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Zirtual – what went wrong?

Last week virtual assistant giant Zirtual suddenly ceased trading with an email sent to all its employees and clients shutting the whole operation down. The financial markets that funded the project are somewhat baffled by why it didn’t work and are busy securing more rounds of funding to try and get this business back up and running as quickly as possible – because, on paper, it’s a great business. You have lots of clients, all willing to give you lots of outsourced work. You have a willing and highly motivated workforce based all over the world and with a diverse skillset to service those clients. There’s very little equipment cost or capital expenditure as the major cost is time and salary…. And that’s maybe the key to this downfall.

Because as a VA, I’m telling you – the numbers don’t add up.

Zirtual’s business model involved paying upfront for a block of hours – the basic rate was roughly £15/hour for a salaried employee. Now anyone that has employed an employee knows you have insurance, tax and admin fees needing to be paid out of that. And there was Zirtual’s back end system (providing emails to all the assistants, sorting storage for documents, payroll, bookkeeping etc) and the front end (marketing costs, the website etc.). Once you take those costs out of a £15/hour rate, there’s not a lot left to actually pay your staff and Zirtual insisted on their contractors being US based university graduates.

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On top of that, it doesn’t seem like the VA/Client relationship was at all managed – you had Zirtual employees skyping their clients via their own accounts, emailing them direct… As a multi-VA myself, I don’t see how they could have monitored what hours were actually being worked, control the quality of work or indeed stop their employee from contracting outwith their contract. There was nothing to stop them from going direct, except the fact that their client was paying the company less than Zirtual was paying the employees!

So we’re left with a real mess… VAs haven’t been paid for their work last month. Clients have been left high and dry without any admin help. The industry has had its reputation slurred.

They need to redesign the way they work to fit the virtual model. There needs to be flexibility within the system to expand and contract the workforce as client workload demands. You need to find enough people willing to work the quirky hours that this demands – most work comes in at the end of the day, and therefore an evening shift makes sense and keeps the work flowing smoothly. It’s clear the CEO just did not understand what she was asking of the staff and what her clients needed. She was relying on VC funding to plug the gap between income and expenditure but that simply can’t go on forever – you need a sustainable model. We estimate that about 30% of the hourly fee should be going on systems and 60% on the VA… So at an average UK rate around £22/hour you should be charging clients at least £28 in order to cover your costs, let alone make a profit.

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Apparently they are relaunching soon with a contractor based model. And good luck to them, but please look at your rates!

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