Is a retainer agreement part of your pricing strategy?
Back in episode 11 of
Resourceful Designer I talked about pricing strategies for
your graphic design business. In it I talked about how value based
pricing is the Holy Grail of all the pricing methods. In that
episode I didn't cover the retainer agreement because I don't
really view it as a pricing strategy. It's more of a payment
method. But if I was to include it in all the ways you can be
paid I think it comes in a close second.
What is a retainer agreement?
Simply put, a retainer agreement is a way to be paid in advance
for work you'll do in the future. It's an agreement between you and
your client stating that for a fixed amount of money paid up front
on a regular basis, you agree to provide a predetermined amount of
work for that client.
Why should you use a retainer agreement?
There are several reasons why a retainer agreement will benefit
your home based graphic design business. First and foremost it
creates a steady stream of income. Anyone running a graphic design
business knows that it's not a profession of absolutes. There are
no steady paycheques to be collected every other week. Instead
we live off the whim of our clients and their schedule for paying
their bills. Having a client on retainer creates a small piece of
dependability where you know for a fact that money is coming in.
It's like receiving a paycheque on a regular basis.
Another benefit of using a retainer agreement is it allows
you to plan your work in advance. Knowing that you have to work on
a certain job every week, or that you have to devote a certain
amount of time to a client each week allows you to set a schedule
and be more productive with the remainder of your time.
Don't forget, when you have a client sign a retainer agreement
with you, it's a guarantee that they will come to you for their
work and not look elsewhere for a graphic designer.
What are the Pros and Cons of a retainer agreement?
Pros
Steady Pay: As long as your client pays
according to the agreement, you know when and how much income you
can expect.
Better Clients: Entering into a retainer
agreement is a big commitment. It takes a client with whom you have
a good relationship with to agree to it. Since the relationship is
already there, entering into a retainer agreement with them
solidifies their loyalty to you.
Retainer Agreements Benefit the
Client: There are many benefits to the client to sign
with you. The client solidifies their relationship with a graphic
designer and wont have to shop around each time they have a project
to do. And the client knows in advance how much they are spending,
allowing them to create more focused budgets.
Cons
Scheduling Conflicts: Although it's nice
to know how much work you will be doing for the client each week.
It may be hard to schedule other clients around this, especially if
they have tight deadlines for their projects as well.
Dependence Issues: Relying solely on
clients with retainer agreements may seem great as far as your
income goes, but it can be dangerous if you don't diversify your
work with non retainer clients. If a client with a retainer
agreement decides to end the contract and leave you, there goes a
good chunk of your income.
Potentially Less Pay: One of the things
clients like about retainer agreements is the chance to acquire
your services at a discounted rate. This, along with the scheduling
conflicts I just mentioned could mean putting aside higher paid
work in order to complete the work for the client under contract.
You could potentially loose out on better paying jobs because your
time is tied up due to the retainer agreement.
What type of work do you do under a retainer agreement?
The best type of work for a retainer agreement is anything that
is done on a regular basis. Reoccurring work is perfectly suited
for this scenario. Work such as website maintenance, newsletters,
advertising, consulting, strategic planning.
Don't forget emergency issues. Some clients may want to pay you
a small amount on a monthly basis just in case they need you for
something.
Type of retainer agreements.
There are may ways you can set up your retainer agreement. This
is something you and your client will need to work out. But here
are some of the more popular options.
Paid to work a fixed amount of hours in a given time frame
Paid to work a fixed number of jobs in a given time frame
Paid a fixed amount of money you need to "work off". Usually
within a given time frame.
Paid to be on call or to give the client preferential
treatment.
Discussing a retainer agreement with your client.
When approaching a client about a potential retainer agreement
you should keep the following in mind:
Remind the client how dependable you are.
Remind the client how much money they are regularly spending on
you.
Discuss the benefits to BOTH of you if you enter a retainer
agreement.
Discuss possible bonuses to the client.
What to include in a retainer agreement.
The amount of money you'll receive and the amount of work
expected of you.
The date you are to be paid and how often
What type of work is expected of you.
How much notice will you be given for the work.
How much time will you have to complete the work.
What happens if you go beyond the agreed upon terms (do not
offer discounts for additional work)
Who pays for expenses incurred while doing the work.
Specify that there is no carryover of unused time money at the
end of the specified period.
What is required and how much time is required to end the
retainer agreement.
Include an end date or a renegotiation date so you have a
scheduled point when you can raise your rates if need be.
I want to include a special note about working beyond the
specified time/amount of you retainer agreement. You may be
inclined to offer a discount to your client should you go over the
time/amount specified. I strongly advise against this. Consistently
exceeding the agreement shows that the specifications were not
realistic and gives you the opportunity to renegotiate the
agreement. If you offer a discount for time spent beyond what
is in the agreement the client will be less inclined to
negotiate a new agreement.
Don't get complacent
It's nice to have a steady income you can rely on and that's
exactly what a retainer agreement can offer you. But don't get
complacent while working on retainer. You need to continue to grow
your business and look for more work because you never know when or
why a client will decide to end the agreement and leave you with a
smaller income stream.
What do you think?
What do you do when you take some time off from your graphic
design business? Let me know by leaving a comment
for this episode.
Questions of the Week
If you would like me to answer your question in a future episode
please visit my feedback page.
This week’s question comes from Caitlin,
I've been lucky enough to gain my first handful of web design
clients, which is extremely exciting. But as each contract comes to
a close, I'm always flooded with a variety of other services I know
I could offer the client, such as content marketing designs or
eBook designs. How would you recommend turning web design clients
into retainer clients? Even if the retainer is simply website
maintenance. I'd love to hear your thoughts on the subject, how
you've handled this issue in the past and what services you tend to
offer your clients on a long standing basis after the website
design is complete.
To find out what I told Caitlin you’ll have to listen to
the podcast.
Resource of the week is WhatTheFont
Whatthefont.com is a website I've been using for
many years to help me identify fonts used on designed pieces
by simply uploading an image of the font. The site uses OCR to
identify the characters, allowing you the option to fix the
selected character if it chose wrong. Then the site uses it's vast
library of fonts to try to identify or provide you with fonts that
closely match the one you provided.
This site has saved me countless hours over the years I would
have spent scrolling through my font library looking for that
elusive font.
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I want to help you.
Running a graphic design or web design business all by yourself
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business please reach out to me. I'll do my best to help you
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here at Resourceful Designer. You can reach me
at feedback@resourcefuldesigner.com
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