One of the downsides of being a freelance consultant is the irregular cash flow that comes with the cycles. However, you still need to ensure that you receive at least a steady sum to keep the practice running.
This issue can pose a nightmare since you may have thousands of dollars in unpaid receivables which you still can't collect for one reason or another. Thus, having a retainer agreement with your clients will act as the ultimate shield against the cyclic flow of consultancy fees.
Having a monthly retainer agreement will take you from being reactive to being proactive while providing the assets to keep your business afloat. Thus, how do you go about selling a retainer agreement to your clients?
For most consultants, selling the idea of a monthly retainer can be affected by the inability to communicate their value to the clients. For many others, the task of asking the client to sign a retainer agreement is riddled with the fear that the client may reject the entire deal.
However, to ease off the pressure of asking the client to sign a monthly retainer agreement, you can make the monthly retainer a product by unbundling the services they find valuable each month. It could be a monitoring service, marketing campaign or any service the client will discover valuable each month.
This arrangement allows the client to see the value in your continued services for their business instead of viewing your services from a single one-time package. This also removes the image that the clients will pay a monthly fee "just in case" they need your services at one point or another. Thus, the client will have a thorough understanding of the value they will be getting on a monthly basis.
Once the client is on board with your services having tried your products, it is better to sell on the value of the product you had sold rather than opting to bill the client hourly consultancy fees. Hourly retainer pricing limits your profitability. The better the services you provide are, the less you subsequently get paid.
The subsequent services will require less time to execute. However, if you sell to the client what you will do for them every month concerning long-term facilities, you are guaranteed to make the same amount of money each consecutive month regardless of whether the clients "feel" they need you or not. For example, a website maintenance retainer could include services like bug fixes, technical support, keeping CMSs and plug-ins to date and so on.
A vague contract encourages "scope creep" which occurs when tasks mutate into sub-tasks that require more time and resources to handle. Thus, the monthly retainer agreement should keep the boundaries clear. For example, the retainer agreement should define what a minor fix or revision is, otherwise how would the review be classified as overtime.
A retainer agreement allows your clients to know what services to expect for the agreed sum, and if they would require additional support beyond the primary service provided, these extra services are clearly outlined.
For example, you can describe the difference between a bug fix (which is when the system doesn't perform as required) and a feature (when the system performs as expected, but the client wants an additional function that wasn't in the original design). You can then explain when bug fixes applied, and how much extra the clients would need to pay to access the new feature.
A retainer agreement is a contract signed between the client and freelancer in which the former commits to paying the latter a certain amount of money each month. The two parties can agree on a retainer based on the project scope or a specific amount of hours. The terms of the agreement vary depending on many factors. For the most part, however, the contract runs for 6-12 months.
Now that you understand what it can do, it should be pretty obvious to you what the retainer agreement sample is. The sample shows you the type of agreement you should prepare or expect to sign, especially if you are unfamiliar with such contracts. It helps to study the agreement closely so you know its most important segments, as that could be the difference between profitability and losses for your business.
When followed religiously, the retainer agreement sample can bring in more efficiency and accuracy to your business. The accuracy will be more evident in your monthly income projections. Financial projections are important to a business in many ways. They are essential for proper planning. In freelancing, you can’t run your business without any planning. You have to put measures in place to help the business grow in size, number of clients and revenue.
On top of that, the agreement is also essential for controlling workflow. It also helps the business owner to manage their work schedule better. The fact you know that a specific amount of work is available and payment shall come in religiously like clockwork, you can organize the schedule and roster of the individuals working for you. It helps you to manage your time more efficiently too. Poor time management can cause businesses to collapse.
Poor time management can lead to tons of conflicts for your business. If left unresolved, it can also eventually kill your business. It causes distractions and loss of work. Missed deadlines and massive financial losses become the norm as you continue mismanaging time. The relationships with your clients – coupled with the ones you have within the business – also suffer deeply. A retainer agreement can help you to avoid all these business-crippling behaviors.
Consistent flow of cash into your business can also increase your profits. In some cases, it can be more important than profits. Yes, the retainer agreement sample guarantees you a monthly income for several months – usually 6-12 as previously stated. You can then plan your work properly fully assured that money to cater for any forthcoming expenses will come in. You can also recruit new members of your workforce in case the project demands more hands.
However, it’s important to note that the benefits do not just happen automatically without your input. You have to know how to use the retainer agreement sample properly. You have to know how to prepare it too. More importantly, restrict yourself to what the agreement says. Use it to determine the course of action you should be taking. Use it to manage your business more professionally so that customers learn to be loyal and depend on it more.
Memorize all that’s on the retainer agreement sample. Refer to it in case of conflicts too.
Securing just a few monthly retainer agreements with clients allows you breathing room during the low seasons where cash flow is expected to dwindle. Retainers help avoid end-month panic, as well as allowing you to schedule projects and growth plans. Moreover, having a retainer agreement boosts your relationship with your clients over a more extended period.