In service-based industries, retainers are becoming a popular way to build long-term relationships with your best clients, provide a higher level of service and ensure cash flow.
Creative agencies and freelancers are understanding the benefits of providing their clients with retainer-based services, but it can be difficult to know how to get started if you’re new to this form of billing. Here are 5 tips for setting up your first retainer-based clients.
Focus on Existing Clients
With existing clients, your agency already has an understanding of their needs and goals, and what they need to do to grow. Position your agency as a long-term partner in their business’ success.
Using your expertise in their industry, create a long-term plan for how your agency can position them for growth using data and reports. Now is the ideal time to wow them with what you’ll be capable of providing them with long-term.
Determine Your Hours
With a solid understanding of your scope of work, determine the number of hours your team will allocate to your client. Understandably, some months are busier than others and you’ll need to build a slight buffer to accommodate this, because retainer hours don’t carry over.
Just because you’re providing a retainer doesn’t mean you’ll have any freedom to slack on time-tracking. A common mistake agencies make is setting up a retainer and then loosely estimating hours—which can lead to months of accidentally under-charging for your time. Function Point’s simple time-tracking allows creatives to easily track as they work, rather than trying to estimate where their time was spent at the end of the day.
Set Your Rates
When you’re determining retainer-based pricing, you should anticipate that most clients will expect to be paying a slightly lower hourly rate. Here’s a loose rundown of how to plan for retainer pricing:
First, calculate your full time employees’ total costs (salary, taxes, health benefits, etc). For each retainer, loosely estimate the percentage of time that your employees will be taken up by the client. For simplicity’s sake, we’ll say that you’re providing a staff of 5, all spending 25% of their time on Client X. Add up 25% of each of their total employee costs, multiply by 2% (to include the average overhead cost per employee), and then add a 20% profit margin.
Decide on Your Terms
Depending on the scope of work and the size of your agency, determine the length of contract you feel is the best fit for you and your client. Having a shorter term contract gives both parties the opportunity to feel out the situation and make adjustments as necessary, or decide if it isn’t working.
What else should you consider? Set a 30-day notice requirement for canceling a retainer, and make it apply to both parties. Ensure you’ve included written agreements on when invoices and payments are due. Make sure your client is aware that hours do not roll over—this isn’t to earn your agency free money but to ensure your client is using the retainer and your talent to their fullest potential. These rules provide security and protection for both parties!
Avoid Client Bullying
Hopefully when you’ve set a retainer with a client, it’s because you enjoy working with them and see mutual benefit in your long-term partnership. A retainer is not a monthly payment for all-access creative support!
You’ll know the difference between providing extra value for your client, and being steamrolled into going over budget to retain a client who is becoming a bully. Strong account management and bulletproof time tracking can help negate these situations when they arise.
Creatives and marketers frequently lament the snail’s pace at which true ROI can be proven. Retainers give agencies the chance to really show their true worth, and let your clients experience the kind of growth that only comes with long-term partnerships. Function Point’s analytics and collaboration tools allow you and your clients to track project process as it happens, and make your monthly reporting easier than ever.
Beyond improving cash flow, the main benefit of having client retainers is the ability to significantly improve your work, flex your creativity and provide real results for clients.
Wondering if a retainer pricing model is right for your agency? Check out our guide, Agency Retainers: What You Need to Know
Function Point alleviates the chaotic nature of operating creative agencies, internal marketing teams, and professional service firms. Used by over 9000 customers across the world, the all-in-one solution helps teams connect each stage of project management. Our goal is to make productivity more personable; to warm it up and give it a heartbeat.