Work Notes (9 Part Series)
Retainers are seen as the holy grail of freelance work, but if they’re not set up correctly they’re more trouble than they’re worth.
One of the perennial problems with freelancing is the ebb-and-flow of work. It’s not uncommon to experience periods of extreme busy-ness, followed by a lean month or two.
Retainers are a popular way to create some stability. They provide regular income and it’s possible to find work that can be offered as a retainer in almost any sector.
There are lots of ways these can be set up. From time banks to monthly agreements based on work or time.
Then there are the terms. How much work will you be doing? Does the time rollover? When does it expire? How does billing work?
With all of the possible combinations, it’s no surprise that it’s possible to set-up bad retainers.
When I started freelancing, retainers were appealing to me. As a web designer and developer, it’s common to offer maintenance work and ad-hoc fixes/updates.
I looked at what various agencies offered and was staggered by the pricing for what seemed to be mostly automated work. How could they justify those costs for what might only be an hour of actual work?
Naïvely, I entered into some agreements where I billed by the hour and invoiced at the end of the month. This worked well in weeks where there was a lot of retainer work and I didn’t have other projects on.
As I gained more experience and started to book bigger projects, these arrangements became a hassle. I’d wake up to emails from several clients asking for minute changes to their websites.
These were disproportionately disruptive to the rest of my day. I found that I’d be feeling incredibly busy but wouldn’t have completed much billable work.
I hadn’t properly set expectation or boundaries around when work would be completed. And I was still billing by the hour. Urgh!
It took me much too long to realise the error of my ways. Seeing the stack of unread emails each morning became increasingly stressful, especially when I was busy with pre-booked work.
Ignoring the email count was a fool’s game – they would play on my mind until they were completed. Spoiler alert: unread emails aren’t the best to-do list strategy.
The tasks ranged from minutes to hours in length. Though my clients didn’t expect them to be completed immediately, they’d certainly want it done within a couple of days.
Daily pressure, expectation and stress for what might only be a couple of hundred quid at the end of the month. Not good.
There are lots of problems with billing hourly in general, but they’re a particularly poor set-up for retainers. Here’s why:
Clients may expect your availability at short notice. There are ways to handle this, but it’s not easy to reset expectations once they become used to short turnaround times.
As with all hourly work, you’re only being for the time it takes you to do the work. You can factor some value into your hourly rate, but there’s an upper limit to what clients will consider acceptable.
Billing retrospectively is generally a terrible idea as you’re basically offering credit upfront. Even if your payment terms are two weeks, you might be looking at a six-week period between completing the work and payment.
The biggest realisation for me was this: the value of retainers is your availability, not the work! And that’s the critical flaw in this set-up.
Retainers have to be beneficial for both parties: the client and you! The rate has to reflect the time you’re blocking out as well as the value of your expected availability.
For instance, if the retainer doesn’t specify days when the work will take place, but the client expects you to be available at short notice, that should come with a hefty premium. On the other hand, a time-based retainer (e.g. working on a project 9-11am each Monday) might be closer to your standard hourly rate.
If you’re not sure what to charge, or how much time the client needs, it’s likely that the work hasn’t been discussed in enough detail. Go back to the client and discuss their needs until you’re comfortable quoting on it.
Common advice is to do a month or two on an ad-hoc basis, then work out a fee that covers that. This is risky because it doesn’t allow you to factor the value into the quote and may anchor the client’s pricing expectations at an unfeasibly low level.
Another consideration is the increased non-billable work: emails and other communication. This increases the time you’re spending on that client and should be factored into the rate.
I stopped offering this sort of retainer to most clients because it wasn’t working. If I offer them again, I’ll be basing retainers on the following principles:
- They’ll be charged upfront and use GoCardless for easy management of payment (on both sides)
- I’ll carefully stipulate what’s included – anything else will require a separate quote
- The rate will factor in value for my availability if it’s not fixed to specific days/times
- My availability and turnaround times will be clearly stated, though exceptions for genuine emergencies may be made
On the last point, some people offer a credit system to handle this. Certain pieces of work equal a number of credits and emergency work requires more credits than normal. There are different ways to handle that if it’s likely to crop up.
These principles may or may not be appropriate for all types of work. Whatever your situation, make sure retainers properly compensate you for the value of being available – it’s worth more than you might think.
Originally published on Work Notes.