Virtual Assistants: 5 Business Terms You Need To Know
Posted on 31st March 2023 at 15:54
If you’re new to being a VA, there may be some key business terms that you have heard but are not quite sure on their meaning yet. We all have to start somewhere, so don’t feel bad if there are some terms you can’t yet make sense of – I’m here to help!
One of the best parts about my job is being able to use my experience and knowledge to help new generations of business owners. Below you’ll find 5 business terms that you’ll need to know when you begin working as a VA, and my simple, no-nonsense explanation for each of them!
2. Cash flow
3. Fixed Vs Variable costs
If you’re new to running a business as a VA, you may shy away from the topic of finances, but it’s crucial that you learn all about expenses in order to determine whether you’re making a profit or not.
Expenses are the costs that you incur when you are running your business. To be a successful VA, your expenses need to be cancelled out by the income that you generate.
Expenses for a VA might include:
Subscriptions or software that you need to perform tasks (E.g. Microsoft Office, Canva, Adobe)
Office space/shared office space -whilst plenty of VAs work from home, some may feel that they are more productive when they work in a shared office
Electricity/gas expenses – If you do choose to work from home, you need to factor in the cost of your electric bill! Many VAs find that they use more heating and lighting when they begin working from home!
Equipment such as a laptop, monitor, dedicated work phone, keyboard, desk, lighting
Registering with ICO (Information Commissioner's Office) if you process any personal data (approx. £40 a year)
Insurance for Professional Indemnity (will typically cost just under £100 a year)
Webpage domain and hosting costs for your website
You will also need to register with HMRC and keep track of your potential income tax and national insurance contributions.
These terms are used in relation to costs or expenses (see above!). A fixed expense is one that doesn’t ever change and is always the same even if your business has a good month or a not-so-good month.
Examples of fixed expenses could include:
• Rent on an office space that you use.
• Costs for subscriptions that you need for your business.
• Any insurance that you have for your business or your business’s valuables (e.g., laptop).
Variable costs refer to costs that do fluctuate. These may include expenses that ebb and flow along with your business, such as:
• Any additional software/equipment you need to do a specific task for a client.
• One-off costs such as replacing a broken piece of equipment or paying a one-off fee for software.
Cash flow refers to the ‘flow’ of your financial situation – how much money is coming in? How much money are you spending?
One of the reasons that many begin working as a VA is the fact that there aren’t many expenses that you have when setting up, compared to other businesses.
The fact remains that you still need a steady flow of cash going in and out of your VA business for it to be viable.
If you’re interested, we have a blog all about maintaining a healthy cash flow – click HERE to read it!
Gross income refers to the income that you generate but doesn’t take into account any expenses (fixed or variable) that you may have had.
As a virtual assistant, your expenses are likely to be relatively low (as the cost of working remotely often means that setting yourself up as a VA is a cost-effective business!) but you will still have business expenses. It’s easy to look at your gross income and assume that all of that is your profit, but gross income is only part of a bigger picture.
Net income is the money you will get after you take into account your expenses. Once you deduct the cost of your expenses (such as your subscriptions, insurance, rent on an office space if you have one) then you have your net income!
Knowing your net income is essential because your business has to be able to make a living – you need to have enough net profit after considering your expenses for your business to be worth your time.
Now that you hopefully know some of the business terms and how they can apply to you as a virtual assistant, you can begin your business journey armed with the knowledge you need. If you are interested in other VA blogs, follow the links below!
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