What Is a Retainer? Definition and Overview

Changing up your business’s payment structure is a big deal. It’s important to do your due diligence to determine what will work best for you and your clients.

Retainers are a popular choice for service providers. Here, we’re reviewing everything you need to know before committing to this form of payment agreement.

What Is a Retainer?

Retainers are structured agreements in which the client agrees to pay 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 of services being provided or at the end of the month once the work has been completed. 

Types of Retainers

Once you determine that a retainer is the right choice for collecting payment for your services, you need to figure out which type you’ll use. Below are the two most common types you’ll come across.

1. Pre-paid (Fixed price)

A pre-paid retainer requires that you commit to handling a certain amount of work during the predetermined period. This work can be in the form of hours or output. Businesses use pre-paid models when they need specific work done — work that’s broken into a defined set of tasks. Think accounting, SEO and website maintenance, for example. 

2. Post-paid (Time and materials)

Sometimes, a client may not have an immediate need for your company’s services but wants you to be available when they do. This often happens with consultants working in fields like IT, web development and other specialized services. A customer will pay a fee to access your expertise as problems arise. A post-paid retainer will make you available as needed.

READ NEXT: Retainers vs. Projects — Choosing the Best Pricing Structure

Why Use Retainers?

Instead of spending time and money looking for new clients to keep cash flow coming in, many business owners choose to build a retainer program. Recurring work serves as an insurance policy of sorts, especially when times are tough.

There are three primary reasons to go with retainers:

• Less pitching‌: Chances are, you don’t want to spend a lot of your time selling. You have a very specific skillset that you should be able to put to use. Retainers will ensure you have consistent work without having to pitch your services all the time.
• Better cash flow: Waning cash flow is one of the most significant issues a service business can face. If you rely on new clients, it’s challenging to estimate how much cash you’ll bring in each month. Retainers solve this problem.
• Stronger relationships: There’s only so much you can learn from someone when you work with them one time. Working on a retainer allows you to get to know your clients much better over time. As your relationship grows, you’ll be able to anticipate what they need and provide improved service as a result.

READ MORE: Why Retainer-Based Services Are the Best Option for You and Your Clients

How To Manage Retainers

If you’re intrigued and looking to switch to retainers, you’ll need to consider how you’ll keep track of retainer periods and accurately attach work to each client’s agreement. Follow the steps below to set up an efficient retainer management system.

1. Define the scope of work

The first step in managing retainer projects is to establish a scope of work. Talk with your client to set expectations about what your company can help them achieve. Then, establish the type and amount of work you'll do during the retainer period.

2. Use software to manage retainer tasks

To ensure your retainer program is successful, you’ll need to be diligent about keeping track of internal tasks. Task management software can offer the visibility your team needs to categorize, assign and complete all the tasks involved in client work. 

3. Invest in continuous reporting and on-demand access

Upfront payment is an expression of trust, and your clients expect you to accurately track the work you’ve done for them. Reporting on hours and tasks is necessary for accurate billing, and a platform like Accelo can compile live dashboard reports for you automatically. A client portal can also be helpful for providing real-time status updates to retainer clients, whom you probably interact with less often than one-time clients.

4. Streamline your billing

Billing is a headache when you don’t have an organized way to process retainer invoices. Retainer management software that automatically attaches work and hours to a client record can save time and prevent confusion when it’s time to bill for recurring work. Most billing tools even have customization options to make sure your retainers and invoices are aligned with your brand materials.

Dive deeper into retainer management best practices and tips to find out what this payment structure could do for your business's bottom line.

About the Author

Chelsea Williams is Senior Copywriter at Accelo, where she shares unique insights with service professionals and tells user stories via blogs, eBooks, industry reports and more. She has over 15 years of B2B and B2C writing experience — primarily in tech, sales, education and healthcare. Chelsea is an AWAI-certified Master Copywriter trained in brand storytelling and microcopy.