Determining your worth is important and empowering. All professionals should conduct salary research every year or two, and small business owners are no exception. Knowing what to charge for your time and services is important if you want to stay competitive and satisfied. Nailing down the numbers as an independent business owner, however, requires more steps and consideration than would be required of an in-house employee. Because you are your own boss, it can be difficult to objectively determine how much you should make. Additionally, small business owners have to consider more factors when determining what to charge than HR managers in large companies. By asking some important questions and following a few steps, I hope to give you a better idea of what to charge your clients.
1. Why It’s Important to Know Your Worth
Knowing how much your time is worth—or how much to pay yourself, if you sell products instead of services and will take a regular salary—is important for a number of reasons. Asking a competitive price for your services and/or paying yourself “fairly” compared with other industry professionals with similar expertise and years of experience allows you to:
- Charge clients fair, competitive prices that won’t undercut your expertise nor unfairly overcharge them.
- Present yourself and your business confidently because you know where you stand compared with other professionals and businesses in your field.
- Fairly and wisely negotiate your salary should you re-enter a large or corporate company.
- Determine which areas of your work are not as strong as your fellow business owners’ so you can effectively develop your professional skills.
2. Conducting Salary Research
There are tons of resources available for conducting salary research. While most of these will focus on employees working for companies that provide benefits packages vs. independent business owners paying themselves, they are still great starting points (the next step will talk about using other factors to adjust the rough numbers you gather during salary research). If you Google, you may also find some information about what other independent professionals in your field are charging—just make sure they are credible, relevant sources. Here are a few places to start:
- Salary.com and Payscale.com are wonderful resources. They ask a series of questions before providing a salary report in order to take as many factors into consideration as possible so that you take away an accurate number. Among these are your location, size of business, years of experience, and benefits.
- The U.S. Department of Labor offers salary ranges for hundreds of professions.
- Social networking sites like LinkedIn and Twitter can also prove valuable resources. Consider contacting other professionals in your field who have been in business longer and asking what they charge and how they determined their worth.
- If you are still working for someone else but building your independent business, ask your Human Resources Department if they run salary audits for employees. Some companies complete these yearly to ensure that they are remaining competitive in the marketplace so that they can retain their best talent.
3. Other Things to Consider
As we said, determining what to charge as a small business owner is not as simple as figuring out what you should be paid as corporate team member. As an independent business, you will almost certainly charge more per hour than someone doing the same work as an in-house employee at a large company. Before you set down your final number, factor in the following:
- Taxes – As the business owner, you are responsible for all of your taxes—both those that would be paid by the employer and the employee. There are some exceptions based on your business type (LLC, S-Corp), so make sure you speak with an accountant about your tax liability.
- Benefits – You’ll be footing the bill for your own health care, retirement plan, sick days, vacation time, etc. Many corporations offer benefits packages that increase their employees’ overall compensation plans by thousands—and sometimes tens of thousands—of dollars per year.
- Overhead – While you should definitely charge a fair price for your services, don’t undercut yourself by charging too little! Budget carefully so that you understand how much of your income will pay for your business’ overhead before going into your pocket. Are you partnering with a virtual team to get more work done for more people, or simply to take tasks off your plate? Factor in the hourly cost before determining how much to charge.
- Your level of expertise – Many small business owners strike out on their own because their particular knowledge, background, or experience gives them an edge over others in their field. Are you an expert in your area? Are you selling a truly superior product? Is your work more akin to consulting?
Following these steps should provide you with a clearer idea of what you are worth as a small business owner. For those who are already established, how did you determine what to charge your clients?
If you’re still not sure that utilizing a virtual assistant is for you, check out my free workbook. In it, I will tell you exactly what you want to look for from a virtual assistant to make sure you pick the best to work at your small business. Contact me today!