Retainer Definition & Overview

What is a Retainer? Definition & Overview

1-Jul 2021
Screen Shot 2021 04 12 at 3.56.03 pm
Kirsten McNeice MARKETING COMMUNICATIONS SPECIALIST

What is a Retainer?

Retainers are payment agreements between a client and a service provider. The client pays a specific amount of money to a business — usually monthly — and, in return, receives a set of services during that same time period. Clients pay these fees either in advance and the company provides services during the retainer period after payment, or at the end of the month once the work has been completed.

 

How Does a Retainer Work?‌

Now that you know what a retainer is, the question is, how does a retainer work? Below are the steps to take to create a retainer relationship with your clients. 

1. Get to know your clients better

Before you can create a retainer, it’s critical to get a better understanding of your clients. What problems do they have that they need regular help with? Your retainer offering should provide a solution that people are willing to pay for.

2. Build your offering

The next step to creating a retainer is defining your product offering. Ideally, this is something you can offer on an ongoing basis. Work you only do once won’t always work in a retainer relationship. It is during this step that you will also have to define the cadence or cycle of your offering whether that be weekly, monthly, quarterly, or annually.  

3. Sell your services

Once you know your client’s pain points and have your offering, it’s time to pitch your retainer agreement. Structure your sales pitch to focus on the pain point your client has. If you can show that you have a solution, businesses are usually more than willing to pay a regular fee to solve their problems.

4. Scale your services

Once you land your first retainer, it’s time to scale your services. Check in with your first client regularly to see how they respond to your services. Use their feedback to better craft your sales presentation to make landing more clients an easier process.

What Are the Two Types of Retainers?

Once you determine that a retainer is the right choice for your services, you need to figure out what type of retainer to offer. Below are the two types of retainers people expect to see.

1. Pre-paid (Fixed Price)

A pre-paid retainer is one where you commit to handling a certain amount of work during the duration of the retainer. This work can be in the form of hours put in or for a specific output.

Businesses use pre-paid models when they need specific work done. Think of accounting, SEO work, and website maintenance. Anything that contains a set of tasks can fall under the pre-paid model.

2. Post-paid (Time & Materials)

Sometimes a business might not have an immediate need for your company’s services. This often happens with consultants working in fields like IT, web development, and other specialized services.

A customer will pay a fee to access the knowledge your service company has. Whether it’s to fix problems as they arise or to stay available to give advice, a retainer will make you available for those calls.

Why Use Retainers?

Sure, you can always spend your time looking for new clients to keep cash flow coming in. This may sound simpler to many people, so why invest in creating a retainer program in the first place? Keep reading to find out.

Less Pitching‌

The chances are good that you don’t want to spend a lot of your time selling. You have a very specific skill set, and you want to put it to use.

Creating retainers is a way to stop pitching as much. You know for sure how many clients you can handle, and a retainer ensures your day is always packed with work.

Estimate Cash Flow

Stable cash flow is one of the most significant issues a service business can face. If you rely on incoming clients, it’s challenging to estimate how much cash flow you’ll bring in each month.

Offering retainers solves this problem. While you might gain or drop a client from time to time, your cash flow will remain stable. You won’t have to worry as much about not bringing in enough money down the road.

Know Your Customers Better

You can learn a lot about a client by asking the right questions. But there’s only so much you can learn from someone when you only work with them one time.

Working on a retainer allows you to get to know your clients and their needs much better. As your relationship grows, you’ll be able to anticipate what they need far better and provide improved service as a result.

How Do You Manage a Retainer?‌

Getting your retainer business up and running is only the first step. Managing your retainers will take work on your part to get it right. Follow the steps below to set up a system for efficient retainer management.

1. Define the scope of work

The first step to managing your retainer projects is to establish the scope of work. Talk with your client to set expectations about what your consulting company will do for them. Once you set expectations with your clients, you can establish what work you'll do during the retainer period.

2. Use management software to manage retainer tasks

Now that you know your scope of work, you’ll need to manage your tasks. Use project management software to manage the day-to-day work for your retainers.

3. Continuous reporting

Transparency is critical in a retainer relationship. Your client trusts you when they pay upfront for your services. Set up tracking for both tasks and hours worked by your employees. You should continue providing a report for your clients that lets them know exactly what you accomplished every month.

4. Streamline your billing

Billing is a headache when you don’t have an organized way to process your retainer invoices. Investing in retainer management software gives you one place to manage your retainer’s financials and efficiently bill your clients. 

 

Conclusion

By now, you should have a better idea of what a retainer is and how it can help your business. Using retainers won't just streamline your client operations, it will also help you create a stable income well into the future. Create your first retainer package today to get started.

Of course, you need a way to manage your retainers once you start signing clients. Sign up for a free trial with Accelo to see how it can help manage your business.

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