in advance by paying an up-front fee for a fixed amount of your time, like ten hours of work, over the course of a month. What services are included in the retainer can be specifically outlined beforehand, or they can simply reserve your time and request the services they need on a monthly or weekly basis. The retainer fee just ensures that you’ll be available for whatever comes up throughout the length of the contract. In many cases, clients will pay a retainer fee on a regular basis (like monthly) to continue to take priority over your time on a regular basis.
If you go this route, I’d recommend also including a stipulation in your contract that covers what happens if you go beyond the time commitment outlined in your retainer. It may make sense to make additional hours available at an hourly rate if you go beyond the retainer amount. On the other hand, some service providers choose to set a standard that they will not be available for work beyond the retainer’s set scope at all.
It’s up to you to set this standard so that you and your client are on the same page if more work is needed! You may also want to discuss whether hours will roll over if they’re not used within a specific timeframe, or whether they just expire. These are all choices that are up to you as you continue to build up your ideal VA or SMM business!
The main pro for retainer pricing is the regularity of payment. Especially for long-term clients who pay a retainer fee on a regular basis, as the service provider, you’re receiving income in a way that feels more like the standard many of us are used to. You’re able to predict your cash flow in a more reliable way, which can make the rest of your financial decisions (like budgeting) easier to manage.
Retainer pricing can also help grow your business over time, as you don’t have to worry about fluctuating workloads week to week or month to month!
Many VAs or SMMs will strive to take 1-2 bigger monthly retainer clients (based on the services they provide), and additional, smaller retainers to supplement. No matter which structure you choose, it’s always a great idea to have multiple sources of income, and offering retainer pricing makes this much easier to accomplish!
One drawback of retainer pricing is that you don’t have much flexibility if other projects come up throughout the length of the retainer’s contract. Because the client has pre-booked your time, you’re expected to be available for the work that comes up, at least up to the number of hours that the client has paid for in advance!
This can mean that you have to turn down other projects that may seem more lucrative or enjoyable, simply because your time is completely booked out. Depending on the client, it may also make scheduling your time difficult if you’re expected to be available at a moment’s notice to take on new tasks.
And although it isn’t necessary, some clients may expect a slightly discounted rate when working on a retainer. They may feel that by guaranteeing you a regular scope of work in bulk, you’re benefiting from the regular work and should provide a slight discount.
Ultimately, you’re the only one who can decide what’s best for you and your business. You know your work best, and part of the beauty of becoming a VA or an SMM is that you have the flexibility to set the tone with your clients about how you want your work to… work!
I hope you’re able to use the pros and cons above to take a look at your own situation and make the right choice for you and your business. Just make sure to communicate clearly with your clients and discuss any specific scenarios that may arise, like going beyond the number of retainer hours that have been pre-paid.
Lastly, remember that you can always change your mind over time. While some clients may only be willing to accommodate one payment model, most will be somewhat flexible if you realize your original choice isn’t working out. Best of luck with your choice, and don’t hesitate to reach out if I can answer any other questions you may have!