Whether you’re a consultant or an agency, generating a consistent flow of revenue can be difficult. Projects come and go and client priorities can change, so it’s up to you to ensure you have enough cash flow each and every month. Retainer agreements can help take you from reactive to proactive when it comes to closing deals, and provide you with steady income to keep your business afloat. To avoid any stall in cash flow, consider selling your clients on monthly retainers. Here’s how to do it right.
(This article was originally published on 2/27/2018 and updated on 7/6/2021)
When you’re trying to scale your business, there’s nothing worse than seeing sales drop. It’s like the feeling you get on a rollercoaster when it plummets...but without any of the fun and excitement.. Over the course of the sales process, there are several challenges that could arise to stall your cash flow and puncture your profits:
The sales cycle can take months to close a new project contract.
When you finally close the deal, you only get paid a deposit.
You perform the work, and depending on the size of the project, you may not get paid again for another month or two.
Projects sometimes go dormant for chunks of time because clients don’t get back to you with feedback or content.
Depending on the client’s pay cycle, you sometimes have to wait weeks/months to get paid, not to mention that some clients need to be chased down or they push back on paying because they don’t “feel” the project is finished (surprise!).
Future projects that once seemed guaranteed are sidelined or cancelled altogether.
Needless to say, any one of these obstacles could be a nightmare for your cash flow, so it’s important to be proactive. You may have thousands of dollars in unpaid receivables that you haven't been able to collect, but your fixed monthly expenses still need to be paid regardless. What you need is a way to regulate your revenue, and the best way to do that is with a monthly retainer.
A retainer fee is an amount of money paid in advance by a client to ensure your services will be available to them for an extended amount of time. The client pays a lump sum upfront, or makes a recurring monthly payment, and you work with them on a long-term project, or provide them with access to your services each month.
Retainer agreements can bring stability to your business, get you out of the firefighting mode of needing to win new projects all the time, and provide cash flow within a company or contract.
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Now that you know what a retainer is, how do you start selling them?
Many consultants and agencies struggle with selling retainers because a) they aren’t confident about their own pricing, b) they’re afraid to ask their clients for a monthly commitment, or c) they aren’t able to communicate the value to clients, so the clients say no.
Fortunately, we’re here to help you overcome these hurdles. Here are five steps to get clients on board with paying you a monthly retainer:
As with any new relationship, you don’t want to move too fast with a new client before you get to know each other. No matter how deep your client’s pockets may be, it’s unlikely that anyone would agree to pay a fixed monthly retainer fee for X number of months without getting a taste of what they’re buying.
You wouldn’t commit to a major purchase like a new car without test-driving it first, so why should your client?
Offering a free trial of your product or service helps customers understand what to expect and gives them a clear idea of how it will work for them. Plus, it can help hook them into a long-term arrangement if it’s something they deem valuable. Similar to how cell phone companies offer “free” phones in exchange for fixed contracts, SaaS companies offer trial periods in hopes that users will be compelled to upgrade to paid plans at the end. You need to prove to the client that your services are worth the price and to get the most value, they need to use them every month.
There are other ways to get your foot in the door with your client, like selling them an upfront discovery call as a way to kick-off their project. Many agencies give this away for free at the proposal stage but it’s actually better to sell a discovery as a paid service. Selling an upfront engagement for$500-$3,000 is a lot easier than selling a $5,000-$100,000 project.
Discovery sessions are a way to ease clients into a project with you before compelling them to make a big commitment. The process also makes it easier for you to develop a more accurate project estimate because you’ll know how to meet their needs. Rather than offering it as an option to your clients, instead, emphasize that the discovery phase is a critical component of the process.
The discovery session is your opportunity to build trust and to show the client the high-quality work you can do. It’s your time to shine, but it’s important to remember that during this phase, you don’t want to come across as pushy or like your only goal is to upsell the client (even if it is).
Look for opportunities to show the client areas that can be streamlined to save them money. When they realize you’re there to solve their problem and not to milk them for all they’re worth, they’ll be more inclined to trust your future recommendations.
Now that your client is on board with working together, they’ve tried your product, and understand the benefits you offer, focus on the value your service provides rather than billing them by the hour.
The problem with hourly retainer pricing is that you end up punishing yourself for being efficient, thus limiting your profitability. The first time you do something, it always takes the longest, but each time after that you get faster and better at it. If you’re paid by the hour, the better you get at your job, the less you get paid. That’s not right.
Instead, sell your client on what you’ll do for them every month and demonstrate why it’ll bring them value in the long term.
For example, a website maintenance retainer might include these services:
Technical support and bug fixes
Phone/email-based help on using CMS (e.g., Wordpress) and email management tools (e.g., Mailchimp)
Keep Wordpress CMS and plugins up-to-date
Communicate with hosting provider regarding email/server issues
Minor updates and enhancement to the design/content based on user feedback and testing
Monthly analytics reports and recommendations
While an inbound marketing agency may provide these services in a retainer:
HubSpot integration and support
One blog post/week
Two landing pages/CTAs per month
One email campaign/month
One top-of-funnel offer (e.g., ebook) per quarter
One post on all your social media platforms per day
Listing everything included in the retainer fee manages your client’s expectations and helps them plan their yearly goals based on the value you’ll bring them.
To really drive home your justification for a monthly retainer, include the end-goal in your retainer proposal and explain the results you’ll deliver. “By the end of the 12-month contract, our goal is to generate 500 leads every month through your website.” This tangibly demonstrates to your clients how they’ll see a return on investment.
In your efforts to sell your client on a monthly retainer, it’s important to keep your best interests in mind, too. Scope creep is an often overlooked factor that can take over projects and soak up far too much of your time because of a vague contract.
To avoid clients asking for ‘minor’ fixes, updates, or changes through each step of the project, make sure you’re clear about what is included in the retainer and what isn’t. If you use slippery words like ‘minor,’ then define what ‘minor’ means – is ‘minor’ something that takes less than three hours? Or something that takes less than one day to complete?
Similarly, if you use the word “bug fixes,'' then outline the difference between a bug fix and a feature. For example, in your retainer you could say, “a bug refers to a situation where the system is designed to perform a function, and it doesn’t work. A feature is a function that is desired, or even needed but isn’t originally included in the design.”
If your client asks for something that falls outside the scope of the retainer contract, it’s not the end of the world. Just be sure to outline the process of additional work for them, so they know what to expect. You could pull back on other services that month or include a separate work order for the request.
Even if you aren’t charging per hour, you’ll still want to record your hours using time-tracking software to monitor your profitability.
One of the hardest parts of working with long-term clients is maintaining your enthusiasm. New projects are full of wonder and excitement, but after a while, disagreements can come up, or you might start getting bored of the work. Even if none of that happens, you never want to take your client’s business for granted and only deliver them the bare minimum.
It’s critical to keep your enthusiasm high for the length of the contract. Otherwise, your client may feel you aren’t meeting their expectations, and they’ll be less likely to continue working with you, or to recommend you to other businesses in their industry.
If you go above and beyond every month (while still maintaining profitability, of course), work to provide the value you’ve outlined, and show clients how much peace of mind you bring, they’ll be more likely to agree to a monthly retainer and renew their contract at the end of the term.
Customers always want to know what they’re getting for their money, so a regular report on your progress will go a long way in helping you sell and retain (pun intended) a monthly retainer. It helps you showcase exactly what you did and demonstrate in clear terms what they are gaining from the retainer relationship.
For example, if you work as a marketing consultant, your monthly progress reports could include things like:
Web traffic
Social media engagement
SEO performance
Landing page visits
Conversions
ebook downloads
If goals are a part of your contract, it’s essential to track your progress along the way. Bonus points if you’re able to benchmark your work in order to compare performance and growth from month to month. At the end of the day, monthly reporting is one of the most effective ways to demonstrate to the client why they are continuing to pay you.
Monthly retainers help avoid end-of-month panic as you scramble to land new clients, allow you better schedule projects, and plan for growth. Securing even one solid monthly retainer can help you bring in consistent income and buy you some breathing room for your business. Plus, working with clients over a longer period builds lasting business relationships, develops trust, and helps you reach your profitability goals.