9 steps to a bulletproof retainer relationship (and a bonus)

16

Min Read

Ardith Stephanson

Predicting cash flow can be one of the most difficult aspects of being a freelancer. When there are plenty of jobs flowing in, cash flow is easy. But keeping a steady flow of paid invoice templates isn’t always possible.

So what’s another option for consistent, predictable revenue? A retainer.

What is a retainer agreement? And how does a retainer work?

A retainer basically means that a client pays in advance in exchange for ensuring your services covered in the scope of work template are available to them for an extended amount of time. A client can make recurring monthly payments, or pay a lump sum up front. This can be in exchange for a long-term project or for access to services on a regular basis.

As freelance blogger Linsey Knerl states, “…retainer agreements are a dream come true for freelancers. Being able to say, ‘I work on retainer’ proves that you’ve gotten some work as a freelancer, and that you can expect a least one source of income each month to balance out your wages.”

The steady cash flow from a retainer helps make sure you can cover expenses, which don’t change from month to month.

Retainers can help you and your business by:

  • Providing stability.
  • Reducing the pressure to win new projects all the time.
  • Allowing you to build a relationship with a client.
  • Giving some consistency to your work, rather than having different clients every month.

But how does a retainer work? Let’s look at 9 key points for making it work for you and your clients.

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1. Build a business case for a retainer

It’s not always easy to obtain work under a retainer. Freelancers may be hesitant to ask a client about a retainer, or be unable to communicate the value of a retainer to the client.

So your first step is to build your own business case for a retainer by determining what value you can provide to a client. What are the services you can provide to a client on a regular basis that will bring value to them on a regular basis?

Depending on your freelance business, ideas include:

  • A marketing campaign.
  • A monitoring service.
  • Email marketing.
  • A package of monthly blog posts or other content management.
  • Building or updating websites.

Bonsai can provide you with resources for developing a marketing pitch before you approach clients.

Clients need to be able to understand – what is a retainer fee? And they must be able to explain such a monthly fee to those who pay the bills. In most cases it’s not a fee “just in case” they need work from you; it’s a fee for a regular flow of work from you.

The incentive to the client could be that your work is somewhat discounted because you’re providing it in quantity. But if you have a great freelance reputation, or your work is in demand, you could take an opposite position, in that committing your time in advance actually commands a premium price above your regular rates. This is a balancing act, as you will have to impress client with your unique abilities or how well you know the client and their needs.

If you’re just starting out as a freelancer, Bonsai can help you with tips on building your freelance reputation.

2. Get to know the client(s)

You know your own strengths, you have your value proposition figured out and you’re ready with your marketing pitch. Before you approach a client, get to know them and their business. Figure out how you can help advance their business interests with your freelance skills.

For instance, to know how a graphic design retainer agreement will work with a specific client, evaluate their current state. Look at whether they post regularly on social media, or send out email newsletters, and be sure you are following and subscribing so you can learn more about them. You will gain a better understanding to enable you to suggest improvements or to take over that aspect of the business.

It’s also good to know if they have full-time employees that look after that sort of work. Could those employees better spend time on other aspects of the business if you took on that work?

Understanding the business of potential clients will make it easier for you to sell them on how a retainer agreement works and the benefits of having one with you.

3. Sell the client on a retainer

Once you have your pitch ready and can articulate the value you can bring to a client, it’s time to incorporate the retainer concept into your proposals and pitches.

There are several ways you can pitch to a client how a retainer agreement works:

  • At the beginning of the relationship, when proposing to do work.
  • At the close of a project, as part of client off-boarding.

In this way, you’re selling your ability to support the completed project, before you start the work, and at the conclusion of the work.

As part of an initial pitch, you can include the option for a retainer relationship at the successful conclusion of the project. When the work is complete, you will understand the client and their needs. You can support the work you just implemented, you can provide some value-add to the project, or you can tweak anything that needs to be adjusted.

The end of a project is an ideal time to transition to a retainer, as the client will also know you and the value you can bring to their business.

If you’re approaching a new client and the work doesn’t involve a project or other finite amount of work to start the relationship, you may want to give the client a taste of what you can offer. A free trial of your services can give clients a sense of what you can do for them. Just be sure you don’t dedicate too much time for free – there’s a balance between enticing a client and working for nothing.

4. Structure the agreement

So what is a retainer agreement? There are different ways to structure an agreement, from a time management perspective. It’s up to you to consider the different ways you want to work with a client, before proposing a retainer relationship.

For instance, you can agree to provide an allotted amount of work each month, such as 10 blog posts per month. This way, you are billing for value and actual work completed, not time.

You can also agree to provide a certain amount of hours of work each month. In this format, it would be important to determine what happens if all the time allotted isn’t used – does the client “lose it,” or does it roll over into the next month.

And, as Entrepreneur.com points out,

“Since your client will have prepaid you for your time up to a certain amount, you need to make provision in your retainer agreement for periods when your client uses more than the time you've sold them in advance. Then you want to negotiate to bill them for the extra time you've spent rather than carrying it over to another period.”

You can also build retainer proposals with different tiers. In this scenario, you offer different levels of work with differing amounts of pay. You could have Tier 1, 2 and 3 options, which gives the client a choice rather than a “yes or no” to only one option. Remember though, that a proposal and a contract are two different things.

To summarize what is a retainer agreement, it can be structured in several different ways:

  1. Client pays a set amount each month to access a certain amount of time. Be sure to spell our what happens if the time is not used – is it “lost,” or does it carry over into the next month.
  2. Client pays a set amount each month for a specific set of deliverables. The agreement spells out the additional costs if more work is required, or if an emergency arises that needs to be handled over and above the deliverables.
  3. Client pays simply to have access to the freelancer. This is probably the least common contract template for freelancers, but more common for prestigious agencies or law firms. It could be possible if you are a sought-after freelancer.

What is a retainer agreement that works for you depends on several factors:

  • Your business.
  • Your expertise.
  • Your services.
  • The client’s business.
  • The client’s needs.
  • The relationship between you and the client.

If you’re wondering what to include in your freelance agreements, Bonsai can help.

5. Establish a contract

The actual contract is the nitty gritty that defines: how does a retainer work. It’s important to work with the client to determine what you’ll deliver every month. Be sure to clearly define that work and prevent scope creep. Being vague will not help you or the client. If you need help, Bonsai has resources for all your freelance contracts needs.

It’s also key to determine and discuss what happens if extra work is needed. If the client requires work that isn’t within the scope of the retainer, there should be a process in place so the client knows what to expect. That could be replacing other work or including an additional fee for the extra work.

And even if you aren’t charging per hour, you should be recording your time to determine the profitability of the retainer agreement. There are always ways to improve your efficiency and profitability, either with another client or when your retainer agreement is re-negotiated. Bonsai has resources to help with freelance time tracking.

As well, if you’re considering retainer relationships with more than one client, it’s important to be up front with those clients, and ensure you aren’t entering a conflict of interest situation. Working for two clients in the same industry could cause issues. In fact, often companies that hire a consultant on a retainer basis have a clause in their contract that prohibits them from working for the competition.

It’s also good practice to define deadlines for your work. Things to consider include:

  • If you’re doing regular work, what are the timelines for it?
  • Will you deliver on a weekly basis? Or by the end of the month? Or will you work on call?

Often clients who are paying a retainer for services expect that work be done on short notice. Or, depending on your business, the client may have a need to access you in a crisis or emergency situation, such as a website going down. What will happen if you’re busy with another client, or away from work? A contingency plan should be built into the contract.

It’s important to clearly define deadlines to ensure the client stays happy, and that you can meet expectations. You also have to consider your other clients and prospective clients when you establish deadlines on a retainer. A retainer agreement needs to work for you, your client, and any other or potential new clients you have.

Did you know that you can use Bonsai's integrated contracts software to create your very own ready-to-sign retainer agreement in less than 2 minutes?

All you have to do is to go to your Bonsai dashboard, and click on "create a contract" from the right hand side.

create a contract

Now you'll have to create or choose a client and project for which you plan to draft the retainer agreement. Make sure you go with the "standard template" and then just click on "create contract".

https://app.hellobonsai.com/users/sign_up?utm_campaign=howto&utm_medium=content&utm_source=blog

After you go through the first 2 steps of the contract creation process, you will reach the "payment" section. This is where you can set up your retainer agreement by just clicking and selecting "a monthly rate", entering the amount and other specific details such as deposits, late fees, and contract termination.

set up contract details

Once done, click on continue and you will reach the final step of the contract creation process. Ensure everything looks good and click "create contract" to have your retainer agreement generated and ready to send for e-signature.

finalize contract creation process

Easy, right? Now, sign up for a free trial of Bonsai and create your very own retainer agreement. Feel free to explore the rest of the integrated features such as proposals, invoices, time-tracking, and the new freelance tax add-on.

6. Ensure you get paid

As part of the structure of the retainer agreement, how and what you get paid is an important component – especially for you! That regular cash flow we mentioned as a benefit to a retainer? It’s good to make sure it’s flowing to your business!

What is a retainer fee and how it works can help determine the payment plan. There are several ways to structure the fees you charge to have you on retainer for services:

  1. A lump fee up front, perhaps for a full year of work.
  2. A single, monthly payment.
  3. A fee plus clearly defined additional fees for additional work.
  4. A fee for simply being available, plus additional fees for completing emerging work.
  5. A fee adjusted monthly according to how much work has been delivered.

Once again, depending on the nature of your business, your client’s business, and your relationship, the retainer fee, how the retainer fee works and the payment structure will vary. Bonsai has some great tips on invoicing clients.

How and when you get paid can vary too, depending on your needs and your client’s preferences. Perhaps you prefer the payment up-front for an entire fiscal year. Or perhaps you prefer regular, monthly payments. Bonsai can help you set up freelance recurring auto-payments for your retainer agreements.

It’s also extremely important for your business that you get paid on time. Some ways to ensure that happens include:

  • Bill up front.
  • Make it easy for clients to pay you.
  • Invoice promptly (Bonsai can help you get your freelance invoices paid faster.)
  • Don’t do work until you’re paid.
  • Get it in writing.
how-does-a-retainer-work-accounting

7. Budget your time

You’ve got a relationship with a client, you’ve got a contract in place for a retainer, and you’ve been paid.

Now:

  • Budget your time.
  • Manage your workload.

It’s crucial that your time is budgeted appropriately to ensure you’re able to manage the regular work from your retained client, as well as any emergencies, if that’s built into the contract. That work needs to be handled along with work that flows in from new projects, new clients, or new proposals to ensure you have additional jobs.

Unless the retainer agreement can support your business, it’s important to make sure you don’t forget other clients. You need to structure your time to ensure you can continue to bid on other work, while still meeting the expectations of the client or clients on retainer.

If you need support along the way, there are plenty of amazing project management tools for freelancers out there.

8. Report on benefits

A regular report to your client will go a long way to proving the benefits they are gaining from the retainer relationship they have with you. A monthly report for your client can showcase exactly what you did and the benefits of the work, which provides proof of why they’re paying you.

Here’s the deal: Customers always want to know what they’re getting for their money. If you’re working on a project for a client, regular progress reports are part of the project. A retainer relationship shouldn’t be any different: show the clients the value they’re getting for their money.

Again, depending on your freelance business and what work you are providing for the client, reports could include:

  • Social media engagement.
  • Number of website followers.
  • Sales growth.
  • Number of blog post readers.
  • …you get the idea.

If you’re able to benchmark your work and compare growth every month, even better. If you’ve established goals as part of the contract, progress to goals is important to describe. The reports should always show the client why they are continuing to pay you. Sign up for a free Bonsai trial to get resources on reporting.

9. Review and adjust

As with any kind of contract, agreement or project, it’s important to track the work, review the arrangement, and adjust as necessary.

Part of that process means tracking the work you’re actually doing, the time it takes you, and comparing that to the value of the contract. Is the work profitable? Is the retainer work taking away from other clients, or from finding new work?

It’s also valuable to have a discussion with your client on a regular basis, such as every six months or on an annual basis:

  • Are they finding value in the contract?
  • What’s missing for them?
  • What’s working?
  • Are they willing to provide a testimonial that you can use with other clients?

It should also be made clear to clients that the communication lines are always open. If there’s an issue, you want to hear about it immediately. You don’t want to wait for an annual review discussion to find out the client is dissatisfied and won’t be renewing the contract. That’s a worst-case scenario for you and your business.

You may even want to consider regular reviews as part of the contract. That can be a brief monthly chat, followed by a semi-annual or annual review of the full contract.

Bonus: don’t forget to bring new ideas

Now that you’ve navigated what is a retainer agreement and been successful at securing such an arrangement, it’s important not to be complacent. One of the downfalls of a retainer agreement is sticking to the agreement, and not bringing new ideas to the client. By sticking to an agreed-upon list of work, you can actually do damage to your relationship by avoiding the creativity of new work.

As discussed in Forbes.com, a scope of work is created at the onset of a retainer agreement:

“This list of to-dos is created at a single point in time…so on the one hand, there is pressure to stick to the ‘Scope Of Work’ because no one wants to undo the agreement. On the other hand, there is pressure from the marketplace for ‘new thinking’ that may or may not include the items on the list.”

One solution to this is to include “or equivalent” in the retainer agreement. While different work will need to be discussed with the client, the “or equivalent” clause will allow you to bring forth creative ideas without being perceived as selling additional work. Since business is fluid, a retainer agreement needs some fluidity as well.

During your regular reviews with your client, be sure to suggest any new and creative initiatives that you can accomplish to add benefit to the agreement, perhaps as a replacement for work that has diminished in value since the inception of the agreement.

Final thoughts

If you’re able to secure one or more retainers for your business, you will have some breathing room in ensuring expenses are covered, some of your work is guaranteed, and the potential for additional work is there.

Hopefully we’ve answered all the questions related to: What is a retainer agreement, and how does a retainer work? The ability to work under a retainer relationship will build lasting business collaborations and help your freelance business profit and grow.

For a range of solutions to support your business, sign up now to access Bonsai’s resources.

Ardith Stephanson
Ardith S. is a freelance writer and communications professional who has some fun with her personal blog theardizan.com

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