By the end of this article, you’ll know what it costs to hire a virtual assistant, what their non-cash benefits are, and as the heading says, how much profit the company makes when you hire a virtual assistant (VA) through them.
My wife is a private person and I’m the opposite with my over-sharing. Sometimes she finds this to be one of my best qualities because she is never left guessing how I feel about her. Sometimes she would probably prefer not to know!
Love, lots of love.
As I write this article, I admit to having a wry smile wondering how my competitors are about to feel about my oversharing about their profit margins.
They probably would have hoped I’d collude with them and keep it a big, dirty secret.
Instead, I’ve taken the side of the consumer and being an advocate for them.
After all, you’ve hired or are about to hire a full-time team member to work with you in your business. You have a right to know basic things like:
- What does the staff member earn?
- What are their non-cash benefits?
- What’s the culture like in the company? Will it retain them or make them want to leave?
- Why have staff chosen one VA company over another?
If the owner of the VA company doesn’t answer these questions honestly, would you hire a VA that you will put hundreds of hours of training into?
What’s the risk they’ll leave if you’re not 100% confident that they’re being well looked after?
With this article, I will be Mr. Popular amongst the other VA companies and that’s okay.
So…..here goes, readers…..
How most virtual assistant companies charge
Most charge a flat fee between $2,000 and $2,500/month per VA regardless of the exchange rate.
- They don’t tell you their profit margin.
- They don’t tell you what your staff earns.
- They don’t offer extra services like coaches, trainers, web development, etc.
They simply charge you a flat fee and if you’re happy, you pay it.
Typically there will be CPI indexation each year in the contract.
What’s the profit of a typical virtual assistant company?
When the exchange rate is at PHP39 to AUD$1 as it is now, and if you’re being charged $2,400 plus GST, then the virtual assistant company profits between AUD$900 and AUD$1,300 per month per virtual assistant.
That’s a lot of moola!!
My competitors are silently gawking with open mouths while they read me openly disclosing their profits.
Sorry, but not sorry!
Out of the monthly fee of AUD$2,400, staff typically earn less than AUD$500 which is equivalent to 20,000 pesos. They typically also receive around 2,500 pesos (AUD$62) of benefits such as private health insurance and food.
Let’s break that down, out of AUD$2,400 that a client pays:
- $540 – virtual assistant salary; includes 13-month pay (mandatory Christmas bonus)
- $62 – private health insurance and basic food like bread and jam
- $1,000 – profit to the virtual assistant company
- $798 – operational expenses to run the business such as office space, marketing, etc.
Most contracts also have a clause that states if the exchange rate moves materially, that they can increase your fee to keep their profit margin healthy.
Many VA company owners will start jumping up and down saying these figures are wrong.
Of course, they will!
They’ll come out to discredit the whistleblower.
But I’m not just a whistleblower, I’m an insider running my own VA company, so I know exactly what it costs and what the profits are.
My competitors will try to pick a hole by saying that their operational expenses are higher and their profit is lower.
Depending on how they present you with their information, they can be right. You see, I have deliberately ignored the accounting smoke and mirrors that they will try to present.
The main one is around what the VA company business owner pays himself or herself.
For example, let’s say we have business A and business B:
- Business A – The owner doesn’t take a salary and simply receives a profit from his business of $150,000.
- Business B – The owner takes a salary of $100,000 which they include in their operational expenses on the profit and loss statement. This leaves a profit of $50,000 that the owner receives, bringing the total amount he/she receives to $150,000.
In both scenarios, the owner receives the same amount.
But with smoke and mirrors, they will try to deceive you.
Or they might say they have hired a team of business development managers or a marketing agency which has increased their operational expenses.
But that’s just another way of saying “we have chosen to reinvest our profits back into our business to grow it and make it more profitable”.
Therefore in my figures above, I’ve simply removed the accounting BS.
How does VA Platinum differ?
Are you asking yourself whether I am as bad as all the others?
No, otherwise I wouldn’t be writing about this.
The model I chose for VA Platinum and my clients is one of partnership. We have an open and transparent COST plus a 35% MARGIN fee structure.
My clients know exactly how much their staff take home and they know what our profit margin is.
The exchange rate is locked in for 6 months to ensure there’s no monthly swing of fees.
Therefore, at a time like this when the exchange rate is at PHP39 to AUD$1, the cost of a virtual assistant is around AUD$2,050 plus GST per month.
As we did above for our competitors, I’ll be transparent and show you our numbers:
- $780 – virtual assistant salary (minimum someone with 6 months experience earns)
- $120 – health insurance plus healthy cooked breakfast from a menu plus monthly surprises
- $510 – profit to VA Platinum
- $615 – operational expenses, internet, desks, marketing, etc.
What are the main differences?
Keeping it simple:
- We pay our staff more to keep them happy and retained working for clients
- We give them better benefits
- We take a lower profit margin
- We keep our expenses low
The other most significant difference is that we don’t charge a flat fee. Because we’re in partnership with our clients, our model is COST plus 35% PROFIT MARGIN.
You read it correctly.
I tell all clients (and now you) that my profit margin is 35%.
Clients love the transparency because, in their own businesses, they aim for a much higher profit margin of at least 40% and in some cases 60%.
The Exchange Rate Effect
The fact is, no one knows which direction exchange rates will go or when or by how much.
From the current Philippine rate of PHP39 to one Australian dollar, it could increase by 10% or decrease by 20% in the next 2 years.
Or they could stay where they are for an extended period, not moving up or down more than 2%.
- A 10% increase to PHP43 will see the cost of a VA drop by 10%; OR
- A 20% decrease to PHP31 will see the cost of a VA increase by 20%.
With my competitors, they charge a flat fee regardless of the exchange rate. However, they reserve the right to alter that flat fee if the exchange rate moves.
With VA Platinum, what will clients do when their invoices change as a result of a changing exchange rate?
- Do clients understand what happens when exchange rates change?
- Will clients be able to afford a 20% increase?
- Will clients stop using my service in favour of hiring a local person in their office?
- If the exchange rate increases by 10% so clients get savings and then it increases by 10% to bring invoices back in line with where they are now, will the psychology of an increase hurt the client’s relationship with their virtual assistant?
The real possibility of an exchange rate move
Exchange rates can change drastically and quite quickly, often based on no fundamental reason.
Talking about exchange rates wouldn’t be the same without a chart!!!
Go, you financial boffins!
The above chart of AUD to PHP shows that in 2008 the rate dropped approximately 30% from PHP45 per AUD$1 to PHP30. If you were buying a product or service in the Philippines from Australia, the cost would have risen by 30%.
As the exchange rate between the AUD to PHP moves, this affects the cost appearing on client invoices with VA Platinum.
What if the exchange rate drops to PHP32
As I mentioned earlier, the current exchange rate is PHP39.
If it drops to PHP32 which is a reduction of 18%, then invoices become 18% more expensive. Instead of AUD $2,000 per month for a virtual assistant, the cost becomes 18% higher at AUD $2,360.
Would a client rush off to fire their VA and hire a local staff member in your office?
A person in an onshore office will still cost almost triple an offshore person.
For example, here are the costs of an onshore person of the same quality as an offshore person:
- $5,000/mth – wage
- $475/mth – superannuation
- $50/mth – computer amortised over 2 years
- $1,000/mth – rent of space
- $100/mth – on-costs such as coffee, lunch, gifts, Christmas function
The total of $6,625 brings the cost of a local onshore resource to almost triple that in the Philippines, even if the exchange rate changes by 18%.
How to compare VA companies
The best way is to ask lots of questions.
I find that when a new client is referred to me from someone we both know, they don’t bother shopping around because they want to use me based on the strong referral.
But if you’re reading this article because you found my website, then I have built a tool specifically for you to use.
Download the free worksheet Virtual Assistant Service Provider Comparison Chart which I created just for you to use and ask questions of alternative VA companies.
Also, click here to access more resources.