The feast-or-famine cycle of the freelancer’s life can be difficult to budget for: Promised work never appears, clients come and go, and projects turn out not to be as profitable as anticipated. Yet your financial responsibilities are unwavering in their demand to be met.
When a client wants a retainer agreement with you, then, it’s like manna from heaven. A retainer is a promise of a set amount of work for each pay period (generally a month) and payment is made up front. How cool is that?
For a retainer agreement to work well, though, both parties have to benefit from it, and the agreement details have to be clear to everyone.
How do you create a retainer agreement so that both parties are happy?
1. Define the Parameters
A month is the most common term for a retainer, with a set number of hours you’ll work. However, you and your client are free to determine what works best for both of you. With a current client, I have a quarterly retainer with a set number of hours. With a past client who published a monthly magazine, I had a monthly retainer for a set number of words.
2. Set the Fee
Retainers are often billed at a discount from your usual rate. It’s a swap of guaranteed work for a slightly reduced rate. If you go this route, be sure to educate your client on your usual fee to emphasize the benefit (a discount) that the client receives. You could even note it on your retainer invoice, which will remind the accounting team as well as your supervisor.
I haven’t always given a retainer client a discount, however. As with any pricing discussion, there are a number of variables to consider when setting your fee, such as:
- The demand for your time
- The client’s expectation of what your fee should be
- Your expertise
- Your speed
- The client’s priority in your queue
- Any extras you can include, such as detailed reports, consulting, or training
It all boils down to supply and demand and perceived value. What are you giving the client for that retainer fee?
3. Agree on the Terms
A retainer is paid ahead of the work, period. And while you should always track your work time, will you give the client a detailed accounting at the end of the work period? Will you credit the client for unused hours? If the client goes beyond its hours and you’re charging a discounted rate, will you charge overages at your discounted or your regular rate? Each of these is a decision to make with your client based on both your needs. They can also be used as negotiating points for what you really want.
I give an exact counting of my retainer work to build trust with my clients and to keep myself accountable. It’s easy to overestimate the time you put into a project when that project is difficult or tedious or you’re distracted. Tracking your actual time and projects worked on ensures that the client gets what they’re paying for. Giving the client the report can help them defend your fee to superiors.
Inevitably, the amount of work you receive every work period will vary. Determining ahead of time how you’ll handle that will help everyone set realistic expectations.
4. Write It Up
Whether you use a contract or an email message, spell out your retainer agreement clearly. Include a description of the work you’ll do, each party’s responsibilities, payment method and due dates, and details on what happens if the agreement isn’t followed.
If you already have a contract template, you can use that. The Freelancers Union, Docracy, and Rocket Lawyer offer free templates, and PandaDoc sells a subscription for business documents, which includes a business agreement.
Learn how to charge for your freelancer services so that you and the client are happy in Jake Poinier’s The Art of Freelance Pricing on September 12, 2017. Sign up before it’s too late!