Agency Retainers: What You Need to Know

Retainers are becoming commonplace in the agency world, particularly with smaller or boutique creative agencies. Frequently touted as being a more attractive, strategic pricing model, retainers certainly have their benefits.

Beyond being paid up front, many agencies prefer retainer models because it allows them the time to really connect with clients and prove their worth. Marketing strategies take time to see results, and the longer term relationships of retainers provide agencies with room to experiment creatively and show results progressively, rather than feeling the pressure to “prove” their work’s value with vanity metrics too early in the game.

We’ll get into the definition of an agency retainer agreement, the pros and cons of retainer and project-based pricing, best practices, and how to spot red flags when you’re first navigating client retainers.

What is a retainer?

A retainer is a pricing agreement between an agency and a client for a set rate and period of time. Agencies work with their client to scope out what work will likely need to be completed, agree upon a monthly allotment of hours and then work collaboratively to meet their marketing needs and goals.

Typically, agency retainers are long-term contracts that can last anywhere from six months to many years. In most cases, the client is billed in advance by the agency for its services on a monthly or quarterly basis.

What a retainer isn’t is an open invitation for clients to steamroll your agency with requests and additional work for one flat rate. There is no carryover of hours, meaning you’re trusting one another to provide a steady level of service without anyone taking advantage.

What Are the Two Retainer Types?

After deciding that an agency retainer model is the best option for your services, you must identify what kind of retainer you want to be. The two types of retainers that people typically go for are listed below.

Pre-paid (Fixed Price)

With a pre-paid agency retainer model, you agree to maintain a specific volume of work for the duration of the retainer. This task may be done for a certain output or hours.

When clients require specific work done, you can use pre-paid models. Consider blog writing, SEO efforts, and website upkeep. The pre-paid approach can apply to anything that has a list of responsibilities.

Post-paid

An organization may occasionally not require your services right away. In industries like IT, website development, and other technical services, consultants frequently experience this.

Your agency’s expertise will be made available to customers for a cost. A retainer will make you accessible for such calls, allowing you to respond to issues as they arise or remain open to offer advice.

What do retainers for agencies do?

In a standard agency retainer agreement, the customer pays the agency a fixed amount on a regular basis, typically monthly or quarterly, for a predetermined period. In return, the agency commits to providing the client with a minimum level of service each month. For instance, this can entail a certain volume of creative labor, a specific range of strategic consulting hours, or a set quantity of media placements.

The agency may also offer the customer other services outside the scope of the agency retainer agreement for a fee. Usually, the client has the right to terminate the agreement with appropriate notice and the minimum payment; otherwise, a penalty clause shall be applied.

What are the pros of agency retainers?

1. From the agency’s perspective

Better, Longer Relationships

Agency retainers are built around long-term relationships. By positioning your agency as a strategic partner in your client’s success, more often than not, you’ll have the time and freedom to dig deeper, address more challenges, test strategies, and create more robust solutions to meet your client’s goals.

Establishing a rapport with the customer is crucial for projects calling for an in-depth understanding of the business operations. This encourages your teams to offer the finest service possible because future payments are contingent upon performance.

Furthermore, agency retainers promote a longer-term, more strategic engagement with a client, which can lead to additional sales opportunities. A successful agreement with one client may draw in further business. A portfolio or advisory resume demonstrating extensive work with reputable companies can showcase your credibility and value to prospects. By maintaining a solid and trustworthy relationship with your clients, you have more chance of repeat business while also building a sound reputation in the industry.

Better Work, Faster

Once the onboarding process is complete and your team has fully invested in your client’s business goals, you’ll be able to create better work faster. Retainers based on monthly workload might help an agency’s workers operate more productively. Your content will improve because your team is now essentially a part-time employee of your client.

Improved Project Pipeline

Retainers help agency project managers determine project pipelines well in advance. Project-based billing can mean that one month your team spends 10 hours onboarding, and the following month you’re dedicating 50 hours to wrap up a web project. Retainer-based clients provide a steady stream of work month to month, making it easier to determine when your agency can take on new tasks.

Moreover, agency retainers model speeds up the process of selling your work. Instead of constantly pitching your services to potential customers, you can focus on a few retainer contracts with significant value. One of the easiest methods to establish stability is to set up various retainer agreements. Your agency will still have several other clients who provide guaranteed income even if one of them unexpectedly cancels a contract.

C.R.E.A.M. (and Improved Cash Flow)

Agency retainer agreements offer a steady stream of money that can aid in better managing your cash flow. Payment occurs before the work begins and is guaranteed, which improves cash flow and reduces collections nightmares down the line. Dolla Dolla bills, y’all.

2. From the client’s perspective 

A long-term agency retainer agreement has many advantages for organizations. First, retainers enable companies to collaborate with a constant, dependable partner to achieve their strategic goals. 

Second, agency retainers lead to money savings over time. Clients may budget their marketing spending more effectively and prevent unforeseen cost increases by locking in a fixed quarterly price.

Third, retainers can help companies derive more value for each dollar spent by enabling negotiation for service reductions on larger orders. Agencies can give discounts on other inquiries of a client if they know they have a guaranteed income stream from that customer.

What are the cons of retainers?

Time Tracking is More Important than Ever

Even though you’re no longer billing by the hour, this doesn’t mean your team is off the hook for time tracking. To ensure your agency retainer is actually making you money, you’ll need to track accurately and provide reports to your client listing where your team’s time was allocated.

Trouble Showing Value

Some clients have an easier time understanding the value of creative work when costs are tied to projects rather than tied to progress. Even if you’re providing accurate time tracking, it can be hard to show value when clients feel they are paying for “a month of work” instead of a tangible deliverable.

Communication Breakdowns

When you’re downshifting from a large-scale priority project like developing a new app to a retainer-based relationship for maintenance and digital marketing, it can be difficult to navigate the new flow of communication. Clients who become accustomed to on-demand emails and phone calls may think that is the norm, and you may find you’re wasting uncompensated time fielding requests and inquiries.

Potentially Complicated Breakups

If you’re stuck with a difficult client, the light at the end of the tunnel is project completion. If you’re in a retainer-based relationship with a problematic client, be prepared for a potentially complicated client breakup. Which brings us to the following…

When should agencies avoid retainers?

When You’ve Just Met

In short: you wouldn’t commit to a long-term relationship on a first date, so you probably shouldn’t commit to a retainer with a new client you’ve never worked with. Knowing how your client likes to work will be a major factor in deciding if an agency retainer is the right fit.

When They’re New to Creative Agencies

Some clients are aware that they need to partner with a creative agency but aren’t sure exactly what that’s going to look like. Maybe they’ve been bitten before, or maybe they’re completely new to marketing and aren’t yet sold on its value. With clients like these, you’ll have a more challenging time getting their full buy-in on a retainer, and you’re more likely to hit bumps in the road if they aren’t immediately seeing results.

When They’re, Well, Bullies

Some clients will see retainer agreements as a flat rate for your agency, fulfilling all of their creative dreams. These red-flag clients are usually spotted pretty easily by keen-eyed account managers. That’s not to say agency retainers aren’t possible if everyone is clear on your scope of work, but your project managers will need to carefully monitor these projects to ensure you’re not being bullied.

Retainers can be annoying and stressful for the partnership if the client doesn’t comprehend their long-term goals. This can result in unexpected overages and add unanticipated hours to the agency’s workload if the client underestimates their requirements.

When there’s a need for a consistent, predictable connection, agency retainer model is at their most beneficial. In these situations, it enables everyone to put aside the paperwork and concentrate on creating and executing. It’s a means for clients and agencies to work together to advance their businesses.

How Should You Manage a Retainer?

The first step in starting a retainer business is to get it going. To manage your retainers properly you’ll need to put in some effort to manage your retainers properly. Establish a method for effective agency retainer management by following the instructions below.

Specify the work’s scope

To efficiently manage your retainer projects, you must first define the scope of the task. Set clear expectations with your client for the work your consulting business will perform for them. Once you’ve established expectations with your clients, you can decide what work you’ll complete during the retainer period.

Simplify the billing process

When you don’t have a system in place to process your retainer invoices, billing might be a pain. By investing in retainer management software, you can effectively charge your clients and manage the finances of your retainer from one location. 

Manage retainer work using management software

As long as you are aware of both their potential benefits and drawbacks, retainers can be a blessing to your company. It’s important to keep in mind that retainer clients are typically excellent if you manage them properly.  You must manage your tasks now that you are aware of the breadth of your work. Use project management software to oversee the ongoing tasks associated with your retainers.

Regular reporting

In a relationship based on trust, transparency is essential, particularly when a client pays in advance. To maintain that trust, it’s crucial to set up a tracking system for the jobs and hours completed by your staff. Additionally, you should provide your clients with a monthly report detailing precisely what you accomplished each month.

Like any contract, you’ll want to consider the following:

• The length of your retainer
• What happens when it’s time to renew
• What happens when it’s time to terminate
• Set out communication expectations, including how you’ll be reporting
• And of course, timelines and due dates still apply

Ready to set up your first agency retainer? Consider a trial period of 6 months (or less) for both you and your client to grow comfortable with the agreement. Rely on your project management software to increase transparency in your client relationship, allowing clients to view time tracking and project progress.

Function Point alleviates the chaotic nature of operating creative agencies, internal marketing teams and professional service firms. Used by over 9000 customers worldwide, the all-in-one agency management system 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.

FP does more than just time tracking. Learn more about our agency management software by visiting our Product page or booking a demo with us.