Disclosure: At Pro Q, we are trying out retainers to see how they work with clients. Our opinions and position may change as we get new facts, but the following articles describe our current experience.
Wondering if you should switch to a retainer? Weighing the positives and negatives of a retainer is essential to determine the future of your company. If you plan on expanding your business and team, it would be wise to consider directing long-term clients to become retainers.
Here at Pro Q, we know about retainers through experience. Our marketing department has used retainers for a few years, and development started using them earlier this year. A common question we are asked by businesses looking to partner with us is how we bill for services. We started out charging per hour for our work. Before this year, development always created fixed-price and hourly arrangements for development. Now we are in the process of switching most of our development services from an hourly rate-based system to retainer. There are a few specific benefits we believe will come from this change. The most important is a more predictable workflow and communication. Scheduling the upcoming month’s workload allows us to better plan out our time and communicate the steps we are taking to accomplish our client’s goals.
How can a retainer benefit your small business? Here are three possible benefits of switching to a retainer for development work:
There is less risk involved and more reward in the end. Our team is able to estimate with fairly close accuracy how much time a project will take and therefore, the overall cost.
Forecasting each month, our team could work up to 30 hours for a client based on their budget. We can’t be assured to have all 30 hours. This makes it difficult for us to be readily available for clients’ requests. The best way to consistently grow is to have retainers.
Dustin Woods, Pro Q’s Lead Web Developer, outlines how a client’s budget and Pro Q’s time aligns: “One of our clients has a budget of $2,250 a month. That’s the retainer amount. We have set aside time for a week of the month to focus on her account. That’s regardless of what work is available to work on. Even if they were too busy to decide on the priority of changes to make, we still have things to work on. We can plan out a week of time per month to work on their goals for the month. We can spend that time to focus with them and pick up each day where we left off.”
The more experience you have, the better you will be able to understand how to switch from per hour to a project-based cost structure. Educate yourself and the client on the value your services add to their business. Consulting Success gives an excellent example: “As you begin to understand the true value you are providing, make sure it’s in line with your pricing; i.e. if your product or service will save your buyer $12k (the value), you’ll have a hard time selling your solution for $41k.” A client will be able to expect to pay a set price for the scope of the project without any surprises, bringing comfort to both your team and the client.
As a client, it is important to understand and outline your payments for the year. Your time is valuable, and a retainer contact is an excellent way to save time and add stability to your marketing efforts. A marketing team has the potential to save you money. But keep a close watch on pricing. Buy packages and sign contracts that will bring in more income than you’re spending. This way, you’ll feel comfortable with signing a year-long marketing contract, knowing the exact benefits you can expect to receive.
A plan is made based on this timeline, which promotes our task-based structure. Understanding the tasks needing to be accomplished for the month ahead of time allows for a more fluent work environment. This specific structure gives us a way to measure our success and show clients our steps along the way.
Clients feel comforted knowing that their set project agenda will be done in a timely manner. Any emergency requests they have are given an allotted time during the work week, creating congruence from the client to our team, from the beginning to the end of a project.
A bonus with a retainer is the ability to hire temporary positions or offer contract work because a specific system is in place and the tasks are clearly outlined. Work is recorded in relatively accurate detail and is able to be replicated by others who come onboard. American Express writes about the benefits and cost effectiveness of hiring out work: “Outsource the tasks that are most crucial to helping your business evolve.” A client receives the best service even as your team changes and develops.
- Encourage engaging in a conversation about money: “Define your own expectations, and recognize the market parameters.”
- Treat your clients with kindness: “The thing is, we are more than pleased to deliver as best we can because our client, while demanding, is straight with us. He’s part of the process, quick to praise and as a result, our relationship is strong.”
- Create a relationship based on trust: “Truly great firms have a secret sauce — a magical combination of business-oriented thinking driven through a highly creative environment with delightful white glove service.”
Creating a safe space for feedback is built by a client’s trust and communication. Trust takes time. Recognizing clients on a personal level is done by acknowledging their hard work and needs and stating clearly how your services will make their business better. Knowing a client and securing a long-term, grandfathered-in relationship will produce better results. Retainers bring order and structure to client relationships. Your team will have years of background knowledge with the client, which allows you to move quicker through projects. Both the client and the agency will have a sense of security.
There are a few cons that come with switching to retainers. Acknowledging the shortcomings of retainers is important in order to avoid or work through them as a team. For instance, the unknown variables of a project might take more time than expected. This could easily absorb your entire budget given by a client. The estimate of a project may not anticipate a client’s unvoiced needs. Another factor to take into account is managing client’s goals. It may sound contradictory to view working too quickly as a negative, but a client might assume they overpaid you for your services if it didn’t take your team much time.
All the cons of a retainer come down to communication. If there is a way to make your expectations match the client’s needs while allowing full transparency of your team’s steps, do it. Sometimes, retainers work.
Pro Q is a testament to the success of retainers. Our team finds freedom in setting the client’s priorities as our own. Dustin is accustomed to exploring the importance of time management and workflow. “If we do have a retainer, we can guarantee we have set aside time for them. We call it priority support. By switching to retainers, we are making the active decision to create relationships with clients in our development services. We are moving away from small projects with clients to create longer relationships with the projects we’re working on. [Retainers] will benefit the businesses that want relationships to thrive.”
How do you time when to switch from per hour to retainer? When you know, you know. The switch to a retainer will be natural for your business model and the client. As your business grows and you begin to develop long-term relationships with clients, a retainer becomes a reasonable progression. The conversation will be easy to navigate because the client wants to continue working with your team. Retainers will enable you and your clients to have stability in workflow, cost, and client expectations.