There’s no doubt. Contract work, by definition, ends. This can be stressful. But consulting retainer agreements are one solution that can be a huge help.
If done correctly, monthly or quarterly consulting retainer agreements are a ticket to stop trading time for money and can be a more efficient way to grow your income. So let’s dive in on how they work and how to get started with them.
How do you calculate which is more valuable to you: a $10,000 one-off project vs. a $500 per month retainer?
Let’s look at some of the pros and cons of each:
A $500 per month retainer is a good, reliable source of income to keep getting you paid consistently over the longer-term. It will take you 20 months to get paid $10,000 from just one retainer at this rate. (Or, if you have the space for 20 clients on $500 retainers, you might be able to earn that in one month. Obviously, 20 clients may be a lot for one freelancer to manage!)
With a one-off project, you usually negotiate some percentage of upfront payment with the rest due either incrementally as you hit milestones, or upon completion of the project. How long will it take you to complete the project? How many other clients do you have at the same time?
At first glance, the one-off project might be the quicker way to get paid, but then you’re also banking on being able to complete it within a certain amount of time. That means you’re relying on the client providing timely feedback and avoiding scope creep. (There’s another advantage of a good retainer: they’re firm on scope). How many projects have you taken on where the timeline stretched out much longer than you anticipated?
Let’s say you have a retainer package with some clear boundaries around it (as any good retainer should have). You find that on average, you do eight hours of work per client per month; with that said, do you have a limit on the number of retainer clients you will take on?
If your entire working month is filled with retainer tasks, you will have a natural income ceiling. (For example: Assuming 40 hour weeks, you would max out at 20 clients x whatever your fee is). If a cool $10k project comes along, you may not have room for it (without working night and day).
I’ve written a lot here about the “feast or famine” cycle that freelancers often find themselves in. A clear advantage of retainers is the certainty. You know you’re making X amount per month at a minimum because you have contracts signed for retainers.
On the other hand, if you rely solely on one-off projects, you’re probably spending a lot of time finding the next project, at least until you have plenty of referral business coming in. There’s a lack of certainty that can be difficult for certain aspects of your life (paying the rent or the mortgage!).
A “retainer” in the traditional sense is still a form of trading time for money. A true retainer is an agreement to do a certain amount of work for the client per month (say, 8 hours), in exchange for a fee.
With this sort of setup, there are still a lot of variables in terms of structure. For example, retainer clients tend to expect you to be on-call. Maybe they’ll be calling you at the weekend or sending an email at 5pm on Friday expecting a response. Some might have few needs one month, but expect you to make it up to them with more work the next. In a sense, it’s still training customers to count hours and attach perceived value to the amount of time you have spent on them.
If you find yourself in a situation where clients expect extra time one month to make up for the last one, you can very quickly end up overloaded. In terms of structure, you might find that difficult to manage. Are you okay with setting boundaries? Will your retainer clients accept the boundaries you need to enforce?
A lot of what we do is about relationship-building. You’ll get some one-off projects where you form a great relationship with the client, but there’s a better chance of making those relationships with clients you interact with on a regular basis.
Longer-term relationships can be better for getting referral business and meeting new connections. They can also be great if you’re socially anxious about having to get to know new people all the time. In a way, the value of longer-term relationships might be a sense of comfort for you, the freelancer.
One-off projects give you more flexibility in terms of what you charge. You get to negotiate a new contract for each new project and you can base your rates however you like. We’ve talked about selling the value of what you do to a client before – one-off projects don’t need to share an hourly rate with clients. You can lay out a package and say “that will cost $10k” having worked out for yourself how long you think it will take you.
On the other hand, traditional retainers are based on hourly rates. Not only that, many clients will expect that those are discounted hourly rates in return for giving you regular business. This is a common retainer practice that many freelancers have difficulty pushing back against. Agencies and others follow this discounting practice too.
So, there’s a good chance you might find you’re working for a lower rate on retainer work than on one-off projects. If you have no trouble getting a constant stream of either one-off projects or retainers, what will make you more money?
You could also look at whether a mixture of both makes sense. A few retainers for reliability and some one-off projects for variety and the potential to earn more…
The traditional “time for money” retainer can give you reliable income, but can tie you down in terms of how much you earn over a period of time. There are some other ideas that can work for all sorts of freelancing types:
A productized service is a way to sell a set package of services for a monthly fee. So instead of trading time for money, you’re saying “here are the services you get for $X per month.”
There are entire businesses where the productized service IS their business. For example:
A key factor that makes for successful productized services is putting clear parameters around what the monthly service offers. It’s based on deliverables rather than hours and doesn’t allow for scope creep.
Rounding up your expertise into a paid newsletter service can be a sort of “training” that you offer in return for a monthly fee. Of course, the newsletter has to be of high value to clients to justify the subscription.
Some examples include:
Some freelancers successfully offer monthly services for advisory calls, training of staff or consultations with business owners.
For example, if you specialize in marketing, you might provide monthly analysis of how marketing efforts are going and some suggestions for avenues the company might like to try. In UX design, that might be something like A/B testing to see what strategies work best.
An easy way to get started seeing the benefits of consulting retainer agreements is to email your clients an offer with 10% discount on your hourly rate if they pre-pay and lock-in a set number of hours for the next 6 months.
To entice them, lead with how much they’d save based on past work. Some percentage of your clients will take you up on the offer. This could create a huge revenue spike that allows you to plan for the rest of the year comfortably.
In the end, the best approach is probably to have a mixture of both one-off projects and consulting retainer agreements.
If you’re looking to find clients that you can offer your services to, my course Endless Clients, teaches exactly that. We walk-through step-by-step how to find 10+ $10,000 projects in under 30 minutes anytime you want. The course is currently closed, and we only open it up a couple times per year, but if you sign up below you can get access to the next spot.
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