How to Earn a Steady Income With a Retainer Fee
While it's important to regularly market and network for new clients as a freelancer or consultant, you can take the pressure off an unsteady, project-by-project income by developing long-term contracts, known as retainer agreements, with your clients.
By having a dedicated chunk of time you work for each client every month, you can focus completely on your clients' needs and issues. That can streamline procedures and result in profits for them and you. Delivering high-quality work and return on investments will keep your clients happy and willing to set retainer agreements.
What Is a Retainer Agreement?
A professional services retainer agreement is a contract between a client that retains ongoing services from you, the consultant or freelancer. Unlike usual freelance or contract work, which is paid on a per-hour or per-project basis, a retainer is a regular, ongoing fee paid in advance of the work. This concept is most understood in the legal field, where clients will hire an attorney on retainer in case they need legal services. In exchange for a regular monthly fee, the attorney agrees to provide a set number of hours of service.
Having a freelancer or consultant on retainer is great for companies because it means they'll have a dedicated contractor for the period of time they've paid for.
This arrangement is also better for freelancers and consultants because it allows them to have payment upfront, making it possible for them to better budget their time and money for the month. Since a retainer agreement is guaranteed income, it is highly sought after by independent contractors.
Developing a Retainer Program
Setting up your clients on a retainer allows you to avoid having to continue to sell to your current clients or worry about where your next job will come from. But it does take some forethought and a plan to convince your current and potential clients to hire you on an ongoing basis.
Start by brainstorming how a retainer would help solve some of your clients' problems. Perhaps in your consulting business, you propose a project, but the client isn't sure how to implement it. As part of your consultant retainer agreement, you could provide guidance and assistance on the project.
If you're a freelance writer who is regularly writing content for a client, offer a retainer for a set number of content pieces per month. The key is to offer a useful solution to clients in exchange for a set regular fee.
Initially, your agreement may be for only a couple of months, but if you provide value, the client will extend the retainer longer. While clients might be hesitant to do a one-year retainer, if you're highly valued, you could do a six-month retainer, which means six months of steady income. If you had three retainer clients paying you $500 per month each, that would be $1,500 you could count on month after month.
Choosing a Retainer Rate
For a client to agree to pay you monthly, they need to feel like they get something in return. Why would a client pay you a $1,000 month after month, if their current use of your services don't always incur $1,000 per month? If your retainer agreement is ten hours a month for $1,000, then why can't they just pay $100 per hour as they go?
One option is to offer a discount to clients for entering into a retainer agreement. Some freelancers and consultants offer a 10% discount, so instead of $1,000 per month piecemeal work, the client pays $900 every month for the term of the retainer agreement.
Experts are divided on discounts for retainers. For one, why should you get paid less for the work you do? Two, the client might come back with, "Why can't I just pay $90 per hour as I need you?" Three, if you're successful at developing all retainer clients at a 10% discount, you've capped your income at that discount rate.
To get around offering a discount, add perceived value to your clients that they don't get with the hourly or project rate. This could be an extra 30-minute consultation a month, a detailed monthly report, head-of-the-line attention, or some other benefit to the client.
Handling Negative Opinions About Retainers
Before pitching a retainer agreement to clients, understand that some people have a negative association with the term. Some clients may have had bad experiences with consultants in the past who did not work the hours agreed upon and cost them money. You can overcome this objection by turning your current per-hour or per-project clients into retainer clients. You've already built a level of trust in your abilities, integrity, and productivity that will make them more likely to approve a retainer agreement with you over someone who's never worked with you.
For new clients, you can offer them a short term retainer so they can have a positive experience with you first, and then move them to a longer-term agreement.
As a freelancer or consultant, it's important to focus on building long-term relationships and retainer agreements rather than strings of one-off clients. With your work, you can position your agreement as a pivotal step in helping your customers achieve their goals.