VAs are NOT cheaper than employees

As you mosey about the Net, you’ll see charts posted (perhaps you even have one on your own site) that show how working with a VA is less expensive than hiring an employee.

I have a fundamental issue with these kinds of charts. They’re not presenting an accurate picture. And what got me to write today is that I saw a tweet where a VA was explaining to a client that it’s a good deal to work with VAs because, in part, the client wouldn’t have to pay for benefits. A URL was then given to the VAnetworking comparison chart.

As for what the tweet said? It’s bunk. Clients absolutely DO pay for the Vas' benefits.

And chart makers really are coming from the right place--but what's being taken away from the charts is fundamentally incorrect.

So let’s take a look at all of this stuff. And let’s use the VAnetworking chart as an example. Here’s what it shows:

Now here’s my view on this, item by item:

Hourly Rate of Pay

Employee = $20 (btw, based on the US Dpt of Labor, an admin/office manager at the top of her pay grade would be making more like $22.89/hour
VA = $30-$100+

The VA’s hourly rate is what it is because she should have all the skills of the employed admin, plus, she has additional responsibilities (due to working virtually) that employed admins don’t have to have.

Fringe Benefits

Employee = $7 @35%
VA = Whatever it actually costs the VA to replace the sorts of benefits she would have had in the corporate world. Those costs are likely to be higher than 35% of her base hourly rate, because corporations have greater buying power for some of those benefits than do solopreneurs. No one client absorbs all the expense, but each pays part of it.

Overhead Rate

Employee = $10 @50%
VA = Based on actual cost, again—although significantly lower than in the employment scenario. It’s true that clients don’t have to have physical space, or pay various taxes/insurances, but there are other expenses clients DO have when working with VAs. There are times when clients may purchase equipment for their VAs to use because it’s specific only to them, and a VA would have no reason to have it, otherwise. Clients also routinely reimburse VAs for costs of postage, phone expenses, education, travel—all sorts of things.

Certifications/Experience (not included on the chart, but begs to be considered!)

Employee = An employee at the top of her pay grade can get all the certifications and special knowledge she wants, but hitting that ceiling is hitting that ceiling. She’s not going to “cost” her employer more in hourly expense beyond a certain point.
VA = Every new certification, every new skill mastered, even niching at a high level and gaining expertise in the needs of a specific group makes the VA more valuable. As a business owner, she has no ceiling on her fee, and appropriately raised, it’s absolutely passed on to the client.

At the end of the day, no matter what, an administrative employee is likely to be maxed out in cost to an employer at something under $50/hour.

So, to a certain financial point, VAs aren’t more “expensive” than employees—but that’s quickly moved beyond as a VA grows. Look at the VA Networking chart. In reality, how many of your VA colleagues do you know who are billing at just $35/hour? That’s barely profitable. And if you swap out the figure for a $50/hour (or more) VA, the figures on the chart are blown to hell. Actually, the value of that chart is blown all to hell if the VA’s fee just exceeds $37/hour.

On the flip side, what clients get from VAs is exponentially greater than what they could get from employees—in terms of abilities, attitude, mindset, and commitment. And they get the added benefit of far less hassle—especially physical, and legal. They also may get to save by paying just for the time they need, but that’s solely dependent on how much time they need.

The more time they need, and the more they need from a top-notch, experienced VA, the more it costs. And at some point, comparing just dollar for dollar, it’s kind of easy to make the mental connection to being able to get more time from an employee for the money. But that still doesn’t address the added abilities the client gets from a top-notch VA that exceed what he’ll ever get from an employee with skills gained through employment.

And the reality? Very few clients using VAs will ever really need to so much time that hiring employees is a better option.

By way of example, sure, if you have a $37(complete compensation package/overhead cost) employee working 40 hours/week, that’s almost $77K/year. A $50/hour (complete) VA would cost $102K for the same amount of hours worked. But it’s the rare client who needs that much help. The very rare client. It’s far more likely that the client, with a high need, would buy something like 50 hours/month. And that would cost just $30K/year. The more “usual” client AssistU VAs see who need 10-20 hours/month would be paying $6K-$12K.

If a client needs 10-20 hours/month to accomplish what he needs done, then paying an employee is absolute overkill. In fact, it then becomes far more wasteful than working with a VA at a higher hourly rate.

I’ll say it again for the umpteenth time: Virtual Assistance was never intended to be the inexpensive alternative to hiring employees. It was intended to be the efficient, effective, and convenient one. (Do feel free to quote me, please!) And it is exactly that. But that comes at a higher price, as most conveniences do. It also comes with greater benefits.

VAs need to stop trying to make a case for being “cheaper” than employees—we just aren’t. It’s not a place where we need to compete. It’s stupid in the extreme, especially since it’s not true. Where we make sense is not in the dollar-to-dollar comparison, but in the effective/efficient/convenient—and even the GREEN comparison. Overall, for most clients, working with VAs is absolutely going to result in a cost savings over hiring employees.

Virtual Assistance best serves unconventional thinkers. If clients can’t wrap their heads around the reality that VAs present a unique opportunity for them to get the high-level administrative support any business owner/person needs to move forward strongly, and/or don’t want to pay for the convenience, they should absolutely feel comfortable going the employment route. And you should feel equally comfortable helping them see that path clearly and quickly.

Comments

[Jessica]

Hear! Hear! As someone who hires VAs, those charts have always bugged the heck out of me to the point that when I'm looking for a new VA and they have such a chart on their site, there has to be something really compelling going on for me to even consider hiring that particular VA.

Why? In addition to being misleading it really doesn't tell me anything. If I'm looking for an estimate on what working with a certain VA would cost, the chart's useless. Far more helpful are time estimates for certain types of projects and loads of testimonials. And, if I'm looking for the best VA for the job, the chart seems defensive and makes it appear that the best that particular VA has to offer is being "cheaper" which generally doesn't build confidence that said VA is the best choice for a gig.

Maybe there are business owners who are looking for a cheaper alternative to hiring an employee, but I think they're few and far between, and I know that if I were a VA, they wouldn't be my target market.

So glad you're taking a stand on this, Stacy! I'd love to see those charts disappear ;-).

[Terry MacRae]

As always, you are so "on target." Your post is a must-read for my AssistU students who are currently studying the benefits of Virtual Assistance, and they're in the process of determining and defining their fee structures. I'm adding this post as a mandatory assignment to the already awesome VTP manual.

[Tawnya Sutherland]

Hi Stacey...As the owner and founder of the website used in your example above (http://vanetworking.com), I should clarify that the chart is intended for illustrative purposes only. What a specific type of employee earns hourly differs not only by area of specialization but in terms of location and of course, the business they work for. Instead, the purpose of the chart is simply to help business owners new to the virtual assistance concept understand that hiring someone for what initially appears to be a higher cost is in fact a feasible option. Perceived cost is a common objection voiced by prospective VA clients who understandably need to grasp how hiring a VA will impact cash flow versus hiring staff. This is perhaps even more true in today's economic climate.

In any event, thanks for bringing to light a different take on the numbers. If there is one thing we can certainly all agree on as VAs is that the long term value of virtual assistance far outweighs the costs, perceived or real.

[Rita Cartwright]

Hi Stacey,

You made some valid points. However, in all fairness, there is more than the cost comparison chart on Vanetworking.com. There is also information following the chart that addresses some of the issues you pointed out. If you going to tell it, tell it all IMO.

[Stacy Brice]

Thanks to everyone for joining in the conversation.

Rita--you're sweet for taking up for VAnetworking, but it really isn't needed. If you sense that I'm slamming them in any way, I'm not. If I were, I'd have the moxie to say it straight out--and I'd have the integrity to say it directly to Tawnya.

But the issue isn't anything having to do with VAnetworking; in fact, the only thing they have to do with the post at all is that it was their chart that was being pointed to in the tweet that gave me the idea for this post. It could have just as easily been any of a dozen (or more) other such charts I've seen.

The issue is what's being taken away from the charts that make this sort of comparison--by VAs and prospective clients alike.

As such, I addressed the realities of that, and NOT what's on the VAnetworking site, although I linked to the page where the chart is located, in case anyone wanted to click through and see it all for themselves.

That *is* fair.